FINANCING AGREEMENT FINANCING AGREEMENT, made effective the 4th day of February,
1997, by and between XXXXXX XXXXXXXX HOTEL & CASINO, INC., F/K/A XXXXXXX
PRODUCTION, LTD., a Nevada corporation ("DRHCI"), with a principal place of
business of 000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, and GALT
CAPITAL, LTD. ("Galt") whose principal place of business is 0000 Xxxxxx, Xxxxxx
Xxxx, Xxxxxxxx 00000. RECITALS A. DRHCI is one of the Makers of a Note dated
December 1, 1994 in the original principal amount of One- Million One Hundred
Thousand Dollars ($1,100,000), originally payable to Source Capital Corporation,
which Note has subsequently been assigned to TPM Financial, Inc. (Which Note may
be referred to as the "TPM Note"), a true and correct copy of which is attached
as Exhibit"A". B. The TPM Note currently has a remaining outstanding balance
(including principal, interest, and any other amounts due thereunder) of
approximately $540,000. The TPM Note is secured by an Deed of Trust, Partial
Assignment of Time Share and/or Vacation Interval Proceeds and Security
Agreement dated December 1, 1994 (which may be referred to herein as the "TPM
Deed of Trust"), a true and correct copy of which is attached as Exhibit "B". C.
DRHCI is in need of short term financing, D. Subject to various terms and
conditions, as set forth below, Galt is prepared to acquire the TPM Note, along
with any and all rights under the TPM Deed of Trust, and make short term
advances pursuant to such Note and Deed of Trust. E. The parties desire to enter
into a written agreement setting forth in detail the terms and conditions of the
transaction. NOW, THEREFORE, in consideration of the mutual promises contained
in this Agreement, the parties agree as follows: 1. GALT TO ACQUIRE TPM NOTE.
Subject to all of the other terms and conditions as set forth in this Agreement,
Galt agrees to use, its best efforts to acquire the TPM Note, 2. ADVANCES UNDER
THE TPM NOTE. Subject to the conditions set forth below, upon acquisition by
Galt of the TPM Note, Galt agrees to make cash advances to DRHCI in an - I -
amount which, when added to the total cost of acquiring the TPM Note, brings the
total to One Million Dollars ($1,000,000). 3. TERMS OF TPM NOTE. The terms of
the TPM Note shall remain unchanged. Subject to that provision, Galt agrees
that, until the expiration of one hundred twenty (120) days from the date of
acquisition of the TPM Note or until the closing of DRHCI's financing
transaction with ILX Incorporated, whichever occurs first (which may be referred
to herein as the "Due Date" of the obligations), Galt will waive the requirement
for monthly payments from DRHCI under the TPM Note. If the TPM Note is paid-off
in its entirety by its Due Date, Galt agrees to waive a portion of the interest
due thereon to the extent that it exceeds interest at the rate of 12% per annum
on the $1 Million expended by Galt to acquire the TPM Note and to make the
additional advances to DRHCI. As an additional matter, if the amounts thus due
are paid by the Due Date, Galt agrees to waive any interest on the $100,000 owed
to it as part of the TPM Note, representing the portion attributable to the loan
fee hereunder (see section 5 below). 4. DRHCI TO GRANT STOCK OPTIONS TO GALT. In
consideration of Galt's promises under this Agreement and with respect to the
transaction generally, DRHCI agrees to grant to Galt unrestricted options to
purchase 260,000 shares of DRHCI common stock at a purchase price of $.22 per
share. DRHCI shall cause, at its sole expense, the registration under the
Securities Act of 1933, as amended, of all shares of stock to be issued pursuant
to the options granted under this section, so that all shares issued pursuant to
the options shall be fully tradable by October 31, 1997. DRHCI shall also
qualify the shares under applicable state securities laws. The options shall be
exercisable at any time within the three (3) year period from the date of the
acquisition of the TPM Note and the advances called for hereunder. It is agreed
and understood that the options shall not be subject to dilution. To the extent
that any additional stock is issued by DRHCI that would have the effect of
diluting the options, or to the extent that other options, warrants, or other
purchase rights are issued which would have the effect of diluting the ownership
of stock in DRHCI in the, event that the options were exercised, then additional
options shall be granted to Galt sufficient to permit it to maintain its
percentage of ownership at two percent (2%) of the total stock ownership of
DRHCI, if all such options were to be exercised. DRHCI warrants that there are
currently 13,000,000 fully diluted shares outstanding including without
limitation shares of stock, warrants, options, and the like. Galt's options
shall be divisible and assignable by it. The dilution restrictions imposed by
this section will be effective for a period of eighteen months from the
acquisition by Galt of the TPM Note. 5. LOAN FEE. Upon the acquisition by Galt
of the TPM Note and the making of the advances to DRHCI called for under this
Agreement, DRHCI agrees that it shall be obligated to Galt for a loan fee in the
amount of $100,000. Galt agrees to defer - 2 -
Exhibit "D".
DRHCI warrants and represents that the TSI Title Preliminary Report is accurate,
except with the addition of one judgment, which has been orally disclosed, Any
other liens against the Real Estate for mortgages, deeds of trust, taxes,
judgments, or otherwise are as disclosed in the Title Report. c) To the best of
the knowledge of DRHCI, and its Officers and Directors, the Real Estate has no
environmental problems. Specifically, there are no material amounts of asbestos
in the structures situated on the Real Estate, and there are no hazardous
materials or other pollutants suspected, known, or believed to be present on the
Real Estate. DRHCI and its Officers and Directors have made due inquiries and
understand and believe these representations to be true and accurate. 9.
CONDITIONS TO GALT'S OBLIGATIONS. It is expressly agreed by the pages that the
following constitute absolute conditions to any and all of Galt's obligations
hereunder, including but not limited to the acquisition of the TPM Note and the
making of any advances thereunder as called for thereunder in this Agreement: a)
That all of the warranties and representations made by DRHCI in this Agreement
are accurate, true, and correct as of the date hereof and as of the date of the
acquisition of the TPM Note and of any advances thereunder. b) That, upon
completion of the acquisition by Galt of the TPM Note, and upon the making of
any advances by Galt as called for in this Agreement, the TPM Deed of Trust
shall secure Galt to the full extent of the $1.1 Million obligation of the TPM
Note, pursuant to the TPM Deed of Trust, and that Gait's security with respect
to that obligation shall be subordinate only to the Xxxxxxx Mortgage (only the
first mortgage) described above. c) That there shall be issued to Galt a
mortgagee's or lender's policy of title insurance in the amount of $1,100,000
issued by Fidelity National Title on a standard California Land Title
Association Standard Coverage form policy, describing the Real Estate, which
policy: (i) specifically insures that Galt's lien for $ 1,100,000 under the TPM
Deed of Trust is subordinate only to the Xxxxxxx Mortgage (only the first
Mortgage) described above, and is prior to and superior to any other liens
against the Real Estate; and (ii) is subject only to those exceptions
specifically approved by Galt. 10. GALT'S RIGHT TO ASSIGN. It is agreed and
understood that Galt shall have the unrestricted right to permit other
individuals and/or entities to participate with it in the transaction which is
the subject of this Agreement, so long as Galt continues - 4 -
to participate
personally in the transaction. To the extent of such participation, which shall
be determined in Galt's sole discretion, Gait shall have the right to assign to
such individuals or entities who participate with Galt in this transaction
proportionate shares of its rights under this Agreement and under the related
documents which are part of this transaction. 11. FINANCING COSTS TO BE PAID BY
DRHCI. DRHCI specifically agrees that it will pay any and all of Gait's costs
associated with this transaction, including, attorneys' fees incurred by Galt in
correction with the transaction, any and all filing fees or documentary deed
taxes or fees of any kind, fees payable to a title company for closing, and the
costs of obtaining the mortgagee's or lender's policies of title insurance
referred to in sections 9 and 14 above. Amounts for the payments of such fees
and expenses shall be paid out directly to the designated recipients and
considered as advances made with respect to the TPM Note. 12.TRANSFER OF SHARES
OF ILX INCORPORATED. As additional consideration to Galt, upon completion of the
ILX Incorporated transaction described above, DRHCI agrees to transfer and
assign 50,000 shares of ILX Incorporated stock to Galt free and clear of any
obligations and subject to no restrictions greater than those to which ILX stock
held by DRHCI is subject. 13.DEFAULT BY DRHCI. Under this Agreement, or under
the TPM Note or the TPM Deed of Trust, Galt shall be entitled to avail itself of
any and all remedies available to it under the TPM Note and the TPM Deed of
Trust, along with any other security given by or on behalf of DRHCI, and, to the
extent not otherwise provided for thereunder, Galt shall be entitled to recover
from DRHCI and any Guarantor hereunder all of its costs and expenses in
connection therewith, including reasonable attorneys' fees,, whether or not suit
is commenced. In addition, in the event of any default in payments due
hereunder, interest shall accrue on any amounts in default at the default rate
of interest provided for in the TPM Note. 14.CONTINGENCY FOR ADDITIONAL
SECURITY. In the event that DRHCI is unable to satisfy the condition set forth
in section 9.c) pertaining to full title insurance coverage, Galt agrees to
complete the transaction on the following additional conditions: a) DRHCI shall
provide additional security for Galt by way of an unconditional first mortgage
against real estate owned either by Xxxxxx Xxxxxxxx or Selden Enterprises, a
limited Partnership owned directly or indirectly by her, against a strip mail
located in California, which DRHCI has represented as having an estimated market
value in excess of $600,000 (it being understood that, in the event of a
default, Gait, in its discretion and judgment, will seek first to satisfy its
claim out of the Real Estate secured by the TPM Deed of Trust). - 5 -
b) DRHCI
shall procure for Gait a mortgagee's title insurance policy insuring Galt's
mortgage against such real estate at least to an amount equal to the difference
between $1.1 Million and the amount of title insurance coverage (insuring Gait's
security position as superior to all other liens other than the Xxxxxxx First
Mortgage) with respect to the, Real Estate secured by the TPM Deed of Trust. 15.
MISCELLANEOUS PROVISIONS. The parties agree: a) This Agreement represents the
entire agreement between the parties pertaining to its subject matter. b) This
Agreement shall be binding upon and shall benefit the parties and their
respective successors, assigns, heirs and personal representatives. c) Whenever
possible, each provision of this Agreement and each related document shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or any related document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or such related documents. d) This Agreement may not be and shall not
be deemed or construed to be modified, amended, rescinded, canceled or waived in
whole or in part except by written instrument signed by the parties. e) All
representations, warranties, covenants and undertakings contained in this
Agreement shall survive the closing of this transaction and the delivery of any
documents or instruments. f) All notices, requests, covenants, demands, waivers
and other communication required or permitted to be given shall be in writing
and shall be deemed to have been properly given if delivered personally or
mailed first class, postage prepaid, by registered or certified mail to the
addresses set forth above. Such notices shall be given to such other persons and
addresses as a party shall specify in writing. g) This Agreement shall be
governed by Nevada law. h) This Agreement may be executed in counterparts, each
of which will be deemed an original but which, together, will constitute one and
the same instrument. However, in making proof hereof it will be necessary to
produce only one copy hereof - 6 -
signed by the party to be charged. Proof of
execution may be transmitted by facsimile transmissions among the parties (which
term, as used herein, includes Guarantors). Upon transmission of a facsimile
copy of the executed signature page of this Agreement to any other party or to a
designated agent, the party so transmitting the signature page shall
conclusively be deemed to have executed the Agreement and to be bound thereby,
subject only to the obtaining of signatures of all the parties. IN WITNESS
WHEREOF, the parties executed this Financing Agreement effective as of the date
indicated. XXXXXX XXXXXXXX HOTEL & CASINO, INC., F/K/A XXXXXXX PRODUCTION, LTD.
BY:/s/ Xxxxxx Xxxxxxxx, Chairperson of the Board, Secretary By:/s/ Xxxx Xxxxxx,
President and Treasurer GALT CAPITAL LTD. By:/s/ Xxxxxxx Xxxxx, President FOR
VALUABLE CONSIDERATION, the undersigned, XXXXXX XXXXXXXX and XXXX XXXXXX, whose
principal place of business is 000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx
00000, agree to fully and unconditionally guaranty the performance of all
obligations of Xxxxxx Xxxxxxxx Hotel & Casino, Inc. under the Financing
Agreement as set forth above, and under the TPM Note and the TPM Deed of Trust,
and further warrant and represent to Galt Capital, Ltd. that the warranties and
representations contained in the Financing Agreement are true and correct. 7 -
Dated: February 4,1997 AMENDMENT TO DEED OF TRUST THESE PRESENTS, executed at
Las Vegas, Nevada, this 4 day of February, 1997 , by the undersigned, Trustor,
Trustee, and Beneficiary. WITNESSETH THAT: 1. The undersigned parties are named
respectively as Trustor, Trustee, and Beneficiary in that certain Deed of Trust
recorded as Document No. 01626 in Book 941202 of Official Records, in the office
of the County Recorder of Xxxxx County, State of Nevada, and none of them has
transferred any interest under or in connection with the same. 2. As of the date
hereof said Beneficiary has made an additional loan of $1,000,000 to said
Trustor evidenced by a promissory note, executed and delivered by the Trustor to
the undersigned Beneficiary. 3. It has been and is hereby mutually agreed by and
between the parties hereto that in addition to the obligations originally
secured thereby, the Deed of Trust referred to in Paragraph 1 hereof shall
secure performance of all of the obligations evidenced by the promissory note
referred to in Paragraph 2 above. IN WITNESS WHEREOF, the undersigned parties
have executed these presents. Xxxxxx Xxxxxxxx Hotel & Casino, Inc. Xxxxxx
Xxxxxxxx Resorts, Inc. By:/s/ Xxxx Xxxxxx, President and CEO County Mgr. Galt
Capital By:/s/ Xxxxxx X. Xxxxxxxx STATE OF NEVADA COUNTY OF XXXXX This
instrument was acknowledged before me on February 4, 1 997 by Xxxx Xxxxxx and
Xxxxxxxx X. Xxxxx TSI Title & Escrow, Inc. By:/s/ Xxxxxxxx X. Xxxxx, V.P. and
Notary Public: /s/Xxxxxxxxxx Xxxx Xxxxxxxx This instrument was acknowledged
before me on February 5, 1997 by Xxxxxx X. Xxxxxxxx, as beneficiary of Galt
Capital Notary Public: /s/ Xxxxxxxx X. Xxxxxxx
- 9 -
