Revolving Demand Loan Acknowledgment Letter to CII and Denis Benoit, dated April 26, 2011

The Empire Sports & Entertainment, Co.

110 Greene Street, Suite 403

New York, New York 10012

Telephone:           ###-###-####

Fax:                       ###-###-####

9. 

Interest on the Loan shall accrue at the Interest Rate on the daily balance of the outstanding Loan and all other amounts owed hereunder.

 

For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest to be paid hereunder or in connection herewith is to be calculated on the basis of any period of time that is less than a calendar year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360.

 

10. 

If any principal, interest or any other amount payable hereunder is not paid when due, the Borrowers shall pay on demand interest on such overdue amount both before or after judgment at a rate per annum equal to fifteen percent (15%).  Such interest shall accrue on a daily basis and shall be payable on demand.

11. 

Any payment on account of an amount due in United States Dollars that is paid in any other currency for any reason (including, without limitation, pursuant to a court order) shall constitute a discharge of the obligations of the Borrowers hereunder only to the extent of the United States Dollar amount that the Lender is able to purchase with the foreign currency amount so received on the date of receipt and the Borrower shall indemnify the Lender in respect of any shortfall.

 

12. 

CII shall grant to the Lender a security interest in all of its present and future assets and shall deliver to the Lender a security agreement (the “CII Security Agreement”) in a form satisfactory to the Lender and shall pledge to the Lender all the shares of Capital Hoedown Inc. owned by it from time to time and shall deliver to the Lender a pledge agreement (the “Pledge Agreement”) in a form satisfactory to the Lender.  Benoit shall provide to Lender a personal guarantee (the “Guarantee”) of the obligations of CII and under the Loan and shall grant to the Lender a security interest in all of his present and future assets (the “Benoit Security Agreement”) and shall deliver to the Lender the Guarantee and Benoit Security Agreement each in a form satisfactory to the Lender.

 

13. 

No Borrowing shall be advanced unless the Borrowers have satisfied, and continue to satisfy, the following conditions:

(a) The Borrowers shall cause the following to have been executed and delivered to the Lender:

 

(i) the CII Security Agreement, the Pledge Agreement, the Benoit Security Agreement and the Guarantee; and

 

(ii) all other security documentation and/or deliveries reasonably requested by the Lender as security for the Loan.

 

(b) The Lender shall have registered personal property security registrations against the Borrowers in all jurisdictions where such registrations are required in order to perfect the security interest granted to the Lender pursuant to the CII Security Agreement, the Pledge Agreement and the Benoit Security Agreement.

 

(c) All representations and warranties contained herein shall be true and correct on the date of the advance of the Loan.

 

(d) The Borrowers shall not be in default under any agreement with respect to any indebtedness on the date of the advance of the Loan.

 

14. 

The Borrowers jointly and severally represent and warrant to the Lender, which representations and warranties shall be deemed to be repeated at the time the Loan or any Borrowing is advanced hereunder, that:

(a) each of the Borrowers is solvent and neither of them is aware of any conditions that would render either of them insolvent;

 

(b) this Agreement, the CII Security Agreement, the Pledge Agreement, the Benoit Security Agreement and the Guarantee delivered by the Borrowers constitute, and the transactions contemplated hereunder shall constitute, legal, valid and binding obligations of the Borrowers, enforceable against them in accordance with their terms;

 

(c) upon execution and delivery of the CII Security Agreement and the Pledge Agreement, the Lender shall have a perfected first priority security interest in the collateral described therein and, upon execution and delivery of the Benoit Security Agreement, the Lender shall have a perfected first priority security interest in the collateral described therein;

 

(d) no event has occurred that constitutes, or that with the giving of notice, lapse of time or other condition would constitute, a default under or in respect of any agreement, undertaking or instrument to which the Borrowers or any of their respective properties or assets may be subject;

 

(e) none of the documents, financial statements or other materials provided to the Lender by the Borrowers in connection with this Agreement or the Event contain any untrue statement of a material fact, or omit to state any material fact, necessary to make the information contained therein not misleading, or are in any other manner inaccurate or misleading in any material respect;

 

(f) there are no legal or administrative proceedings pending, or to the knowledge of the Borrowers threatened, against them; and

 

(g) the Borrowers have not incurred any liabilities (including any guarantees or other contingent liabilities) or indebtedness, other than the Borrowers’ incurring of indebtedness under this Agreement.

 

15. 

The Borrowers covenants that,

 

(a) except with the prior written consent of the Lender, the Borrowers shall not incur any liabilities (including any guarantees or other contingent liabilities) or indebtedness, other than indebtedness incurred under this Agreement;

 

(b) the Borrowers will keep proper books or record and account in which full, true and correct entries are made of all dealings and transactions in relation to their business and activities; and

 

(c) each of the Borrowers will permit the Lender or any of its representatives, upon prior notice, to visit and inspect its books and records, and to otherwise be provided with any information regarding its affairs, finances and condition as requested by the Lender.

 

16. 

The Borrowers agree with the Lender:

(a) to promptly give notice to the Lender of:

 

(i) any default by either of the Borrowers under any material agreement;

 

(ii) the insolvency of either of the Borrowers or the institution by either of the Borrowers or any creditor thereof of any proceeding under any bankruptcy or insolvency law or the appointment of a receiver or trustee for either of the Borrowers, the execution by either of the Borrowers of any assignment for the benefit of creditors, or any execution, seizure, stay, moratorium, distress or similar process that is enforceable against either of the Borrowers or any of their assets;

 

(iii) any change in the ability of the Borrowers to meet their obligations to the Lender; and

 

(iv) the commencement of any litigation or proceeding to which either of the Borrowers is a party.

 

(b) to provide from time to time such further information regarding the business, property, financial condition or other condition of the Borrowers as the Lender may reasonably request.

 

17. 

All payments to be made by the Borrowers hereunder shall be made without deduction, set-off or counterclaim by the Borrowers.  The Lender may set-off any liabilities owing by it to the Borrowers from time to time against all amounts owing by the Borrowers hereunder.  For certainty, the provisions of the CII Security Agreement, the Pledge Agreement, the Benoit Security Agreement or Guarantee shall not restrict or otherwise affect the Lender’s exercise of its rights of set-off at any time.

18. 

Any notice or demand contemplated hereunder shall be given in writing by telecopier or by hand delivery and shall be addressed as follows:

 

To the Lender:

 

 

110 Greene Street, Suite 403

New York, NY 10012

Facsimile: (646) 370-4283

Attention: Mr. Shelly Finkel, Chief Executive Officer

 

To the Borrowers:

 

152 Boul. De Lucerne

Suite 201

Gatineau, QC J9A 3V8

 

Attention:  Denis Benoit, President and Chief Executive Officer

 

Facsimile:                       ###-###-####

 

Any such notice or demand if telecopied before 4:00 p.m. on a Business Day shall be deemed to be given and received on that day and otherwise on the Business Day next following the date of transmission, and if hand delivered, when delivered if delivered on a Business Day, otherwise on the Business Day next following the date of delivery.

 

19. 

The Borrowers shall pay all expenses incurred by the Lender in connection with the enforcement of the Lender’s rights under or in connection with this Agreement, the CII Security Agreement, the Pledge Agreement, the Benoit Security Agreement, the Guarantee and any other documentation or actions contemplated thereby.

 

20. 

Any provision of this Agreement that is invalid or unenforceable in any jurisdiction shall be, as to such jurisdiction only, ineffective to the extent of such invalidity or unenforceability without invalidating or otherwise affecting the remaining provisions hereof, and any invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction.

21. 

Time shall be of the essence of all provisions of this Agreement.

 

22. 

This Agreement shall be construed in accordance with and governed by the laws of the Province of Ontario and the laws of Canada applicable therein and the parties attorn to the non-exclusive jurisdiction of the courts of Ontario.

 

23. 

The Borrowers shall not assign or transfer all or any part of their rights or obligations under this Agreement without the prior written consent of the Lender.  The Lender may assign all or any part of its rights and obligations hereunder upon giving written notice to the Borrowers.

 

24. 

This Agreement and any documents and instruments delivered pursuant to or referenced in this Agreement constitute the whole and entire agreement between the Borrowers and the Lender in connection with the subject matter hereof.