Document:

Exhibit 10.4

 

AMENDED AND RESTATED GENERAL
CREDIT

AND SECURITY AGREEMENT(1)

 

THIS AMENDED AND RESTATED GENERAL CREDIT AND SECURITY
AGREEMENT, dated as of the 20th day of April, 2000, between Bremer
Bank, National Association, a national banking association, having its mailing
address and principal place of business at 633 South Concord Street, South St.
Paul, MN 55075 (herein called “Lender”), and Canterbury Park Holding
Corporation, a Minnesota corporation, having offices at 1100 Canterbury Road,
Shakopee, Minnesota 55379, (herein called “Borrower”).

 

RECITALS

 

A.            Borrower
and Lender are the parties to that certain General Credit and Security
Agreement dated as of June 3, 1998 as amended to date (as so amended, the “Original
Agreement”).

 

B.            Borrower
has requested that Lender make certain Term Loans to Borrower and Lender has
agreed to do so subject to the terms and conditions of this Agreement amending
and restating the Original Agreement.

 

NOW THEREFORE, Borrower and
Lender agree to amend and restate the Original Agreement in its entirety to
read as follows:

 

1.             Agreement.  This Agreement states the terms and
conditions under which Borrower may obtain certain loans from Lender.

 

2.             Certain Definitions.  For purposes of this Agreement,
the following terms shall have the following meanings:

 

“Advance(s)” shall have the meaning provided in
Paragraph 4A(a).

 

“Affiliate” shall include, with respect to any
party, any Person which directly or indirectly controls, is controlled by, or
is under common control with such party and, in addition, in the case of
Borrower, each officer, director or shareholder of Borrower, and each joint
venturer and partner of Borrower.

 

“Agreement” shall
mean this Agreement as originally executed and as it may be amended, modified,
supplemented or restated from time to time.

 

“Borrower” shall have the meaning provided in
the preamble hereto.

 

(1)   As amended subsequent to April 20, 2000
by amendments dated April 30, 2001, May 23, 2002, April 30,
2003, May 10, 2005, April 30, 2007, April 30, 2008, and October 30,
2008.

 

 

“Business Day” shall mean any day on which
commercial banks in Minneapolis, Minnesota are open for the transaction of
business of the kind contemplated by this Agreement.

 

“Cash Management
Agreement” shall have the meaning provided in Paragraph 4A(b).

 

“Change of Control”
shall mean the occurrence after the date of this Agreement of any event where: (a) Curtis
A. Sampson, Randall D. Sampson and Dale Schenian shall cease to respectively
own 35%, 5% and 15% of the aggregate voting power of all classes of Borrower’s
stock entitled to vote generally in the election of Borrower’s directors; or (b) Curtis
A. Sampson, Randall D. Sampson and Dale Schenian, acting individually or in
concert, shall cease to control the election of a majority of Borrower’s board
of directors or the direction of Borrower’s management policies.

 

“Chattel Paper” shall
have the meaning ascribed to such term in Article 9 of the Commercial
Code.

 

“Closing Date” shall
mean the day specified by Borrower on which all of the conditions precedent
specified in Paragraphs 21 and 23 shall have been satisfied.

 

“Collateral” shall
have the meaning provided in Paragraph 3.

 

“Commercial Code”
shall mean the Uniform Commercial Code as enacted in the State of Minnesota, as
amended from time to time, including, without limitation, on and after the
effective date of Minn. Laws 2000, Chapter 399, substantially adopting Revised Article 9
of the Uniform Commercial Code as approved by the National Conference of
Commissioners on Uniform State Law Laws in July, 1998 (as so adopted being
sometimes hereinafter referred to as “Revised Article 9”) by Revised Article 9.

 

“Completion” shall
mean that all Improvements are completed in accordance with the Plans and paid
for in full; a certificate of substantial completion for the Improvements has
been signed by Borrower, the Construction Manager and the General Contractor
and delivered to Lender, and no punch-list items remain to be completed; an
unconditional certificate of occupancy for all of the Improvements has been
issued by the appropriate governmental authority; and Borrower has delivered to
the Lender copies of all licenses and permits needed to operate the Project.

 

“Completion Deadline”
shall mean August 1, 2000.

 

“Contingent Obligations”
shall mean, with respect to any Person, all of such Person’s liabilities and
obligations which are contingent upon and will not mature unless and until the
occurrence of some event or circumstance and which are not included within the
definition of Liabilities of such Person.

 

“Default” shall mean
any event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default.

 

2

 

“Default Rate” shall
mean with respect to any: (a) Note, a rate per annum equal to two percent
(2%) per annum in excess of the interest rate which would otherwise be in
effect on such Note; or (b) other Obligation, a fluctuating rate per annum
equal all times to the sum of the Reference Rate plus 1.50% per annum.

 

“Disbursing Agreement” shall mean that certain
Disbursing Agreement dated as of even date herewith by and among Borrower, the
Lender and Commercial Partners Title, LLC (“CPT”).

 

“Equipment” shall have the meaning provided in
Paragraph 3(c).

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as the same may from time to time be amended, and
the rules and regulations promulgated thereunder by any governmental
agency or authority, as from time to time in effect.

 

“ERISA Affiliate” shall mean, with respect to
any Person, any trade or business (whether or not incorporated) which is a
member of a group of which such Person is a member and which is under common
control within the meaning of Section 414 of the Code, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.

 

“ERISA Event” shall mean: (a) a Reportable
Event described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the provision for
30-day notice to the PBGC under such regulations); (b) the withdrawal of
Borrower or any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in
Section 4001 (a)(2) of ERISA; (c) the filing of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA; (d) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA;
or (e) any other event or condition that might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan.

 

“Event of Default” shall have the meaning
provided in Paragraph 20.

 

“GAAP” shall mean generally accepted accounting
principles consistently applied and maintained throughout the period indicated
and consistent with the audited financial statements delivered to Lender
pursuant to Paragraph l5(h).  Whenever
any accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.

 

“General Intangibles” shall have the meaning
provided in Paragraph 3(d).

 

“Improvements” shall mean the 15,828 square
foot card club to be constructed within the existing buildings upon the Land.

 

“Independent Public Accountants” shall mean
Deloitte & Touche
or any other firm of independent public accountants which is acceptable to
Lender.

 

3

 

“Inventory” shall have the meaning provided in
Paragraph 3(b).

 

“Land” shall mean the land legally described on
Schedule A attached hereto and incorporated
herein by reference.

 

“Letters of Credit” shall have the meaning
provided in Paragraph 4D(a) and shall be deemed to include the “Letters of
Credit” issued by Lender pursuant to the Original Agreement (the “Existing
Letters of Credit”).

 

“Letter of Credit Application(s)” shall have
the meaning provided in Paragraph 4D(b) and shall be deemed to include the
“Letter of Credit Applications” (the “Existing Letters of Credit Applications”)
delivered to Lender pursuant to the Original Agreement for the Existing Letters
of Credit.

 

“Letter of Credit Commission” shall have the
meaning provided in Paragraph 4D(e).

 

“Letter of Credit Commitment” shall mean, at
any date, the maximum amount of Letter of Credit Obligations which may from
time to time be outstanding hereunder and under the Letter of Credit
Applications, being initially $150,000.00 and, as the context may require, the
agreement of Lender to issue the Letters of Credit for the account of Borrower
subject to the terms and conditions of this Agreement.

 

“Letter of Credit Obligations” on any date
shall mean the sum of: (a) the aggregate amount available to be drawn on
the Letters of Credit on such date; plus (b) the aggregate amount
owed by Borrower to Lender on such date as a result of draws on the Letters of
Credit for which Borrower has not reimbursed Lender.

 

“Letter of Credit Commitment Termination Date”
shall mean the Revolving Credit Termination Date.

 

“Liabilities” of any Person shall mean those
items which, in accordance with GAAP, appear as liabilities on a balance sheet.

 

“Loan(s)” shall mean the Revolving Credit Loan,
Term Loan A and Term Loan B.

 

“Loan Document(s)” shall mean individually or
collectively, as the case may be, this Agreement, the Notes, the Disbursing
Agreement, the Letter of Credit Applications and any and all other documents
executed, delivered or referred to herein or therein, as originally executed
and as amended, modified or supplemented from time to time.

 

“Loan Year” shall mean the period from the date
of this Agreement (or its anniversary date in a succeeding calendar year)
through the day preceding the anniversary date of this Agreement in the
immediately following calendar year.

 

“Material Adverse Occurrence” shall mean any
occurrence of whatsoever nature (including, without limitation, any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding) which Lender shall determine, in its sole discretion, could
adversely affect the present or prospective financial condition or 

 

4

 

operations of Borrower or
impair the ability of Borrower to perform its obligations under this Agreement
or any other Loan Document.

 

“Maturity Date” shall mean with respect to: (a) the
Revolving Credit Loan, the earlier of: (i) June 30, 2009; or (ii) the
date upon which the Obligations are declared to be due and payable (or
automatically become due and payable) upon the occurrence of an Event of
Default as provided in Paragraph 20; (b) Term Loan A, the earlier of: (i) August 1,
2005; or (ii) the date upon which the Obligations are declared to be due
and payable (or automatically become due and payable) upon the occurrence of an
Event of Default as provided in Paragraph 20; or (c) Term Loan B, the
earlier of: (i) August 1, 2003; or (ii) the date upon which the
obligations are declared to be due and payable (or automatically become due and
payable) upon the occurrence of an Event of Default as provided in Paragraph
20.

 

“Maximum Term Loan A Amount” shall mean an
amount up to 75% of the Project Costs as set forth in the Sworn Construction
Cost Statement.

 

“Maximum Term Loan B Amount” shall mean an
amount up to 50% of the card club supply costs (the “Card Club Supply Costs”)
as set forth in the budget (the “Approved Card Club Supply Budget”) approved by
Lender and as amended to allow for changes under Paragraph 17(n) hereof.

 

“Monthly Payment Date” shall mean the first day
of each month.

 

“Multiemployer Plan” shall mean a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA to which Borrower is
making or accruing an obligation to make contributions, or has within any of
the preceding three plan years made or accrued an obligation to make
contributions.

 

“Net Income” for any period shall mean net
income for such period, determined in accordance with GAAP excluding, however, (i) extraordinary
gains, and (ii) gains (whether or not extraordinary) from sales or other
dispositions of assets other than the sale of Inventory in the ordinary course
of Borrower’s business.

 

“Note(s)” shall mean the Revolving Credit Note
and the Term Notes.

 

“Obligations” shall have the meaning provided
in Paragraph 3.

 

“Original Agreement” shall have the meaning
provided in the recitals hereto.

 

“PBGC” shall mean the Pension Benefit Guaranty
Corporation or any successor board, authority, agency, officer or official of
the United States administering the principal functions assigned on the date
hereof to the Pension Benefit Guaranty Corporation under ERISA.

 

“Participant” shall
mean each Person who purchases a participation interest from Lender in the
obligations.

 

5

 

“Permitted Encumbrances”
shall mean the Security Interests and other matters affecting Borrower’s title
to the Land listed on Schedule B attached hereto
and incorporated herein by reference.

 

“Person” shall mean
any natural person, corporation, firm, partnership, association, government,
governmental agency or any other entity, whether acting in an individual,
fiduciary or other capacity.

 

“Plan” shall mean
each employee benefit plan or other class of benefits covered by Title IV of
ERISA, in either case whether now in existence or hereafter instituted, of
Borrower or any of its Subsidiaries.

 

“Plans” shall mean
the final working plans for the Improvements, including drawings,
specifications, details and manuals as approved by the Lender and as amended to
allow for changes under Paragraph 17(n) hereof.

 

“Quarterly Payment Date”
shall mean the last day of each March, June, September and December.

 

“Receivables” shall
have the meaning provided in Paragraph 3(a).

 

“Reference Rate”
shall mean the publicly announced base rate (or other publicly announced
reference rate) charged by Bremer Financial Corporation; Borrower acknowledges
that the Reference Rate may not be the lowest rate made available by Lender to
its customers and that Lender may lend to its customers at rates that are at, above
or below the Reference Rate.

 

“Reportable Event”
shall have the meaning given to that term in Title IV of ERISA.

 

“Revolving Credit
Commitment” shall mean $5,000,000.00 and, as the context may require, the
agreement of the Lender to make Advances to Borrower up to the Revolving Credit
Commitment subject to the terms and conditions of this Agreement.

 

“Revolving Credit Loan”
shall mean, at any date of determination, the aggregate outstanding principal
amount of all Advances.

 

“Revolving Credit Note”
shall mean promissory note in the form of Exhibit A attached hereto
and made a part hereof made by Borrower payable to the order of Lender to
evidence the Advances and each renewal, replacement or substitute note
therefor.

 

“Revolving Credit
Termination Date” shall mean the Maturity Date of the Revolving Credit
Loan.

 

“Security Interest” shall mean any lien,
pledge, mortgage, encumbrance, charge or security interest of any kind
whatsoever (including, without limitation, the lien or retained security title
of a conditional vendor) whether arising under a security instrument or as a
matter of law, judicial process or otherwise or the agreement by Borrower to
grant any lien, security interest or pledge, mortgage or encumber any asset.

 

6

 

“Subordinated Debt” shall mean indebtedness of
Borrower for borrowed money which is subordinated to the Obligations on terms
satisfactory to Lender in its sole discretion.

 

“Sworn Construction Cost Statement” shall mean
one or more itemized, certified statements of actual and estimated costs (the “Project
Costs”) for the build out and equipping of the Improvements (the “Project”),
signed and sworn to by: (a) Borrower, Kraus-Anderson Construction Company
as the General Contractor (the “General Contractor”) and Christenson Building
Corp., as the Construction Manager (the “Construction Manager”), in the case of
any Project Costs relating to work to be done under the construction contract
(the “General Construction Contract”) between Borrower and the General
Contractor; and (b) Borrower, in the case of any Project Costs relating to
work separately contracted for by Borrower; and, in either case, as amended to
allow for changes under Paragraph l7(n) hereof.

 

“Tangible Net Worth” shall mean, at any date of
determination, the difference between: (a) the total assets appearing on
Borrower’s balance sheet at such date prepared in accordance with GAAP after
deducting adequate reserves in each case where, in accordance with GAAP, a
reserve is proper; and (b) the total liabilities appearing on such balance
sheet (the “Total Liabilities”); excluding, however, from the
determination of total assets: (i) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, covenants not
to compete, training costs and other similar intangibles; (ii) all
deferred charges or unamortized debt discount and expense other than deferred
income taxes; (iii) securities which are not readily marketable; (iv) any
write-up in the book value of any assets resulting from a re-evaluation thereof
subsequent to the date of Borrower’ s annual financial statement described in
Paragraph 15(h); (v) amounts due from officers or Affiliates; and (vi) any
asset acquired subsequent to the date of this Agreement which the Lender, in
its reasonable business judgment, determines to be an intangible asset.

 

“Term Loan(s)” shall mean Term Loan A and Term
Loan B.

 

“Term Loan A” shall mean the loan described in
Paragraph 4B.

 

“Term Loan A Commitment” shall mean
$1,586,750.00 and, as the context may require, the agreement of the Lender to
make Term Loan A subject to the terms and conditions of this Agreement.

 

“Term Loan A Commitment Termination Date” shall
mean the earlier of: (a) August 1, 2000; or (b) the Maturity
Date of Term Loan A.

 

“Term Loan B” shall mean the loan described in
Paragraph 4C.

 

“Term Loan B Commitment” shall mean $290,699.00
and, as the context may require, the agreement of the Lender to make Term Loan
B subject to the terms and conditions of this Agreement.

 

7

 

“Term Loan B Commitment Termination Date” shall
mean the earlier of: (a) August 1, 2000; or (b) the Maturity
Date of Term Loan B.

 

“Term Note(s)” shall mean Term Note A and Term
Note B.

 

“Term Note A” shall mean the
promissory note in the form of Exhibit B attached hereto and made a
part hereof made by Borrower payable to the order of Lender to evidence Term
Loan A and each renewal, replacement or substitute note therefor.

 

“Term Note B” shall mean the promissory note in
the form of Exhibit C attached hereto and made a part hereof made
by Borrower payable to the order of Lender to evidence Term Loan B and each
renewal, replacement or substitute note therefor.

 

“Total Usage” shall mean, at any date of
determination, the sum of the Revolving Credit Loan and the Letter of Credit
Obligations.

 

3.             Security.  As security for all present and
future sums loaned or advanced by Lender to Borrower and for all other
obligations now or hereafter chargeable to Borrower’s loan account hereunder,
and all other obligations and liabilities of any and every kind of Borrower to
Lender, due or to become due, direct or indirect, absolute or contingent, joint
or several, howsoever created, arising or evidenced, now existing or hereafter
at any time created, arising or incurred including, without limitation, the
Loans and the Letter of Credit Obligations (herein called “Obligations”),
Borrower hereby grants to Lender a security interest in and to the following
property (any quoted term used in this Paragraph which is a defined term under
the Commercial Code is being used as defined in the Commercial Code except as
otherwise defined herein):

 

(a)           All
Receivables of Borrower, whether now owned or existing, or owned, acquired or
arising hereafter, together with all customer lists, original books and
records, ledger and account cards, computer tapes, discs, printouts and
records, whether now in existence or hereafter created.  ‘Receivables’ means all rights of Borrower to
the payment of money, whether or not earned and howsoever evidenced or arising,
including (without limitation) all present and future ‘Accounts’, ‘Chattel
Paper’ including, without limitation, all ‘Electronic Chattel Paper’ and ‘Tangible
Chattel Paper’, ‘Instruments’, and rights to payment which are ‘General
Intangibles’ including, without limitation, all ‘Payment Intangibles’, all
security therefore including, without limitation, all ‘Supporting Obligations’
and all of Borrower’s rights as an unpaid seller of goods (including
rescission, replevin, reclamation and stopping in transit) and all of Borrower’s
rights to any goods represented by any of the foregoing including returned or
repossessed goods;

 

(b)           All
‘Inventory’ of Borrower, whether now owned or existing, or owned, acquired or
arising hereafter and wherever located including, without limitation, all ‘Goods’
leased to Borrower as a lessor, all ‘Goods’ intended for sale or lease or to be
furnished under contracts of service, all ‘Goods’ furnished by Borrower under a
contract for service, all raw materials and work in process therefor, all
finished goods thereof, all materials and supplies of every nature used or
usable or consumed or consumable in connection with the manufacture, packing,
shipping, advertising, selling, leasing or furnishing of such ‘Goods’, and all
accessories thereto and all documents of title therefor evidencing the same;

 

8

 

(c)           All
‘Equipment’ of Borrower, whether now owned or existing, or owned, acquired or
arising hereafter and wherever located including, without limitation, all of
Borrower’s ‘Goods’ other than ‘Inventory’, all replacements and substitutions
therefor and all accessions thereto, and specifically includes, without
limitation, all present and future machinery, equipment, vehicles,
manufacturing equipment, shop equipment, office and record keeping equipment,
furniture, ‘Fixtures’, parts, tools and all other ‘Goods’ (except ‘Inventory’)
used or acquired for use by Borrower for any business or enterprise;

 

(d)           All
‘General Intangibles’ of Borrower, whether now owned or existing, or owned,
acquired or arising hereafter, including without limitation, all present and
future domestic and foreign patents, patent applications, trademarks, trademark
applications, copyrights, trade names, trade secrets, patent and trademark
licenses (whether Borrower is licensor or licensee), shop drawings, engineering
drawings, blueprints, specifications, parts lists, manuals, operating
instructions, customer and supplier lists, licenses, permits, franchises, the
right to use Borrower’s corporate name and the goodwill of Borrower’s business;

 

(e)           All
‘Deposit Accounts’ of Borrower, whether now owned or existing, or owned,
acquired or arising hereafter;

 

(f)            the
‘Commercial Tort Claims’ of Borrower described on Schedule I attached
hereto;

 

(g)           All
‘Investment Property’ of Borrower, whether now owned or existing, or owned,
acquired or arising hereafter excluding, however, ‘Investment Property’ pledged
to secure Borrower’s bond in favor of the Bureau of Alcohol, Tobacco and
Firearms;

 

(h)           All
‘Letter of Credit Rights’ of Borrower, whether now owned or existing, or owned,
acquired or arising hereafter; and

 

(i)            All
products and ‘Proceeds’ of any and all of the foregoing and all products and ‘Proceeds’
of any other Collateral (as hereinafter defined) including the ‘Proceeds’ of
any insurance covering any of the Collateral.

 

All such
Receivables, ‘Inventory’, ‘Equipment’, ‘General Intangibles’, ‘Deposit Accounts’,
‘Commercial Tort Claims’, ‘Investment Property’, ‘Letter of Credit Rights’,
products and ‘Proceeds’, together with all other assets and properties of
Borrower in or on which Lender is now or hereafter granted a security interest,
mortgage, lien or encumbrance pursuant to this Agreement or otherwise, are
hereinafter sometimes referred to as ‘Collateral’

 

4.             Terms
of Lending; etc.

 

4A           Revolving
Credit Loan Advances.

 

(a)           At the request of Borrower,
Lender agrees, subject to the terms and conditions of this Agreement, to make
loans (each such loan being herein sometimes called individually an “Advance”
and collectively the “Advances”) to Borrower from time to time on any Business
Day during the period from the date hereof and ending on the Revolving 

 

9

 

Credit Termination Date; provided, however, that Lender
shall not be required to make any Advance if, after giving effect to such
Advance, the Total Usage would exceed the Revolving Credit Commitment. The
amount of each such Advance shall be charged to Borrower’s loan account.

 

(b)           In
order to obtain an Advance, Borrower shall give written or telephonic notice to
Lender, by not later than 1:00 p.m. (Minneapolis time) on the date the
requested Advance is to be made Lender, shall make such Advance by transferring
the amount thereof in immediately available funds for credit to an account
(other than a payroll account) of Borrower at Lender, as specified in such
notice; provided, however,  that no request for an Advance
shall be required if such Advance is to be made under that certain Execusweep-Loan Sweep Agreement dated as of June 10,
1998 (the “Cash Management Agreement”) between Borrower and Lender and each
such Advance shall deemed to have been requested by Borrower under this
Agreement. At the request of Lender, Borrower shall confirm in writing any
telephonic notice.

 

(c)           The
obligation of Lender to make Advances shall terminate on the Revolving Credit
Termination Date.

 

(d)           Borrower
agrees that, on the Maturity Date of the Revolving Credit Loan, it will repay
the entire outstanding principal balance of the Revolving Credit Loan together
with accrued interest thereon and all accrued fees without presentment or
demand for payment, notice of dishonor, protest or notice of protest, all of
which are hereby waived.

 

(e)           The
Advances shall be evidenced by the Revolving Credit Note made by Borrower
payable to the order of Lender; subject, however, to the provisions
of such Note to the effect that the principal amount payable thereunder at any
time shall not exceed the then unpaid principal amount of the Revolving Credit
Loan made by Lender.  Borrower hereby
irrevocably authorizes Lender to make or cause to be made, at or about the time
of each Advance made by Lender, an appropriate notation on the records of
Lender, reflecting the principal amount of such Advance, and Lender shall make
or cause to be made, on or about the time of receipt of payment of any principal
of the Revolving Credit Note, an appropriate notation on its records reflecting
such payment.  The aggregate amount of
all Advances set forth on the records of Lender shall be rebuttable presumptive
evidence of the principal amount owing and unpaid on the Revolving Credit Note.

 

4B           Term
Loan A

 

(a)           At
the request of Borrower made prior to the Term Loan A Commitment Termination
Date, Lender agrees, subject to the terms and conditions of this Agreement, to
make a term loan (the “Term Loan A”) to Borrower in an amount up to the lesser
of: (i) the Term Loan A Commitment; or (ii) the Maximum Term Loan A
Amount.  Term Loan A proceeds shall be
disbursed by the Lender solely for the purpose of paying, or reimbursing
Borrower for the payment of, Project Costs.

 

(b)           Term
Loan A proceeds shall be advanced by the Lender in accordance with the terms
and conditions of this Agreement and in accordance with the Disbursing 

 

10

 

Agreement.  All monies advanced
by the Lender to CPT shall constitute Advances under this Agreement, and shall
bear interest from the date of advance to CPT, whether such Term Loan A
proceeds are fully disbursed by CPT or are withheld in full or in part.

 

(c)           The
obligation of Lender to make Term Loan A shall terminate on the Term Loan A Commitment Termination Date.

 

(d)           Term
Loan A shall be evidenced by, and payable in accordance with, the Term Note A
made by Borrower payable to the order of Lender; subject, however,
to the provisions of such Note to the effect that the principal amount payable
thereunder at any time shall not exceed the then unpaid principal amount of
Term Loan A made by Lender.  Borrower hereby irrevocably authorizes Lender
to make or cause to be made, at or about the time on which the Term Loan A
proceeds are advanced to CPT, an appropriate notation on the records of Lender,
reflecting the principal amount of Term Loan A, and Lender shall make or cause
to be made, on or about the time of receipt of payment of any principal of the
Term Note A, an appropriate notation on its records reflecting such
payment.  The outstanding principal
amount of Term Loan A set forth on the records of Lender shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on the Term Note
A.

 

(e)           Lender shall not be obligated to advance any
Term Loan A proceeds unless and until Borrower has provided Lender with
evidence that Borrower has paid sufficient Project Costs so that all remaining
unpaid Project Costs do not exceed the amount of the Term Loan A proceeds not
yet advanced by Lender.  If the Lender or
Borrower determines that the unadvanced balance of Term Loan A proceeds is
insufficient to cover any Project Cost, or to complete the Project, it shall
notify the other party of such determination, and Borrower shall, within five (5) Business
Days after such notice, deposit with the Lender funds equal to the amount of
the deficiency, except that, with respect to any such deficiency with respect
to the payment of Project Costs or estimated expenses of Completion arising at
any time when no other Event of Default has occurred and is continuing, Lender
agrees that Borrower shall not be required to make any such deposit until five (5) Business
Days after the deficiency is at least $250,000.00. Borrower hereby assigns and
pledges to the Lender all funds so deposited as additional security for the
Obligations.  Borrower may not reallocate
items of costs or change the Sworn Construction Cost Statement without the
consent of the Lender.

 

4C           Term Loan B

 

(a)           At
the request of Borrower made prior to the Term Loan B Commitment Termination
Date, Lender agrees, subject to the terms and conditions of this Agreement, to
make a term loan (the “Term Loan B”) to Borrower in an amount up to the lesser
of: (i) the Term Loan B Commitment; or (ii) the Maximum Term Loan B
Amount.  Term Loan B proceeds shall be
disbursed by the Lender solely for the purpose of paying, or reimbursing
Borrower for the payment of, Borrower’s Card Club Supply Costs.

 

(b)           In
order to obtain Term Loan B proceeds, Borrower shall give written or telephonic
notice to Lender, by not later than close of Lender’s business at least one (1) 

 

11

 

Business Day prior to the date on which Borrower desires that Term Loan
B proceeds be disbursed to Borrower. 
Each request for a disbursement of Term Loan B proceeds shall be in the
form of Exhibit D attached hereto. 
On the requested date but subject to the terms and conditions of this
Agreement, Lender shall make Term Loan B proceeds available to Borrower by
transferring the amount thereof in immediately available funds for credit to an
account (other than a payroll account) of Borrower at Lender.

 

(c)           The
obligation of Lender to make Term Loan B shall terminate on the Term Loan B
Commitment Termination Date.

 

(d)           Term
Loan B shall be evidenced by, and payable in accordance with, the Term Note B
made by Borrower payable to the order of Lender; subject, however,
to the provisions of such Note to the effect that the principal amount payable
thereunder at any time shall not exceed the then unpaid principal amount of
Term Loan B made by Lender.  Borrower
hereby irrevocably authorizes Lender to make or cause to be made, at or about
the time on which the Term Loan B proceeds are advanced to the Borrower, an
appropriate notation on the records of Lender, reflecting the principal amount
of Term Loan B, and Lender shall make or cause to be made, on or about the time
of receipt of payment of any principal of the Term Note B, an appropriate
notation on its records reflecting such payment.  The outstanding principal amount of Term Loan
B set forth on the records of Lender shall be rebuttable presumptive evidence
of the principal amount owing and unpaid on the Term Note B.

 

4D           Letters
of Credit

 

(a)           Subject
to the terms and conditions of this Agreement, Lender agrees to issue stand-by
letters of credit (the “Letters of Credit”) from time to time on terms
acceptable to Lender on any Business Day during the period from the date hereof
and ending on the Letter of Credit Commitment Termination Date; provided,
however, that Lender shall not be required to issue any Letter of Credit
if, after giving effect to such issuance, either: (i) the Total Usage
would exceed the Revolving Credit Commitment; or (ii) the Letter of Credit
Obligations would exceed the Letter of Credit Commitment.

 

(b)           In
order to obtain a Letter of Credit, Borrower shall appropriately complete, duly
execute and deliver to Lender an application for a Letter of Credit in form
acceptable to Lender (the “Letter of Credit Application(s)”) by no later than
the close of Lender’s business at least five (5) Business Days prior to
the date on which Borrower desires that the Letter of Credit be issued.  Notwithstanding anything to the contrary set
forth in this Agreement or any other Loan Document, no Letter of Credit shall
have an expiry date later than the Letter of Credit Commitment Termination
Date.

 

(c)           The
obligation of Lender to issue Letters of Credit shall terminate on the Letter
of Credit Commitment Termination Date.

 

(d)           Borrower
agrees to pay to Lender on demand: (i) the amount of each draft or other
request for payment drawn under any Letter of Credit (whether drawn before or
on its stated expiry date) issued by Lender; and (ii) interest on all
amounts referred to in clause (i) 

 

12

 

above from the date of such draw until payment in full at a fluctuating
rate per annum at all times equal to the Reference Rate plus 2.00% per
annum.

 

(e)           Borrower
agrees to pay to Lender a commission (the “Letter of Credit Commission”) of
1.5% per annum upon the undrawn face amount of each Letter of Credit issued by
Lender outstanding from time to time. 
The Letter of Credit Commission for each Letter of Credit shall be
payable in advance: (1) on the date of issuance of such Letter of Credit
for the initial period from the date of issuance through, to and including the
day preceding the immediately following Quarterly Payment Date; and (2) on
each Quarterly Payment Date following such issuance date for the following
quarter (or, any lesser period if the relevant Letter of Credit is scheduled to
expire prior to the end of such quarter). 
Borrower further agrees to pay to Lender all reasonable and customary
charges, fees and expenses which Lender may generally assess to its customers
in connection with, and any and all expenses which Lender may payor incur in
connection with, the issuance, extension, amendment or payment of any Letter of
Credit.

 

(f)            The rights of Lender against Borrower
hereunder shall be in addition to all rights under (and shall control over any
conflict under) any Letter of Credit Application.

 

5.             Interest.  Borrower agrees to pay interest on
the outstanding principal amount of each Loan
at the rates and at the times specified in the Note evidencing such Loan.  Each change in the interest rates due to a
change in the Reference Rate shall take effect simultaneously with the
corresponding change in the Reference Rate. 
Interest may be charged to Borrower’s loan account as an Advance at
Lender’s option, whether or not Borrower then has a right to obtain an Advance
pursuant to the terms of this Agreement.

 

6.             Set-Off; etc.  Upon the occurrence of a Default or an Event of Default, Lender is
hereby authorized at any time and from time to time, without notice to Borrower
(any such notice being expressly waived by Borrower), to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by Lender or any
Participant to or for the credit or the account of Borrower, any amounts held
in any account maintained at Lender or any Participant, against any and all
amounts which may be owed to Lender or any Participant by Borrower whether in
connection with this Agreement or otherwise and irrespective of whether
Borrower shall have made any requests under this Agreement.

 

7.             Collection.

 

(a)           At
any time after the occurrence of an Event of Default, Lender may notify account
debtors on the Receivables (the “Customers”) at any time that Receivables have
been assigned to Lender and collect them directly in Lender’s own name but
unless and until Lender does so or gives Borrower other instructions, Borrower shall
make collection for Lender at Borrower’s sale cost and expense.  Following the occurrence of an Event of
Default, Borrower shall deliver to Lender all full and partial payments arising
from the sale or other disposition of Collateral received by Borrower their
original form, except for endorsement where necessary.  Until such payments are so delivered to
Lender, such payments shall be held in trust by Borrower for and as Lender’s
property and shall not be commingled with any funds of Borrower.  The net amount received by Lender as proceeds

 

13

 

arising from the sale or other disposition of Collateral will be
credited by Lender to Borrower’s loan account (subject to final collection
thereof) after allowing the number of days required by the applicable bank for
collection of checks and other instruments. 
On and after the effective date of Revised Article 9, Borrower, for
purposes of the security interest granted pursuant to this Agreement, has
granted to the Lender a direct security interest in all Deposit Accounts
constituting part of the Collateral and such Deposit Accounts are not claimed
merely as Proceeds of other Collateral.

 

8.             Warranty
as to Collateral.  Borrower
warrants that:

 

(a)           All
Receivables listed in Borrower’s financial statements or schedules will, when
Borrower delivers such financial statements or the schedules to Lender, be bona
fide existing obligations created by the sale and actual delivery of goods or
the rendition of services to Customers in the ordinary course of business,
which Borrower then owns free of any Security Interest except for the Security
Interest in favor of Lender created by this Agreement and which are then
unconditionally owing to Borrower without defense, offset or counterclaim; and

 

(b)           all
Inventory and Equipment is and shall be owned by Borrower, free of any Security
Interest except for the Security Interest of Lender created by this Agreement
or Security Interests permitted by Paragraph 18(c).

 

Lender’s rights to
and security interest in the Collateral will not be impaired by the
ineligibility of any such Collateral for Advances and will continue to be
effective until all Obligations chargeable to Borrower’s loan account have been
fully satisfied.

 

9.             Power
of Attorney.  Borrower appoints
Lender, or any other person whom Lender may from time to time designate, as
Borrower’s attorney with power: (a) to endorse Borrower’s name on any
checks, notes, acceptances, drafts or other forms of payment or security that
may come into Lender’s possession; (b) to sign Borrower’s name on any
invoice or bill of lading relating to any Receivables, on drafts against
Customers, on schedules and confirmatory assignments of Receivables, on notices
of assignment, financing statements and amendments under the Commercial Code
and other public records, on verifications of accounts and on notices to
Customers; (c) to notify the post office authorities to change the address
for delivery of Borrower’s mail to an address designated by Lender; (d) to
receive, open and dispose of all mail addressed to Borrower; (e) to send
requests for verification of accounts to Customers; and (t) to do all
things necessary to carry out this Agreement; provided, however,
that the powers specified in clauses (c) and (d) above may be
exercised only after the occurrence of an Event of Default. Borrower ratifies
and approves all acts of the attorney taken within the scope of this power of
attorney.  Neither Lender nor the
attorney will be liable for any acts of commission or omission nor for any
error in judgment or mistake of fact or law. 
This power, being coupled with an interest, is irrevocable so long as
any Receivable in which Lender has a security interest or any Obligation
remains unpaid.  Borrower waives presentment
and protest of all instruments and notice thereof, notice of default and
dishonor and all other notices to which Borrower may otherwise be entitled.

 

10.          Location
of Collateral.  Borrower warrants
that its chief executive office is at the address stated in the opening
paragraph of this Agreement and that its books and records 

 

14

 

concerning Receivables are located there.  Borrower’s Inventory, Equipment and other
goods are at the location or locations as designated on Schedule C annexed hereto.  Borrower
shall immediately notify Lender if any additional locations for Collateral are
subsequently established.  Borrower shall
not change the location of its chief executive office, the place where it keeps
its books and records, or the location of any Collateral (except for sales of
Inventory or obsolete Equipment in the ordinary course of business) until
Borrower has obtained the written consent of Lender and all necessary filings
have been made and other actions taken to continue the perfection of Lender’s
Security Interest in such new location. 
Lender’s Security Interest attaches to all the Collateral wherever
located, and the failure of Borrower to inform Lender of the location of any
item or items of Collateral shall not impair Lender’s Security Interest
therein.  Borrower’s State of
organization is the State set forth in the preamble hereto and such State has
been its State of organization since the date of Borrower’s organization.  Borrower will not change its State of
organization from such State without 30 days’ prior written notice to Lender,
Lender has given its written consent to such change, and Borrower has delivered
to Lender acknowledgement copies of financing statements filed where
appropriate to continue the perfection of Lender’s security interest as a first
priority security interest therein.

 

11.          Ownership
and Protection of Collateral. 
Borrower warrants, represents and covenants to Lender that the
Collateral is now and, so long as Borrower is obligated to Lender, will be,
owned by Borrower free and clear of all Security Interests except for the
Security Interest in favor of Lender created by this Agreement and except the
Security Interests, if any, permitted by Paragraph 18(c).  Borrower will not sell, lease or otherwise
dispose of the Collateral, or attempt so to do (except for sales in the
ordinary course of business of Inventory or obsolete Equipment) without the
prior written consent of Lender and unless the proceeds of any such sale (including,
without limitation, sales in the ordinary course of business of Inventory or
obsolete Equipment) are deposited in Borrower’s “Main Operating Account”
described in the Cash Management Agreement. 
After the occurrence of a Default or an Event of Default, Lender will at
all times have the right to take physical possession of any tangible Collateral
and to maintain such possession on Borrower’s premises or to remove the same or
any part thereof to such other places as Lender may wish. If Lender exercises
Lender’s right to take possession of such Collateral, Borrower shall on Lender’s
demand, assemble the same and make it available to Lender at a place reasonably
convenient to Lender.  Borrower shall at
all times keep the Equipment constituting Collateral in good condition and
repair.  All expenses of protecting,
storing, warehousing, insuring, handling and shipping of the Collateral, all
costs of keeping the Collateral free of any Security Interests prohibited by this
Agreement and of removing the same if they should arise, and any and all
excise, property, sales and use taxes imposed by any state, federal or local
authority on any of the Collateral or in respect of the sale thereof, shall be
borne and paid by Borrower and if Borrower fails to promptly pay any thereof
when due, Lender may, at its option, but shall not be required to, pay the same
and charge Borrower’s loan account therefor. Borrower agrees to renew all
insurance required by this Paragraph 11 or Paragraph 13 at least 30 days prior
to its expiration.

 

12.          Perfection
of Security Interest.  Borrower
agrees to execute such financing statements together with any and all other
instruments or documents and take such other action, including delivery, as may
be required to create, evidence, perfect and maintain Lender’s Security
Interest in the Collateral and Borrower shall not in any manner do any act or
omit to do any act which would in any manner impair or invalidate Lender’s
Security Interest in the Collateral or the perfection thereof.  Borrower will cooperate with Lender in
obtaining control with respect to 

 

15

 

Collateral
consisting of Deposit Accounts, Investment Property, Letter of Credit Rights,
and Electronic Chattel Paper.  Where
Collateral is in the possession of a third party, Borrower will join with
Lender in notifying such third party of Lender’s security interest and in
obtaining an acknowledgement from such third party that it is holding such
Collateral for the benefit of the Lender.

 

13.          Insurance.  Borrower shall maintain insurance coverage on
any Collateral including Receivables and other rights to payment with such
companies, against such hazards, and in such amounts as may from time to time
be acceptable to Lender and shall deliver such policies or copies thereof to
Lender with satisfactory lender’s loss payable endorsements naming Lender.  Each policy of insurance shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Lender in the event of any anticipated cancellation of the policy for any
reason and a clause that the interest of Lender shall not be impaired or
invalidated by any act or neglect of Borrower nor by the occupation of the
premises wherein such Collateral is located for purposes more hazardous than
are permitted by said policy.  Borrower
will maintain, with financially sound and reputable insurers, insurance with
respect to its properties and business against such casualties and contingencies
of such types (which may include, without limitation, public and product
liability, larceny, embezzlement, or other criminal misappropriation insurance)
and in such amounts as may from time to time be required by Lender.

 

14.          Borrower’s
Loan Account.  Lender may charge
to Borrower’s loan account at any time the amounts of all Obligations (and
interest, if any, thereon) owing by Borrower to Lender, including (without
limitation) loans, Advances, the Term Loans, the Letters of Credit Obligations,
debts, liabilities, obligations acquired by purchase, assignment or
participation and all other obligations, whenever arising, whether absolute or
contingent and whether due or to become due; also the amount of all costs and
expenses and all attorneys’ fees and legal expenses incurred in connection with
efforts made to enforce payment of such obligations, or to obtain payment of
any Receivables, or the foreclosure of any Collateral or in the prosecution or
defense of any actions or proceedings relating in any way to this Agreement
whether or not suit is commenced, including reasonable attorneys’ fees and
legal expenses incurred in connection with any appeal of a lower court’s order
or judgment; and also the amounts of all unpaid taxes and the like, owing by
Borrower to any governmental authority or required to be deposited by Borrower,
which Lender pays or deposits for Borrower’s account. All sums at any time
standing to Borrower’s credit on Lender’s books and all of Borrower’s property
at any time in Lender’s possession or upon or in which Lender has a Security
Interest, may be held by Lender as security for all obligations which are
chargeable to Borrower’s loan account. 
Subject to the foregoing, Lender, at Borrower’s request, will remit to
Borrower any net balance standing to Borrower’s credit on Lender’s books.  Lender will account to Borrower monthly and
each monthly accounting will be fully binding on Borrower, unless, within sixty
(60) days thereafter, Borrower gives Lender specific written notice of
exceptions.  All debit balances in
Borrower’s loan account will bear interest as provided in Paragraph 5 of this
Agreement.

 

15.          Participations.  If any Person shall acquire a participation
in any Loan or the Letter of Credit Obligations, Borrower hereby grants to any
such Person holding a participation, and such Person shall have and is hereby
given a continuing Security Interest in any money, securities and other
property of Borrower in the custody or possession of such Participant,
including the right of set-off as fully as if such Participant had lent directly
to Borrower the amount of such participation.

 

16

 

16.          General
Representations and Warranties. 
To induce Lender to make Advances and the Term Loans hereunder, Borrower
makes the following representations and warranties, all of which shall survive
the occurrence of the Closing Date, the making of the initial Advance and the
Term Loans and the issuing of the Letters of Credit:

 

(a)           Borrower
is a corporation duly organized, existing, and in good standing under the laws
of the State of Minnesota, has power to own its property and to carry on its
business as now conducted, and is duly qualified to do business in all states
in which the nature of its business requires such qualification.

 

(b)           The
execution and delivery of this Agreement and the other Loan Documents and the
performance by Borrower of fits
obligations hereunder and thereunder do not and will not conflict with any
provision of law, or of the charter or bylaws of Borrower, or of any agreement
binding upon Borrower.

 

(c)           The
execution and delivery of this Agreement and the other Loan Documents have been
duly authorized by all necessary official action by the Board of Directors and
shareholders of Borrower; and this Agreement and the other Loan Documents have
in fact been duly executed and delivered by Borrower and constitute its lawful
and binding obligations, legally enforceable against it in accordance with
their respective terms.

 

(d)           There
is no action, suit or proceeding at law or equity, or before or by any federal,
state, local or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, pending or, to the knowledge of
Borrower, threatened against Borrower or the property of Borrower which, if
determined adversely, would be a Material Adverse Occurrence or would affect
the ability of Borrower to perform its obligations under the Loan Documents;
and Borrower is not in default with respect to any final judgment, writ,
injunction, decree, rule or regulation of any court or federal, state,
local or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, where the effect of such default would be
a Material Adverse Occurrence.

 

(e)           The
authorization, execution and delivery of this Agreement, and the payment of the
Loans and interest thereon, is not, and will not be, subject to the
jurisdiction, approval or consent of any federal, state or local regulatory
body or administrative agency.

 

(f)            Except
as set forth on Schedule D attached hereto, all of the assets of
Borrower are free and clear of Security Interests.

 

(g)           Borrower
has filed all federal, state and local tax returns which, to the knowledge of
Borrower, are required to be filed, and Borrower has paid all taxes shown on
such returns and all assessments which are due. 
Borrower has made all required withholding deposits.  Federal income tax returns of Borrower have
been examined and approved or adjusted by the applicable taxing authorities or
closed by applicable statutes for any fiscal years prior to and including the
fiscal year ended on December 31, 1991. 
Borrower does not have knowledge of any objections to or claims for
additional taxes by 

 

17

 

federal, state or local taxing authorities for subsequent years which
would be a Material Adverse Occurrence.

 

(h)           Borrower
has furnished to Lender the financial statements described on Schedule E  attached hereto.  These statements were prepared in accordance
with GAAP and present fairly the financial condition of Borrower and its
consolidated Subsidiaries.  There has
been no material adverse change in the condition of Borrower, financial or
otherwise, since the date of the most recent of such financial statements.

 

(i)            The
value of the assets and properties of Borrower at a fair valuation and at their
then present fair salable value is and, after giving effect to any pending
Advance and the application of the amount advanced, will be materially greater
than its total liabilities, including Contingent Obligations, and Borrower has
(and has no reason to believe that it will not have) capital sufficient to pay
its liabilities, including Contingent Obligations, as they become due.

 

(j)            Borrower
is in compliance with all requirements of law relating to pollution control and
environmental regulations in the respective jurisdictions where Borrower is
presently doing business or conducting operations.

 

(k)           All
amounts obtained pursuant to Advances will be used for Borrower’s working
capital purposes and to finance capital expenditures permitted to made pursuant
hereto.  The Term Loan A proceeds will be
used solely to partially finance the Project Costs and the Term Loan B proceeds
will be used solely to partially finance the Card Club Supply Costs.  No part of any Loan shall be used at any time
by Borrower to purchase or carry margin stock (within the meaning of Regulation
U promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.  Borrower is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purposes of purchasing or carrying any such margin
stock.  No part of the proceeds of any
Loan will be used by Borrower for any purpose which violates, or which is
inconsistent with, any regulations promulgated by the Board of Governors of the
Federal Reserve System.

 

(l)            Except
for the trademarks, patents, copyrights and franchise rights listed on Schedule F  attached hereto, Borrower is not the owner of
any patent, trademark, copyright or franchise rights.  Borrower is not an “investment company”, or
an “affiliated person” of, or a “promoter” or “principal underwriter” for, an “investment company”, as such terms are
defined in the Investment Company Act of 1940, as amended.  The making of the Loans, the application of
the proceeds and repayment thereof by Borrower and the performance of the
transactions contemplated by this Agreement will not violate any provision of
said Act, or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder.

 

(m)          (i) Each
Plan is in compliance in all material respects with all applicable provisions
of ERISA and the Code; (ii) the aggregate present value of all accrued
vested benefits under all Plans (calculated on the basis of the actuarial
assumptions specified in the most recent actuarial valuation for such Plans)
did not exceed as of the date of the most 

 

18

 

recent actuarial valuation for such Plans the fair market value of the
assets of such Plans allocable to such benefits; (iii) Borrower is not
aware of any information since the date of such valuations which would
materially affect the information contained therein; (iv) no Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred an
accumulated funding deficiency, as that term is defined in Section 302 of
ERISA or Section 412 of the Code (whether or not waived); (v) no
liability to the PBGC (other than required premiums which have become due and
payable, all of which have been paid) has been incurred with respect to any
Plan, and there has not been any Reportable Event which presents a material
risk of termination of any Plan by the PBGC; and (vi) Borrower has not
engaged in a transaction which would subject it to tax, penalty or liability
for prohibited transactions imposed by ERISA or the Code. Borrower does not
contribute to any Multiemployer Plan.

 

(n)           The
number of shares and classes of the capital stock of Borrower and the ownership
thereof are accurately set forth on Schedule G attached hereto. 
Borrower has not: (i) issued any unregistered securities in
violation of the registration requirements of Section 5 of the Securities
Act of 1933, as amended, or any other law; or (ii) violated any rule,
regulation or requirement under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, in either case where the effect of
such violation would be a Material Adverse Occurrence.  No proceeds of the Advances will be used to
acquire any security in any transaction which is subject to Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended.

 

(o)           Except
as set forth on Schedule H attached hereto, Borrower does not
have any Contingent Obligations.

 

(p)           Borrower
has conducted a comprehensive review and assessment of its computer
applications and has made inquiry of Borrower’s material suppliers, vendors and
customers with respect to the Year 2000 Problem and, based upon such review,
Borrower reasonably believes that the Year 2000 Problem has not resulted in and
will not result in a material adverse change in Borrower’s business, condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the Obligations.  Year 2000 Problem
means the risk that computer applications used by any Person may be unable to
recognize the perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.

 

(q)           All
factual information heretofore or herewith furnished by or on behalf of
Borrower to Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and no such information contains any material misstatement
of fact or omits to state a material fact or any fact necessary to make the
statements contained therein not misleading.

 

(r)            Each
representation and warranty shall be deemed to be restated and reaffirmed to
Lender on and as of the date of the making of each Advance and each
disbursement of any Term Loan proceeds and of the issuing of each Letter of
Credit, as the 

 

19

 

case may be, under this Agreement except that any reference to the
financial statements referred to in Paragraph 16(h) shall be deemed to
refer to the financial statements then most recently delivered to Lender
pursuant to Paragraphs 17(a)(i) and (ii).

 

(s)           Borrower
is the owner, in fee simple, of the Land subject to no Security Interest except
Permitted Encumbrances.

 

(t)            The
unadvanced portion of: (i) the Maximum Term Loan A Amount equals or
exceeds the sum of: (A) the total of all remaining unpaid Project Costs plus
(B) $250,000.00; and the Maximum Term Loan B Amount equals or exceeds the
total of all remaining unpaid Card Club Supply Costs.

 

17.          Affirmative
Covenants.  Borrower agrees that
it will do all of the following:

 

(a)           Furnish
to Lender in form satisfactory to Lender:

 

(i)            Within
90 days after the end of each fiscal year of Borrower, a complete audited
financial report prepared and certified without qualification or explanatory
language by Independent Public Accountants on a Consolidated and consolidating
basis for Borrower and any Consolidated Subsidiaries of Borrower; together with
a copy of the management letter or memorandum, if any, delivered by such Independent
Public Accountants to Borrower and Borrower’s response thereto.  If Borrower shall fail to supply the report
within such time limit, Lender shall have the right (but not the duty) to
employ certified public accountants acceptable to Lender to prepare such report
at Borrower’s expense.

 

(ii)           Within
45 days after the end of each fiscal quarter, a balance sheet and operating
figures as to that quarter and year to date prepared in accordance with GAAP on
a Consolidated and consolidating basis for Borrower and any Consolidated
Subsidiaries of Borrower and certified as correct by the chief financial
officer or treasurer of Borrower but subject to adjustments as to inventories
or other items to which an officer of Borrower directs attention in writing.

 

(iii)          With the financial statements described in
Paragraph 17(a)(i) and (ii), a compliance certificate in the form attached
as Exhibit E certified as true and accurate by the chief financial
officer or treasurer of Borrower.

 

(iv)          By
no later than 45 days after the beginning of any of Borrower’s fiscal years,
projections for Borrower’s then current fiscal year consisting of projected
month end balance sheets and month end and year to date statements of earnings
and cash flows, all in a form acceptable to Lender and certified by Borrower’s
chief financial officer or treasurer as having been prepared in good faith and
representing the most probable course of Borrower’s business during such fiscal
year.

 

(v)           Immediately
upon and in any event within five (5) days after any officer of Borrower
becomes aware of any Default or Event of Default, a notice 

 

20

 

describing the nature thereof and what action Borrower proposes to take
with respect thereto.

 

(vi)          As
soon as available and in event within ten (10) days after the filing
thereof, a copy of each report filed with the Securities and Exchange
Commission.

 

(vii)         Immediately upon becoming aware of the
occurrence, with respect to any Plan, of any Reportable Event or any “prohibited
transaction” (as defined in Section 4975 of the Code), a notice specifying
the nature thereof and what action Borrower proposes to take with respect
thereto, and, when received, copies of and notice from PBGC of intention to
terminate or have a trustee appointed for any Plan.

 

(viii)        From
time to time, at Lender’s request, any and all other material, reports,
information, or figures required by Lender.

 

(b)           Permit
Lender and its representatives access to, and the right to make copies of, the books,
records, and properties of Borrower at all reasonable times, including, without
limitation, those pertaining to the Project; and permit Lender and its
representatives to discuss Borrower’s financial matters with officers of
Borrower and with its independent certified public accountant (and, by this
provision, Borrower authorizes its independent certified public accountant to
participate in such discussions).

 

(c)           Pay
when due all taxes, assessments, and other liabilities against it or its
properties including, without limitation, an Project Costs and Card Club Supply
Costs except those which are being contested in good faith and for which an
adequate reserve has been established; Borrower shall make all withholding
payments when due.

 

(d)           Promptly
notify Lender in writing of any substantial change in present management of
Borrower.

 

(e)           Pay
when due all amounts necessary to fund in accordance with its terms any Plan;

 

(f)            Comply
in all material respects with all laws, acts, rules, regulations and orders of
any legislative, administrative or judicial body or official applicable to
Borrower’s business operation or Collateral or any part thereof; provided,
however, that Borrower may contest any such law, act, rule, regulation
or order in good faith by appropriate proceedings so long as (i) Borrower
first notifies Lender of such contest, and (ii) such contest does not, in
Lender’s sole discretion, adversely affect Lender’s right or priority in the
Collateral or impair Borrower’s ability to pay the Obligations when due.

 

(g)           Promptly
notify Lender in writing of: (x) any litigation which: (i) involves
an amount in dispute in excess of $50,000.00 which is not covered by insurance
or, if covered by insurance, the insurer has failed to accept defense of the
litigation or has done so under a reservation of rights; (ii) relates to
the matters which are the subject of this Agreement; or (iii) if
determined adversely to Borrower would be a Material Adverse Occurrence; and (y) any
adverse development in any litigation described in clause (x) which could
cause a Material Adverse Occurrence.

 

21

 

(h)           Maintain
all of Borrower’s primary operating accounts at Lender.

 

(i)            At
all times, maintain the ratio of: (i) Borrower’s Liabilities; to (ii) Tangible
Net Worth at not greater than: (i) 1.15 to 1.00 at any time prior to October 1,
2008; or (ii) 0.75 to 1.00 at any time thereafter.

 

(j)            Maintain
Borrower’s Tangible Net Worth at not less than: $24,000,000.00 at all times.

 

(k)           At
all times, keep Lender advised of the name of each contractor for the Project
and of the type of work, material or services and the dollar amount covered by
their respective contracts with Borrower or the General Contractor.  If requested by Lender, Borrower shall also
furnish to the Lender a copy of each contract with each of the contractors or
sub-contractors.

 

(l)            Intentionally
Omitted.

 

(m)          Expeditiously
complete and fully pay for the development and construction of the Project in a
good and workmanlike manner and in accordance with the contracts, subcontracts
and the Plans, and in compliance with all applicable governmental requirements,
and any applicable covenants, conditions, restrictions and reservations, so
that Completion of the Improvements occurs on or before the Completion
Deadline.  Borrower shall correct or
cause to be corrected: (i) any defect in the Improvements; (ii) any
departure in the construction of the Improvements from the Plans or
governmental requirements, and (iii) any encroachment by any part 0 f the Improvements or any other
structure located on the Land on any building line, easement, property line or
restricted area.

 

(n)           Deliver
to Lender revised, sworn statements of estimated Project Costs or Card Club
Supply Costs, as the case may be, showing changes in or variations from the
original Sworn Construction Cost Statement or the Approved Card Club Supply
Budget, as soon as such changes are known to Borrower: Borrower shall furnish
Lender with copies of all changes or modifications in the Plans, contracts or
subcontracts for the Project, prior to incorporation of any such change or
modification into the Project, whether or not Lender’s consent to such change
or modification is required. Borrower shall not make or consent to any change
or modification in such Plans, contracts or subcontracts, and no work shall be
performed with respect to any such change or modification, without the prior
written consent of Lender, if such change or modification would in any material
way alter the design or structure of the Project, or increase or decrease the
Project Costs by $100,000.00 or more for any single change or modification, or
if the aggregate amount of all changes and modifications exceeds $250,000.00.

 

(o)           Upon Completion of the Improvements, and
prior to the final disbursement of Term Loan A proceeds to pay for Project
Costs shown on the Sworn Construction Cost Statement, and as a condition of the
same, furnish the Lender with all items required to evidence Completion,
including unconditional occupancy permits; certification from the Construction
Manager that the Project has been completed in accordance with the approved
Plans; and copies of all licenses and permits required for operation of the
Project.

 

22

 

18.          Negative
Covenants.  Borrower agrees that
it will not do any of the following, without first obtaining Lender’s prior
written consent:

 

(a)           Purchase
or redeem any shares of Borrower’s capital stock; or declare or pay any
dividends (other than dividends payable in capital stock); or make any
distribution to stockholders of any assets of Borrower except that so long as
no Default or Event of Default has occurred and is continuing at the time of
any of the following described payments or would result therefrom, Borrower may
pay dividends payable from Borrower’s net income.

 

(b)           Incur
or permit to exist any interest-bearing indebtedness, secured or unsecured,
including without limitation, indebtedness for money borrowed or capitalized
leases, except (i) borrowings under this Agreement; (ii) borrowings,
if any, which are existing on the date of this Agreement and which are
disclosed on Schedule I
attached hereto; (iii) borrowing from the Minnesota Horesman’s Benevolent &
Protective Association, Inc. so long as the aggregate outstanding
principal amount of such borrowings does not exceed $750,000.00 at any time and
such borrowings are unsecured and do not have any priority of payment over the
Obligations upon the occurrence of any Default or Event of Default described in
Paragraph 20(d), (e), (f), (g) or (h); (iv) capital leases permitted
by Paragraph 18(1) and then only so long as the aggregate balance sheet
amount, as determined in accordance with GAAP, does not exceed $250,000.00 at
any time; or (v) purchase money indebtedness incurred in connection with
capital expenditures permitted by Paragraph 18(1)(ii) so long as the
aggregate outstanding principal balance thereof does not exceed $250,000.00 at
any time.

 

(c)           Create
or permit to exist any Security Interest on any of Borrower’s assets now owned
or hereafter acquired except: (i) those created in Lender’s favor and held
by Lender; (ii) liens of current taxes not delinquent or taxes which are
being contested in good faith for which an adequate reserve has been
established; (iii) Security Interests disclosed on Schedule D attached hereto and in the case of Security Interests disclosed in Part II
of Schedule D, securing only debt outstanding on the date of this
Agreement and disclosed on Schedule I; provided, however,
that Security Interests disclosed in Part I of Schedule D are
permitted only so long as: (A) Borrower’s title to its property is not
materially adversely affected; (B) its use of such property in the
ordinary course of its business is not materially interfered with; (C) adequate
reserves with respect thereto have been set aside on Borrower’s books in
accordance with GAAP; and (D) in all events, Borrower shall payor cause to
be paid all such secured amounts forthwith upon the commencement of foreclosure
of any such Security Interest; or (iv) security interests created in
connection with purchase money indebtedness incurred in connection with the
capital expenditures permitted by Paragraph 18(1)(ii), but only to the
extent that: (A) such security interest attaches only to the equipment
then being acquired by Borrower, did not and does not attach to Borrower’s
current assets and does not secure any other indebtedness; (B) no Default
or Event of Default has occurred and is continuing at the time of the proposed
creation of such security interest or would result therefrom; and/or (C) no
portion of the purchase price of the relevant equipment has been funded by the
trade-in or available proceeds arising from the sale or other disposition of
any of Borrower’s then, or previously, owned equipment.

 

23

 

(d)           Effect
any recapitalization; or be a party to any merger or consolidation; or sell,
transfer, conveyor lease all, or any substantial part, of its property where “substantial”
means any of the Land (including, without limitation, leasehold improvements
thereon) or any portion of Borrower’s personal property having an aggregate
book value (as measured by Borrower’ s then most recent audited financial statements
delivered to Lender) of at least $100,00.00 for any single personal property
transaction (or related series of transactions) or aggregate book value of at
least $500,000.00 for all personal property transactions in any fiscal year; or
sell or assign (except to Lender), with or without recourse, any Receivables or
General Intangibles.

 

(e)           Enter
into a new business or purchase or otherwise acquire any business enterprise or
any substantial assets of any person or entity; or make any loans to any person
or entity except for loans and advances to officers for expenses to be incurred
in the ordinary course of business so long as the aggregate outstanding
principal amount thereof does not exceed $10,000.00 at any time; or purchase
any shares of stock of, or similar investment in, any entity.

 

(f)            Become
a guarantor or surety or pledge its credit or its assets on any undertaking of
another.

 

(g)           Make
any substantial change in present management or policy or in its present
business or enter into a new business.

 

(h)           Enter
into any agreement providing for the leasing by Borrower of property which has
been or is to be sold or transferred by Borrower to the lessor thereof, or
which is substantially similar in purpose to the property so sold or
transferred.

 

(i)            Change
its fiscal year.

 

(j)            (i) Permit
or suffer any Plan maintained for employees of Borrower or any commonly
controlled entity to engage in any transaction which results in a liability of
Borrower under Section 409 or 502(i) of ERISA or Section 4975 of
the Code; (ii) permit or suffer any such Plan to incur any “accumulated
funding deficiency” (within the meaning of Section 302 of ERISA and Section 412
of the Code), whether or not waived; (iii) terminate, or suffer to be
terminated, any Plan covered by Title IV of ERISA maintained by Borrower or any
commonly controlled entity or permit or suffer to exist a condition under which
PBGC may terminate any such Plan; or (iv) permit to exist the occurrence
of any Reportable Event (as defined in Title IV of ERISA) which represents termination by the PBGC of any Plan.

 

(k)           Enter
into any agreement containing any provision which would be violated or breached
by Borrower under any Loan Document or by the performance by Borrower of its
obligations under any Loan Document or, except for this Agreement or any other
Loan Document, which would prohibit Borrower from granting, or otherwise limit
the ability of Borrower to grant to Lender any Security Interest on any assets
or properties of Borrower.

 

(l)            Make
capital expenditures (including without limitation by way of capitalized
leases) except for the replacement and repair of Borrower’s existing Equipment 

 

24

 

or for acquisition of new Equipment consistent with Borrower’s present
business practices and then, only so long as the aggregate amount of all such
capital expenditures made during any of Borrower’s fiscal years does not exceed
the sum of: (i) the amount of capital leases permitted by Paragraph 18(b);
plus (ii) an aggregate amount of $1,500,000.00 for other capital
expenditures.

 

19.          Availability of
Collateral.  Intentionally Deleted.

 

20.          Default and Remedies.  It shall be an Event of Default
under this Agreement if:

 

(a)           Borrower
fails to make any payment required under this Agreement or any present or
future supplements hereto or under any other agreement between Borrower and
Lender when due, or if payable upon demand, upon demand and such failure shall
remain unremedied for five (5) days; or

 

(b)           Borrower
fails to perform or observe any covenant, condition or agreement contained in
this Agreement or any Loan Document on its part to be performed (other than
those failures covered by other subparagraphs of this Paragraph) and such
default shall continue for a period of 30 days after written notice thereof
from Lender to Borrower; or

 

(c)           Any
warranty, representation or statement made or furnished to Lender by or on
behalf of Borrower proves to have been false in a material respect when made;
or

 

(d)           A
proceeding seeking an order for relief under the Bankruptcy Code is commenced
by or against Borrower and, if commenced against Borrower, remains undismissed
for 60 days; or

 

(e)           Borrower
becomes insolvent or generally fails to pay, or admit in writing its or his
inability to pay, its or his debts as they become due; or

 

(f)            Borrower
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for it or him or for any of its or his property, or
makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower or for a substantial part of Borrower’s
property; or

 

(g)           Any
other reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding is
commenced in respect of Borrower; or

 

(h)           Borrower
takes any action to authorize, or in furtherance of, any of the events
described in the foregoing clauses (d) through (g); or

 

(i)            Any
judgments, writs, warrants of attachment, executions or similar process (not
covered by insurance) is issued or levied against Borrower or any of its assets
in excess of an aggregate amount of $100,000.00 for any or all of such
judgments, writs, warrants, executions or similar process and is not released,
vacated or fully bonded prior to any sale and in any event within 90 days after
its issue or levy; or

 

25

 

(j)            Borrower
shall fail to comply with Paragraph 13, any of Paragraphs 17 (a), (i) or CD or any of Paragraphs 18(a) through
(1) (both inclusive); or

 

(k)           The
maturity of any Indebtedness of Borrower (other than Indebtedness under this
Agreement or the other Loan Documents) in the aggregate amount of more than $500,000.00 for Borrower shall be
accelerated, or Borrower shall fail to
pay any such Indebtedness when due or, in the case of such Indebtedness payable
on demand; or

 

(l)            Any
Change of Control shall occur; or

 

(m)          Work
on the Project shall be substantially abandoned, or shall by reason of Borrower’s
fault, be unreasonably delayed or discontinued for a period of ten (10) days,
or construction shall be delayed for any reason whatsoever to the extent that a
Certificate of Occupancy for the Project cannot, in the reasonable judgment of
the Lender, be accomplished prior to the Completion Deadline; or

 

(n)           Lender
determines that the remaining undisbursed portion of the Maximum Term Loan A
Amount is insufficient to fully pay all of the then unpaid Project Costs and
estimated expenses of Completion or that the remaining undisbursed portion of
the Maximum Term Loan B Amount is insufficient to fully pay all of the then
unpaid Card Club Supply Costs and Borrower: (i) fails to deposit with the
Lender, within five (5) Business Days after demand, sufficient funds to
permit the Lender to pay said excess costs as the same become payable; or (ii) does
not pay said excess costs directly and, with respect to the Project Costs, delivers to the Lender
unconditional mechanics’ lien waivers therefor (or paid receipts for
non-lienable items), at the Lender’s option, except that, with respect to any
such deficiency with respect to the payment of Project Costs or estimated
expenses of Completion arising at any time when no other Event of Default has
occurred and is continuing, Lender agrees that Borrower shall not be required
to make any such deposit until five (5) Business Days after the deficiency
is at least $250,000.00.

 

Upon the occurrence
of any Event of Default described in Paragraphs 20(d), (e), (f), (g) or
(h), all Obligations shall be and become immediately due and payable without
any declaration, notice, presentment, protest, demand or dishonor of any kind
(all of which are hereby waived) and Borrower’s ability to obtain any
additional Advance, the Term Loan or any additional Letter of Credit under this
Agreement shall be immediately and automatically terminated.  Upon the occurrence of any other Event of
Default, Lender, without notice to Borrower, may terminate Borrower’s ability
to obtain any additional Advance, the Term Loan or any additional Letter of
Credit under this Agreement and may declare all or any portion of the
Obligations to be due and payable, without notice, presentment, protest or
demand or dishonor of any kind (all of which are hereby waived), whereupon the
full unpaid amount of the obligations which shall be so declared due and
payable shall be and become immediately due and payable. Upon the occurrence of
an Event of Default, Lender shall have all the rights and remedies of a secured
party under the Commercial Code and may require Borrower to assemble the
Collateral and make it available to Lender at a place designated by Lender, and
Lender shall have the right to take immediate possession of the Collateral and
may enter any of the premises of Borrower or wherever the Collateral is located
with or without process of law and to keep and store the same on said premises
until sold (and if said premises be the property of Borrower, Borrower agrees
not to charge Lender 

 

26

 

or a purchaser
from Lender for storage thereof for a period of at least 90 days). Upon the
occurrence of an Event of Default, Lender, without further demand, at any time
or times, may sell and deliver any or all of the Collateral at public or
private sale, for cash, upon credit or otherwise, at such prices and upon such
terms as Lender deems advisable, at its sole discretion.  Any requirement under the Commercial Code or
other applicable law of reasonable notice will be met if such notice is mailed
to Borrower at its address set forth in the opening paragraph of this Agreement
at least ten (10) days before the date of sale.  Lender may be the purchaser at any such sale,
if it is public.  The proceeds of sale
will be applied first to all expenses of retaking, holding, preparing for sale,
selling and the like, including attorneys’ fees and legal expenses (whether or
not suit is commenced) including, without limitation, reasonable attorneys’
fees and legal expenses incurred in connection with any appeal of a lower court’s
order or judgment and second to the payment (in whatever order Lender elects)
of all other obligations chargeable to Borrower’s loan account hereunder.  Subject to the provisions of the Commercial
Code, Lender will return any excess to Borrower and Borrower shall remain
liable to Lender for any deficiency. 
Borrower agrees to give Lender immediate notice of the existence of any
Default or Event of Default.  Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral.  Lender may sell the Collateral without giving
any warranties as to the Collateral. 
Lender may specifically disclaim any warranties of title or the
like.  This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.  Lender has no obligation to
attempt to satisfy the Obligations by collecting them from any other person
liable for them and Lender may release, modify or waive any Collateral provided
by any other person to secure any of the Obligations, all without affecting
Lender’s rights against Borrower. 
Borrower waives any right it may have to require Lender to pursue any
third person for any of the Obligations.

 

Borrower agrees
that if the Obligations become immediately due and payable in full at a time
when one or more Letters of Credit are outstanding, Borrower shall thereupon
automatically be obligated to pay to Lender, in addition to all other amounts
owing under this Agreement, the aggregate face amount of all Letters of Credit
then outstanding.  The foregoing
obligation to pay in advance for amounts which Lender may later have to pay
pursuant to the Letters of Credit is and shall at all times constitute a part
of the “Obligations”.  Amounts paid by
Borrower pursuant to this paragraph shall be made directly to an
interest-bearing collateral account maintained at Lender for application to
Borrower’s reimbursement obligations under Paragraph 4D(d) as payments are
made on the Letters of Credit, with the balance, if any, to be applied to the
other Obligations.

 

21.          Conditions
Precedent to Closing Date; etc. 
The occurrence of the Closing Date and the obligation of Lender to make
the initial Advance or any Term Loan or to issue any Letter of Credit are
subject to the condition precedent that Lender shall have received on or before
the Closing Date or the date of the initial Advance, any Term Loan or any
Letter of Credit, copies of all of the following, unless waived by Lender:

 

(a)           A
favorable opinion of counsel to Borrower m form and substance satisfactory to
Lender;

 

(b)           UCC-1
Financing Statements in a form acceptable to Lender appropriately completed and
duly executed by Borrower;

 

27

 

(c)           Recent
UCC searches from the filing offices in all states required by Lender which
reflect that no other Person holds a Security Interest in any Collateral of
Borrower, except for Security Interests permitted by Paragraph 18(c);

 

(d)           The
Notes, in form and substance satisfactory to Lender, appropriately completed
and duly executed by Borrower;

 

(e)           A
certified copy of all documents evidencing any necessary consent or
governmental approvals (if any) with respect to the Loan Documents or any other
documents provided for in this Agreement;

 

(f)            A
certificate by the Secretary or any Assistant Secretary of Borrower certifying
as to: (i) attached resolutions of Borrower’s Board of Directors
authorizing or ratifying the execution, delivery and performance of the Loan
Documents to which Borrower is a party and any other documents provided for by
this Agreement, (ii) the names of the officers of Borrower authorized to
sign the Loan Documents together with a sample of the true signature of such
officers, and (Hi) attached bylaws of Borrower;

 

(g)           A
copy of Borrower’s articles of incorporation certified by the Secretary of
State;

 

(h)           Certificates
of Good Standing for Borrower issued by its state of incorporation and by those
states requested by Lender,

 

(i)            Evidence
of insurance for all insurance required by the Loan Documents;

 

(j)            An
officer certificate, in form and substance satisfactory to Lender, executed by
the President of Borrower;

 

(k)           A
Title Commitment for the Land prepared by CPT;

 

(l)            The
Plans;

 

(m)          The
General Construction Contract, the agreement with the architect for the Project
(the “Project Architect”) and a schedule listing all subcontracts relating to
the Project;

 

(n)           The
Sworn Construction Cost Statement, and a disbursement schedule showing the
anticipated time and amount of disbursements for construction of the Improvements;

 

(o)           Copies
of all building permits required to complete construction of the Improvements,
or evidence satisfactory to Lender that such permits will be obtained;

 

(p)           A
letter addressed to Lender from an appropriate municipal officer regarding
compliance of the Project with existing zoning and building codes and
ordinances;

 

(q)           The
Approved Card Club Supply Budget;

 

28

 

(r)            An
origination fee of$ 15,000.00 with respect to Term Loan A in immediately
available funds; and

 

(s)           Such other approvals, opinions or documents
as Lender may require.

 

22.          Conditions
Precedent to Term Loan. 
Intentionally Deleted.

 

23.          Conditions
Precedent to All Advances; Etc. 
The occurrence of the Closing Date and the obligation of Lender to make
any Advance (including the initial Advance) or any Term Loan or to issue any
Letters of Credit (including the initial Letter of Credit) shall be subject to
the satisfaction of each of the following conditions, unless waived in writing
by Lender:

 

(a)           the
representations and warranties of Borrower set forth in this Agreement are true
and correct on the date of such credit extension (and after giving effect to
these then being made);

 

(b)           No Default, no Event of Default and no
Material Adverse Occurrence shall then have occurred and be continuing on the
date of such credit extension or result therefrom;

 

24.          Termination.  Intentionally Deleted.

 

25.          Grant
of License to Use Patents and Trademarks Collateral.  For the purpose of enabling Lender to
exercise rights and remedies under this Agreement, Borrower hereby grants to
Lender and irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Borrower) to use, license or sublicense any
patent or trademark now owned or hereafter acquired by Borrower and wherever
the same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer and automatic machinery software and programs used for the compilation
or printout thereof.

 

26.          Miscellaneous.

 

(a)           The
performance or observance of any affirmative or negative covenant or other
provision of this Agreement and any supplement hereto may be waived by Lender
in a writing signed by Lender but not otherwise.  No delay on the part of Lender in the
exercise of any remedy, power or right shall operate as a waiver thereof, nor
shall any single or partial exercise of any remedy, power or right preclude
other or further exercise thereof or the exercise of any other remedy, power or
right.  Each of the rights and remedies
of Lender under this Agreement will be cumulative and not exclusive of any other
right or remedy which Lender may have hereunder or as allowed by law.

 

(b)           Any
notice, demand or consent authorized by this Agreement to be given to Borrower
shall be deemed to be given when transmitted by telex or telecopier or
personally delivered, or three days after being deposited in the U.S. mail,
postage prepaid, or one day after delivery to Federal Express or other
overnight courier service, in each case addressed to Borrower at its address
shown in the opening paragraph of this Agreement, or at such other address as
Borrower may, by written notice received by Lender, designate as 

 

29

 

Borrower’s address for purposes of notice hereunder. Any notice or
request authorized by this Agreement to be given to Lender shall be deemed to
be given when transmitted by telex or telecopier or personally delivered, or
three days after being deposited in the U.S. mail, postage prepaid, or one day
after delivery to Federal Express or other overnight courier, in each case
addressed to Lender at its address shown in the opening paragraph of this
Agreement, or at such other address as Lender may, by written notice received
by Borrower, designate as Lender’s address for purposes of notice hereunder; provided,
however, that any notice to Lender given pursuant to Paragraph 4A(b), 4B(b) 4C(b) or
4D(b) shall not be deemed given until received.

 

(c)           This
Agreement, including exhibits and schedules and other agreements referred to
herein, is the entire agreement between the parties supersedes and rescinds all
prior agreements relating to the subject matter herein, cannot be changed,
terminated or amended orally, and shall be deemed effective as of the date it
is accepted by Lender.

 

(d)           Borrower
agrees to pay and will reimburse Lender on demand for all out-of-pocket
expenses incurred by Lender arising out of this transaction including without
limitation filing and recording fees and reasonable attorneys’ fees and legal
expenses (whether or not suit is commenced) incurred in the protection and
perfection of Lender’s security interest in the Collateral, in the enforcement
of any of the provisions of this Agreement or of Lender’s rights and remedies
hereunder and against the Collateral, in the defense of any claim or claims
made or threatened against Lender arising out of this transaction or otherwise,
including, without limitation, in each instance, all reasonable attorneys’ fees
and legal expenses incurred in connection with any appeal of a lower court’s
order or judgment; provided, however, that Lender agrees that
Borrower’s obligations to reimburse Lender for its attorneys’ fees and legal
expenses incurred in connection with the preparation of this Agreement and the
other Loan Documents shall be limited to the sum of $4,000.00 plus its
out-of-pocket expenses.

 

(e)           Borrower hereby agrees to indemnify,
exonerate and hold Lender and its officers, directors, employees and agents
(the “Indemnified Parties”) free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities and damages, and expenses
in connection therewith including, without limitation, reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to:

 

(1)           any
transaction financed or to be financed in who le or in part directly or
indirectly with proceeds of any Credit extension hereunder, or

 

(2)           the
execution, delivery, performance or enforcement of this Agreement or any document
executed pursuant hereto by any of the Indemnified Parties.

 

except for any
such Indemnified Liabilities arising on account of any Indemnified Party’s
gross negligence or willful misconduct.

 

30

 

If and to the
extent that the foregoing undertaking may be unenforceable for any reason,
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.  The provisions of this
Paragraph shall survive termination of this Agreement.

 

(f)            This
Agreement is made under and shall be governed by and interpreted in accordance
with the internal laws of the State of Minnesota, except to the extent that the
perfection of the Security Interest hereunder, or the enforcement of any
remedies hereunder with respect to any particular Collateral, shall be governed
by the laws of a jurisdiction other than the State of Minnesota.  Captions herein are for convenience only and
shall not be deemed part of this Agreement.

 

(g)           This
Agreement shall be binding upon Borrower and Lender and their respective
successors, assigns, heirs, and personal representatives and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Lender, except
that Borrower may not assign or transfer its rights hereunder without the prior
written consent of Lender, and any assignment or transfer in violation of this
provision shall be null and void.  In
connection with the actual or prospective sale by Lender of any interest or
participation in the obligations, Borrower authorizes Lender to furnish any
information in its possession, however acquired, concerning Borrower or any of
its Affiliates to any person or entity.

 

(h)           Borrower hereby irrevocably submits to the
jurisdiction of any Minnesota state court or federal court sitting in
Minneapolis or St. Paul, Minnesota, over any action or proceeding arising out
of or relating to the Agreement, and Borrower hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such Minnesota State or Federal court. 
Borrower hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding.  Borrower
irrevocably consents to the service of copies of the summons and complaint and
any other process which may be served in any such action or proceeding by the
mailing by United States certified mail, return receipt requested, of copies of
such process to Borrower’s address stated in the preamble hereto and addressed
to Borrower’s President by title. 
Borrower agrees that judgment final by appeal, or expiration of time to
appeal without an appeal being taken, in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Paragraph shall affect the
right of Lender to serve legal process in any other manner permitted by law or
affect the right of Lender to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction.  Borrower agrees that, if it brings any action
or proceeding arising out of or relating to this Agreement, it shall bring such
action or proceeding in Hennepin County or Ramsey County, Minnesota.

 

27.          Effect
on Original Agreement.  On the Closing Date, the Original Agreement
shall be completely amended and restated by this Agreement, and each reference
to the “Credit Agreement,” “Loan Agreement,” “therein,” “thereof,” “thereby,”
or words of like import referring to the Original Agreement in any Loan
Document shall mean and be reference to the Original Agreement as amended and
restated by this Agreement and the $ -
0 - aggregate principal balance of the “Advances” made thereunder which
are outstanding on the Effective Date shall be deemed to 

 

31

 

be Advances made
hereunder and the Existing Letters of Credit shall be deemed to have been
issued pursuant hereto.

 

WITNESS WHEREOF,
the parties have executed this Agreement as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BREMER BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By /s/ Laura Helmueller

  
	
   

  	
   

  
	
   

  	
  Its Vice President

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  CANTERBURY PARK HOLDING CORPORATION

  
	
   

  	
   

  
	
   

  	
  By /s/ Randall D. Sampson

  
	
   

  	
   

  
	
   

  	
  Its President

  

 

32Exhibit 10.1

 

Confidential Treatment has been requested for
portions of this exhibit. The copy filed herewith omits the information subject
to the confidentiality request. 
Omissions are designated as “***”. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

 

 

Proposal for manufacture
and supply of cGMP

Polyribonucleotide Duplex for Phase - I Clinical Trials

 

	
  F.A.O.

  	
   

  	
  Richard
  S. Dondero 

  Senesco Technologies, Inc 

  303 George St., Suite 420 

  New Brunswick, New Jersey 08901

  
	
   

  	
   

  	
   

  
	
  Prepared
  by:

  	
   

  	
  Kristy
  Bazaire 

  Commercial Development Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Charles
  J Shields 

  VP, Global Business Development 

  Avecia Biotechnology

  
	
   

  	
   

  	
   

  
	
  Proposal
  Number:

  	
   

  	
  SNT071608

  
	
   

  	
   

  	
   

  
	
  Version
  Number:

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  September 4,
  2008

  

 

1

 

1.         REQUEST
FOR PROPOSAL

 

Senesco Technologies, Inc (Senesco) requested Avecia to prepare a
proposal for the supply of 3g of material for Toxicology Studies and 15g of
material for use in Phase I Clinical Trials. A stability study of the siRNA
active pharmaceutical ingredient is also included in this proposal.

 

2.         BENEFITS
AVECIA CAN BRING

 

·                  Extensive
experience in oligonucleotide manufacture, >1000 sequences prepared >700
Man-years oligonucleotide technology and manufacturing experience

·                  Available
capacity: 100’s of kg

·                  Experienced in
supply through all Phases of clinical trials

·                  Experienced in
process validation for oligonucleotides

·                  Registered and
FDA inspected USA facility (Milford, Mass)

·                  Experience in
preparation of DMF’s, CMC’s and CTD’s

·                  Intimate
knowledge and control of supply chain to ensure quality and viral safety

·                  Expertise in
process and analytical method development

·                  Industry leading
track record of compliant supply

·                  Access – via our
exclusive license – to optimum deprotection technology for RNA production

 

3.         PROJECT
SCOPE

 

3.1     Product Description:

 

	
  PRODUCT:

  	
   

  	
  RNA Duplex

  
	
   

  	
   

  	
   

  
	
  DESCRIPTION:

  	
   

  	
  Duplex of
  two 21mer single strand RNAs

  
	
   

  	
   

  	
   

  
	
  SEQUENCE

  	
   

  	
  ***

  

  SENESCO IS REQUESTED TO CONFIRM THE SEQUENCES ABOVE

  

 

3.2     Product Specifications

 

To be discussed and agreed after the limited development studies. For
Senesco’s reference, provisional specifications which reflect Avecia experience
with other siRNA compounds have been provided in Appendix A. These are for
information purposes only and should not be considered as agreed or appropriate
for this compound.

 

2

 

3.3     Project Structure

 

Stage 1 Limited Development Studies and
Supply of Toxicology Material

 

Define from Avecia experience the most appropriate operating conditions
for synthesis, cleavage, deprotection, purification, ultra-filtration of the
RNA single strands and for duplexation and lyophilization of the RNA duplex.

 

Carry out a limited number of small scale runs to confirm process
suitability specifically for the Senesco RNA duplex and refine process as
necessary

 

Manufacture and supply *** grams of material for use in Toxicology
studies.

 

This is expected to take 8 labor weeks and includes as a deliverable a
process description to support the GMP manufacturing campaign and CMC sections
of IND submission.

 

The material produced during the experimental runs will also be used to
support an analytical method suitability assessment. A limited forced degradation
study (base and thermal exposure) will be carried out to support stability
testing. The analytical method assessment and forced degradation study are each
expected to take 2 labor weeks, for at a total of four weeks.

 

Deliverable – Technical development reports to support cGMP
manufacturing campaign, analytical methods and data summary.

 

Stage 2 cGMP Manufacture and Supply of API

 

Manufacturing  will  be  carried  out  at  a  1  x  6  mmol  synthesis  scale  for  each  single  strand,  cleavage  and  deprotection  and  purification/UF  followed  by  a  1  x  6  mmol  duplexation.  Manufacturing  scale  is  expected  to  produce  approximately  ***  g  of  cGMP  material.

 

During stage 2 Avecia will execute the following:

 

Prepare process instructions as appropriate for manufacture of a batch
suitable for use in Phase - I Clinical Trials.

 

Confirm suitability of analytical methods for raw materials, in-process
and final product analysis and equipment cleaning

 

Confirm specification for raw material, in-process and final product
Safety, Health and Environment assessment

 

Engineering Review

 

Agree primary packaging and labels and required aliquots

 

Manufacture single strand intermediates and subsequent duplexation

 

3

 

Carry out product analysis and release

 

Deliverable – Sufficient material to satisfy requirement of testing and
regulatory retain (***), ICH stability study (***) and supply of *** cGMP API
to Senesco. QA reviewed Certificate of Analysis will also be provided.

 

Stage 3 Drug Substance ICH Derived Stability
Study

 

Under the guidance of a customer approved protocol, Avecia will perform
a stability study as described below. Should Senesco wish to extend the -209C
study beyond *** months, sufficient material will be available to accommodate
two additional time points to be detailed in a separate proposal. It is
expected that this stability study will require approximately ***g of the
material produced from stage 2.

 

***

 

Deliverable – Avecia will supply Senesco with interim stability reports
for each intermediate pull point (*** and *** months) with a final stability
report at the conclusion of the study (*** months).

 

4.      PROJECT ASSUMPTIONS

 

The following assumptions are applicable to this proposal. Changes to
these conditions and/or the scope of the project may change the project timing
and cost. All changes will be executed using a mutually agreed change order.

 

	
   

  	
   

  	
  Assumptions

  
	
  Pricing

  	
   

  	
  Prices are in US Dollar 

  Pricing includes raw materials

  
	
  Reference  Material

  	
   

  	
  If available, Senesco will supply small quantities of reference
  material

  
	
  Material Use

  	
   

  	
  The material will be used for Toxicology Studies and Phase I Clinical
  Trials 

  Senesco will conduct appropriate Toxicology
  studies in advance of any use of material in human clinical trials

  
	
  Timelines

  	
   

  	
  *** weeks for Tox material from project acceptance 

  *** months for GMP material from project acceptance 

  * Timelines dependant on Raw Material availability

  
	
  API Analysis

  	
   

  	
  Avecia will carry out product analysis and release

  
	
  Development

  	
   

  	
  Pricing assumes Avecia’s existing collection of processes for RNAi
  manufacture and methods for RNAi analyses are suitable for use with this
  compound without the requirement for substantial development.

  
	
  Stability Study  Cancellation

  	
   

  	
  Senesco retains the option to cancel the stability study at their
  sole discretion. Avecia will prorate the stability 

  

 

4

 

	
   

  	
   

  	
  study accordingly and will include any outstanding storage fees
  incurred to date.

  
	
  Confidentiality

  	
   

  	
  All confidential information will be managed in accordance with the
  executed Mutual Confidentiality Agreement dated July 28, 2008

  
	
  Intellectual  Property

  	
   

  	
  Nothing in this Agreement shall affect the ownership by either party
  of any intellectual property or process owned by that party.

  

 

5.      PROJECT TIMELINES

 

A detailed project plan will be shared with Senesco Technologies upon
commencing.

 

6.      FACILITIES

 

Avecia will use its FDA inspected Manufacturing Facility at Milford,
Massachusetts USA

 

7.      COMPLIANCE

 

Material from Stage 1 will be non-GMP and will not be suitable for use
in human clinical trials.

 

Final API material from Stage 2 will be supplied to cGMP as interpreted
by ICH Harmonized Tripartite Guideline Q7, Good Manufacturing Practice Guide
for Active Pharmaceutical Ingredients.

 

Material is supplied under the strict understanding that Senesco
Technologies will conduct appropriate Toxicology studies to ensure material is
safe for human clinical trials before any human trials commence.

 

8.      FINANCIAL SUMMARY

 

Stage 1 Limited Development Studies and supply of *** grams duplex for
Toxicology Studies ***

 

Analytical method assessment and limited forced degradation ***

 

Stage 2 Manufacture and Supply of *** grams cGMP material, *** grams
for stability study and approximately *** grams for QC release and regulatory
retains ***.

 

Pricing assumes orders will be placed at the same time for Toxicology
and P-I material.

 

Pricing includes at no additional cost:

 

A copy of batch records

 

Reasonable assistance in regulatory submissions

 

BSE/TSE traceability documentation

 

5

 

Access as required within project scope to analytical, technical and
validation expertise

 

Project management services

 

Stage 3 ICH Derived Stability Studies ***. Pricing assumes T0 testing
is conducted during lot release in stage 2.

 

9.      MILESTONE INVOICING

 

	
  Project Milestone

  	
   

  	
  Approximate Timing

  	
   

  	
  Payment

  	
   

  
	
  Project
  Acceptance

  	
   

  	
  August 2008

  	
   

  	
  ***

  	
   

  
	
  Start of
  cGMP Manufacture

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Release of
  cGMP Batch

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  2009 Stability
  Activities

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  2010
  Stability Activities

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  

 

10.    EARLY TERMINATION

 

With acceptance of this proposal, Avecia is reserving equipment time
and resources in our manufacturing facility for Senesco. In the event that
Senesco terminates the project, as detailed within this proposal, a
cancellation fee will be applied. The structure of the fee will be:

 

·      If Senesco cancel the
manufacture prior to 90 days before the planned manufacturing start date, no
cancellation fee will be applied.

·      If Senesco cancel the
manufacture between 90 and 60 days before the planned manufacturing start date
40% of the total project cost will be charged as a cancellation fee, all
payments to date will be credited towards this fee.

·      If Senesco cancel the
manufacture between 60 and 30 days before the planned manufacturing start date
60% of the total project cost will be charged as a cancellation fee, all
payments to date will be credited towards this fee.

·      If Senesco cancel the
manufacture <30 days before the planned manufacturing start date 80% of the
total project cost will be charged as a cancellation fee, all payments to date
will be credited towards this fee.

 

6

 

11.    PROPOSAL REVISION HISTORY

 

	
  Proposal Version 

  Number

  	
   

  	
  Date

  	
   

  	
  Comments/Changes

  	
   

  
	
  Version 1

  	
   

  	
  July 24,
  2008

  	
   

  	
  Original
  Version

  	
   

  
	
  Version 2

  	
   

  	
  August 5,
  2008

  	
   

  	
  stage 1
  deliverable to 3g GLP

  	
   

  
	
  Version 3

  	
   

  	
  August 27,
  2008

  	
   

  	
  Amend
  stability study

  	
   

  
	
  Version 4

  	
   

  	
  September 4,
  2008

  	
   

  	
  Correct
  name, add confidentiality and IP statement

  	
   

  

 

12.    PROPOSAL ACCEPTANCE

 

Senesco and Avecia by signing below hereby accept the scope of Proposal
SNT071608 Version 4 and the terms and conditions contained herein.

 

	
  /s/ Richard S. Dondero 

  	
   

  
	
  Name: Richard S. Dondero 

  	
   

  
	
  Title:

  	
   

  
	
  Senesco Technologies, Inc.

  	
   

  
	
   

  	
   

  
	
  /s/ CJ Shields 

  	
   

  
	
  Name: CJ Shields 

  	
   

  
	
  Title: VP Global Business Development 

  	
   

  
	
  Avecia Biotechnology, Inc.

  	
   

  

 

13.    TERMS AND CONDITIONS

 

Avecia Biotechnology Inc standard terms and conditions are outlined
below. These terms would apply in the absence of a supply agreement. We would
be happy to discuss and agree a supply agreement at Senesco Technologies
convenience.

 

This proposal is valid until September 19, 2008.

 

Avecia Biotechnology Inc standard terms and conditions are outlined
below. These terms would apply in the absence of a supply agreement. Terms of
payment are thirty (30) days net from the date of the invoice.

 

	
  Prices:

  	
   

  	
  This quotation is valid for thirty (30) days from the date issued and
  subject to satisfactory credit check. Prices are quoted in US dollars.

  
	
   

  	
   

  	
   

  
	
  Payment by Check:

  	
   

  	
  Payment should be made to: 

  Avecia Biotechnology Inc. 

  125 Fortune Blvd. 

  Milford, MA 01757

  

 

7

 

	
  Payment by Wire Transfer:

  	
   

  	
  Payment should be made to: 

  Citizens Bank 

  Acct #: *** 

  ABA Routing #: ***

  

 

GENERAL CONDITIONS

 

This document entitled “Proposal” once signed and authorized by the
parties becomes a legally binding Agreement. The terms and conditions for sale
and purchase of Product and Services under this Agreement are as follows:

 

1.   Miscellaneous The Agreement
contains all the terms and conditions of sale and purchase of the Product and
Services listed within this Agreement. No modification of any terms and
condition, or of any aspect of the project scope, shall be effected unless
mutually agreed by the parties in writing. This Agreement and performance
hereunder shall be construed and governed by the laws of Delaware.

 

2.   Term This Agreement shall take
effect on the date of the final authorizing signature and shall remain in
effect until the later to occur of (i) completion of all Services listed
within this Agreement or (ii) 30 days following delivery of the final
shipment of Product.

 

3.   Shipments Product will be
delivered EX WORKS AVECIA’s facilities at Milford, Massachusetts. Title to and
risk in the Product shall pass to CUSTOMER at the earliest to occur of (i) the
time at which the Product is placed at CUSTOMER’s request in AVECIA storage or (ii) the
time at which the Product is delivered to CUSTOMER’s designated carrier at
AVECIA’s facilities at Milford, Massachusetts.

 

4.   Invoices and Payment AVECIA
shall issue to CUSTOMER invoices for payment for the Products and Services in
accordance with the payment milestone schedule within this Agreement. Within
thirty (30) days following the receipt of each invoice, absent a good faith
dispute, CUSTOMER shall pay the invoice. AVECIA reserves the right, among other
remedies, to suspend further work or Product deliveries in the event CUSTOMER
fails to pay any invoice when same becomes due. Unless otherwise stated in the
project assumptions within this Agreement, the invoice price for Product shall
be calculated on the weight of the Product discharged from the lyophilizer.

 

5.   Excuse of performance Neither
party shall be subject to any liability for delay in performance, or non
performance, as a result of fire, flood, natural catastrophe, strike, labor
trouble, accident, riot, act of governmental authority or compliance with
government request, act of god, or other contingencies and circumstances beyond
its reasonable control interfering with the manufacture or delivery of Product
or Services covered by this Agreement or with the supply of any raw materials
or utilities used in connection therewith, or in the event AVECIA suspends the
operation of the facility because operation thereof fails to comply with
applicable governmental law, regulation, ordinance, standard order or decree
relating to pollution, ecology, occupational safety and 

 

8

 

health, or environmental
matters. AVECIA may, during any period of shortage due to any cause, prorate
and allocate its supply of raw materials or resources, and delivery of
contractual commitments in such manner as may be deemed fair and reasonable by
AVECIA. In no event shall AVECIA be obligated to purchase Product in the
marketplace to satisfy its obligations hereunder.

 

6.   Taxes The prices quoted exclude
any applicable sales, use, consumption, value added or excise taxes duties,
tariffs and other similar assessments which may be imposed by any governmental
authority an the sale to CUSTOMER (other than with respect to any income,
corporate or similar taxation on AVECIA); provided, however, that the Parties
shall cooperate and take any reasonable and proper steps to reduce or eliminate
taxes.

 

7.   Limited Warranty. AVECIA
warrants title and that all Product sold hereunder conforms to the agreed
specifications and where appropriate cGMP requirements. AVECIA MAKES NO OTHER
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH
RESPECT TO THE PRODUCT OR SERVICES. Any suggestions made by AVECIA concerning
regulatory requirements, regulatory strategy, uses or applications of Product
reflect AVECIA’s opinion only, and AVECIA makes no warranty of results to be
obtained.

 

8.   Limitation of Liability. Within
fifteen days after receipt of each shipment of Product sold hereunder, CUSTOMER
shall examine such Product for any damage, defects or shortage. All claims,
including claims for alleged damaged or defective goods, shortage or
non-deliverance of goods, negligence or any other causes whatsoever, shall be
deemed waived unless made in writing and received by AVECIA within thirty days
after CUSTOMER’s receipt of the Product. Failure of CUSTOMER to give notice of
any claims within the thirty (30) day period shall be deemed an absolute and
unconditional waiver of such claim. CUSTOMER’S EXCLUSIVE REMEDY SHALL BE FOR
DAMAGES AND AVECIA’S LIABILITY FOR ANY AND ALL LOSSES OR DAMAGES RESULTING FROM
ANY CAUSE WHATSOEVER, INCLUDING ALLEGED NEGLIGENCE, SHALL IN NO EVENT EXCEED
THE PURCHASE PRICE OF THE PRODUCT OR SERVICE IN RESPECT TO WHICH THE CLAIM IS
MADE. AVECIA shall not be liable for, and CUSTOMER assumes responsibility for,
all personal injury and property damage resulting from the handling,
possession, use or resale of the Product. In no event shall AVECIA be liable
for special, incidental, or consequential damages, whether CUSTOMER’s claim is
in contract, negligence, strict liability or otherwise.

 

9.   Intellectual Property CUSTOMER
represents and warrants to AVECIA that CUSTOMER has all necessary rights to
have the Product made and that AVECIA’s manufacture of Product for CUSTOMER
will not infringe the intellectual property or other rights of any third party.
CUSTOMER shall indemnify and hold AVECIA harmless from all liability, damages,
costs and expenses relating to any claims brought by third parties for
infringement of any intellectual property rights covering the Product
manufactured to designs or specifications of CUSTOMER. Nothing in this
Agreement shall affect the ownership by either party of any intellectual
property or process owned by that party. Other than giving AVECIA the right to
manufacture the Product for the 

 

9

 

CUSTOMER, nothing in this
Agreement shall give either party the right to use the other party’s
intellectual property. Intellectual property generated, developed, discovered
or invented in connection with work conducted under this Agreement by the
parties relating solely to the composition of the Product shall belong to
CUSTOMER. All other intellectual property generated, developed, discovered or
invented by the parties in connection with work conducted under this Agreement
shall belong to AVECIA.

 

10

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