CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is dated effective as of the
31st day of January , 1997 by and between DOVER DOWNS
ENTERTAINMENT, INC. (the "Borrower") and PNC BANK, DELAWARE (the
"Bank").
Recitals:
R1. Dover Downs Entertainment, Inc. is a Delaware corporation
created and existing as a holding company for one hundred percent of
the stock of a group of companies which own and/or operate the
facilities and various businesses known as "Dover Downs" located on
North duPont Highway in Dover, Delaware;
R2. The Dover Downs group of operating companies (each of which
is a Delaware corporation) consists of Dover Downs, Inc., Dover Downs
International Speedway, Inc. and Dover Downs Properties, Inc.
(collectively, the "Affiliated Companies");
R3. The Affiliated Companies are organized and structured as
follows: (i) Dover Downs, Inc. is the operating company for the
Dover Downs slot machine and harness racing businesses; (ii) Dover
Downs International Speedway, Inc. is the operating company for the
Dover Downs automobile racing business and, (iii) Dover Downs
Properties, Inc. is a real estate holding company which is the record
owner of certain real property, fixtures and improvements at which
these business operations are conducted.
Agreement:
Now therefore, the Borrower with the intent to be legally bound
agrees with the Bank as follows:
A. Agreement to Lend. The Bank will provide the credit facility
described hereinbelow, subject to and governed by this Agreement.
1. Type of Facility and Use of Proceeds. This facility is a
committed, revolving line of credit under which the Borrower may
request and the Bank will, subject to the terms and conditions of
this Agreement, make advances from time to time until the Expiration
Date, in an amount in the aggregate at any time outstanding not to
exceed TWENTY MILLION AND 00/100 DOLLARS ($20,000,000.00) (the "Line
of Credit"). The "Expiration Date" means January 29, 1998 or such
later date as may be designated by the Bank by written notice to the
Borrower. The purpose of the Line of Credit is to provide for
financing needs to support the Borrower's acquisition of additional
facilities or companies related to the gaming and entertainment
industry and working capital for the Borrower and the Affiliated
Companies.
2. Interest Rate. Advances under the Line of Credit will bear
interest at a rate per annum which is at all times equal to the sum
of the Prime Rate minus three-quarters of one percent (0.75%).
3. Repayment. Subject to the terms and conditions of this
letter, the Borrower may borrow, repay and reborrow under the Line of
Credit until the Expiration Date, on which date the outstanding
principal balance of the Line of Credit and any accrued but unpaid
interest thereon shall be due and payable in full. Interest will be
due and payable on a monthly basis, and will be computed on the basis
of a year of 360 days and paid on the actual number of days elapsed.
4. Note. The obligation of the Borrower to repay loans under
the Line of Credit shall be evidenced by a promissory note (the
"Note"), in form and content satisfactory to the Bank.
5. Depository. The Borrower and the Affiliated Companies will
establish and maintain at the Bank their primary depository accounts.
6. Guarantys. The Line of Credit will be jointly and
severally guaranteed by the Affiliated Companies. Each guaranty will
be evidenced by a guaranty and suretyship agreement in form and
content satisfactory to the Bank.
7. Commitment Fee. The Borrower will pay a commitment fee of
7.50 basis points per annum on the average unused portion of the Line
of Credit. This fee will be payable quarterly in arrears.
The Line of Credit supersedes and replaces three lines of credit
referred to, respectively, as Facilities A, B and C in a credit
agreement dated July 31, 1996.
B. Covenants. Unless compliance is waived in writing by the Bank,
or until payment in full and termination of all the Line of Credit:
1. Financial Reporting. The Borrower will promptly submit to
the Bank the following financial information:
a. Financial Statements for its fiscal year, within 120
days after fiscal year end, audited and certified without
disclaimer or adverse opinion by a certified public accountant
who is (i) a member in good standing of the Private Company's
Practice Sessions (PCPS) of the AICPA, or (ii) otherwise
acceptable to the Bank.
b. Financial Statements for each fiscal quarter within 45
days after quarter end, certified as true and correct by the
Borrower's chief financial officer.
With each delivery of Financial Statements, the Borrower's
chief financial officer shall also deliver a certificate as to
the Borrower's compliance with the financial covenants for the
period then ended and whether any known Event of Default (as
defined in the Note) exists to the best of the Borrower's
knowledge, and, if so, the nature thereof and the corrective
measures the Borrower proposes to take.
"Financial Statements" means the consolidated balance sheet
and statements of income and cash flows of the Borrower and the
Affiliated Companies prepared in accordance with generally
accepted accounting principles in effect from time to time
("GAAP") applied on a consistent basis (subject in the case of
interim statements to normal year-end adjustments).
The Borrower will also cause each of the Affiliated Companies to
concurrently submit their separate annual (audited) and quarterly
financial statements prepared in accordance with the standards
applicable to the Borrower's submissions.
2. Financial Performance. The Borrower will have and maintain
on a consolidated basis with the Affiliated Companies:
a. As of the end of each fiscal quarter, a ratio of total
liabilities to Tangible Net Worth of not greater than 1.25 to
1.00, and;
b. At all times, a minimum Tangible Net Worth of
$25,000,000.00.
c. At all times, a total net worth of not less than
$40,000,000.00.
"Tangible Net Worth" means stockholders' equity less loans
or advances to officers, shareholders or other related parties
and all items properly classified as intangibles, in accordance
with GAAP.
Any accounting term not defined in this Agreement and each
accounting term partly defined herein, to the extent not
defined, shall have the meaning given such term under generally
accepted accounting principles.
3. Negative Covenants.
a. The Borrower will not make or permit any change in its
equity ownership which results in John W. Rollins, Rollins
family members or principal officers listed in the Addendum
having an equity ownership, in the aggregate, of less than 55%.
b. The Borrower will not create, assume, incur or suffer
to exist any mortgage, pledge, encumbrance, security interest,
lien or charge of any kind upon any of its property, now owned
or hereafter acquired, or acquire or agree to acquire any kind
of property under conditional sales or other title retention
agreements; provided, however, that the foregoing restrictions
shall not prevent the Borrower from:
(i) incurring liens for taxes, assessments or governmental
charges or levies which shall not at the time be due and
payable or can thereafter be paid without penalty or are
being contested in good faith by appropriate proceedings
diligently conducted and with respect to which it has
created adequate reserves;
(ii) making pledges or deposits to secure obligations
under workers' compensation laws or similar legislation;
(iii) granting liens or security interests in favor of the
Bank;
(iv) maintaining existing acquisition-related mortgages on
its real estate, as disclosed on the Financial Statements
of the Borrower and/or the Affiliated Companies dated as of
7/31/96;
(v) granting any security interest, mortgage, encumbrance
or other lien (collectively, a "Lien") in or upon any item
of real or personal property, or interest therein,
hereafter acquired, which Lien is created or assumed
contemporaneously with such acquisition to secure or
provide for the payment or financing of any part of the
purchase price thereof, or the assumption of any Lien in or
upon any such property hereafter acquired, existing at the
time of such acquisition, or the acquisition of any such
property subject to any Lien without the assumption
thereof; provided, however, that:
a) the indebtedness secured by any such Lien so
created, assumed or existing shall not exceed
100% of the lower of the actual cost or fair
market value of the property covered thereby;
b) each such Lien shall attach only to the
property so acquired; and;
c) the acquisition to which any such Lien relates
shall not result in a default under any provision
of any other agreements with the Bank.
c. The Borrower will not create, incur, guarantee, endorse
(except endorsements in the course of collection), assume or
suffer to exist any indebtedness, except (i) indebtedness
incurred to finance the actual cost of acquiring real property
used, or to be used, to expand the Borrower's existing
operations , (ii) indebtedness to the Bank, (iii) open account
trade debt incurred in the ordinary course of business and not
past due, (iv) other indebtedness disclosed on the Borrower's
Financial Statements dated as of 7/31/96, or (v) additional
indebtedness that is made expressly subordinate to the Bank
indebtedness.
d. The Borrower will not liquidate, merge or consolidate
with any person, firm, corporation or other entity.
e. The Borrower will not in any fiscal year make
acquisitions of all or substantially all of the property or
assets of any person, firm, corporation or other entity, unless
the contract price or actual value given for such property or
assets is in the aggregate, on a consolidated basis with the
Affiliated Companies $20,000,000.00 or less.
f. The Borrower will not make or have outstanding any
loans or advances to or otherwise extend credit to any person,
firm or corporation, except in the ordinary course of business.
The Borrower further agrees that (i) the Borrower will cause
each of the Affiliated Companies to comply with the foregoing
negative covenants and, (ii) a violation of any such covenant by any
of the Affiliated Companies will be an event of default under this
Agreement.
C. Representations and Warranties. To induce the Bank to provide
the Line of Credit, the Borrower represents and warrants on behalf of
itself and each of the Affiliated Companies as follows:
1. All advances received from the Bank under the Line of Credit
will be used solely by, or for the direct benefit of, the Affiliated
Companies.
2. There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower or any of the Affiliated Companies,
none of which could result in a material adverse change in its or
their business, assets, operations, financial condition or results of
operations and there is no basis known to the Borrower for any
action, suit, proceedings or investigation which could result in such
a material adverse change. All pending or threatened litigation
against the Borrower or any of the Affiliated Companies is listed on
the Addendum attached hereto and incorporated by reference (the
"Addendum").
3. The Borrower and each of the Affiliated Companies have filed
all returns and reports that are required to be filed in connection
with any federal, state or local tax, duty or charge levied, assessed
or imposed upon it or its property or withheld by it, including
unemployment, social security and similar taxes and all of such
taxes, have been either paid or adequate reserve or other provision
has been made.
4. The Borrower and each of the Affiliated Companies are in
compliance, in all material respects, with all Environmental Laws,
including, without limitation, all applicable Environmental Laws in
jurisdictions in which each entity owns or operates, or has owned or
operated, a facility or site, or holds or has held any interest in
real property. Except as otherwise disclosed on the Addendum, no
litigation or proceeding arising under, relating to or in connection
with any Environmental Law is pending or, to the best of the
Borrower's knowledge, threatened against the Borrower or any of the
Affiliated Companies, any real property which such entity holds or
has held an interest or any past or present operation of the Borrower
or any of the Affiliated Companies. No release, threatened release
or disposal of hazardous waste, solid waste or other wastes is
occurring, or to the best of the Borrower's knowledge has occurred,
on, under or to any real property in which the Borrower or any of the
Affiliated Companies holds any interest or performs any of its
operations, in violation of any Environmental Law. As used in this
Section, "litigation or proceeding" means any demand, claim notice,
suit, suit in equity, action, administrative action, or investigation
brought by a governmental authority, and "Environmental Laws" means
all provisions of laws, statutes, ordinances, rules, regulations,
permits, licenses, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by any governmental authority
concerning health, safety and protection of, or regulation of the
discharge of substances into, the environment.
5. The Borrower and each of the Affiliated Companies maintains
and will continue to maintain books and records in accordance with
GAAP. The Borrower and each of the Affiliated Companies will give
representatives of the Bank access thereto at all reasonable times,
including permission to examine, copy and make abstracts from any of
such books and records and such other information as the Bank may
from time to time reasonably request, and the Borrower and each of
the Affiliated Companies will make available to the Bank for
examination copies of any reports, statements or returns which they
may make to or file with any governmental department, bureau or
agency, federal or state.
6. As of the date of this Agreement, the individuals named in
the attached Addendum, having the titles indicated, are the principal
managing officers of the Borrower and the Affiliated Companies.
D. Additional Provisions.
1. Before the first advance under the Line of Credit, the
Borrower agrees to sign and deliver to the Bank the Note, and other
required documents and to provide such other instruments and
documents as the Bank may reasonably request, such as
certificates of good standing for the Borrower and the Affiliated
Companies, certified resolutions, incumbency certificates or other
evidence of authority.
2. The Bank will not be obligated to make any advance under the
Line of Credit if any Event of Default (as defined in the Note or as
provided in this Agreement), or event which with the passage of time,
provision of notice or both would constitute an Event of Default,
shall have occurred and be continuing.
3. The Borrower represents and warrants that the Borrower (i)
is the legal owner of one hundred percent of the outstanding shares
of stock of each of the Affiliated Companies and, (ii) will remain
the sole stockholder of each of the Affiliated Companies until
payment in full and termination of the Line of Credit.
4. The Borrower will promptly inform the Bank in writing from
time to time of (i) any material change in the nature of its business
as carried on as of the date of this Agreement or its senior
management, and (ii) any such changes occurring with respect to any
of the Affiliated Companies.
5. If, at any point during any fiscal year, the Borrower and/or
any of the Affiliated Companies shall have sold, leased, transferred
or otherwise disposed of property or assets having an aggregate book
value on a consolidated basis in excess of $1,000,000.00, the
Borrower shall promptly notify the Bank in writing of such fact and
provide such information concerning the transaction as the Bank may
reasonably require.
6. The Borrower and the Bank acknowledge a duty of good faith
and fair dealing in connection with the terms, covenants and
conditions of the Line of Credit as set forth in this Agreement.
7. Each of the Borrower and the Bank irrevocably waive any and
all rights they may have to a trial by jury in any action, proceeding
or claim of any nature relating to this agreement, any documents
executed in connection with this agreement or any transaction
contemplated in any of such documents. Each party acknowledges that
the foregoing waiver is knowing and voluntary.
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
ATTEST/WITNESS: DOVER DOWNS ENTERTAINMENT, INC.
__________________________ By:______________________(SEAL)
Denis McGlynn
President
__________________________ By:______________________(SEAL)
Robert M. Comollo
Treasurer
PNC BANK, DELAWARE
_________________________ By:______________________(SEAL)
Paul L. Frick
Assistant Vice President
Each of the undersigned guarantors hereby reaffirms its guaranty
agreement dated 7/31/96 and acknowledges and agrees that the above-
referenced line of credit is secured by such guaranty agreement.
ATTEST/WITNESS: DOVER DOWNS, INC.
_________________________ By:______________________(SEAL)
Denis McGlynn
President
_________________________ By:______________________(SEAL)
Robert M. Comollo
Treasurer
DOVER DOWNS INTERNATIONAL
SPEEDWAY, INC.
_________________________ By:______________________(SEAL)
Denis McGlynn
President
_________________________ By:______________________(SEAL)
Robert M. Comollo
Treasurer
DOVER DOWNS PROPERTIES, INC.
_________________________ By:______________________(SEAL)
Denis McGlynn
President
_________________________ By:______________________(SEAL)
Robert M. Comollo
Treasurer
ADDENDUM TO CREDIT AGREEMENT
Litigation: Describe pending or threatened litigation, proceedings,
etc. below:
Legal Proceedings
There are various claims and legal actions pending against the
Company. In the opinion of management, based on the advice of
counsel, it is only remotely likely that the ultimate resolution of
these claims and actions will be material.
Directors, Executive Officers, and other Senior Officers:
Dover Downs Entertainment, Inc.
Dover Downs, Inc.
Dover Downs International Speedway, Inc.
Dover Downs Properties, Inc.
Name Position
John W. Rollins Chairman of the Board of Directors
Henry B. Tippie Vice Chairman of the Board of Directors
Denis McGlynn Director, President and
Chief Executive Officer
Eugene W. Weaver Director and Senior Vice President -
Administration
Melvin L. Joseph Director, Vice President and
Director of Auto Racing for Dover Downs
International Speedway, Inc.
Robert M. Comollo Treasurer and Secretary
Tim Horne Vice President - Finance
John W. Rollins, Jr. Director
R. Randall Rollins Director
Patrick J. Bagley Director
Jeffrey W. Rollins Director
Michael B. Kinnard Vice President and General Counsel