Revolving Demand Loan Acknowledgment Letter to Capital Hoedown Inc., dated April 26, 2011

The Empire Sports & Entertainment, Co.

110 Greene Street, Suite 403

New York, New York 10012

Telephone:           ###-###-####

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

Capital Hoedown Inc.

The Empire Sports & Entertainment, Co.

Revolving demand loan

US$4,000,000

Ten percent (10%) per annum, compounded annually

April __, 2011

January 15, 2012

The Loan to be used exclusively for the operation and management of Capital Hoedown Inc.

1. 

Certain defined terms are set out in Schedule A hereto.

 

2. 

The attached Schedules and Exhibits are incorporated herein by reference.

 

3. 

The Lender may, but shall have no obligation to, make the Loan and the Borrowings available to the Borrower on a revolving basis, subject to (i) the Lender’s sole and exclusive discretion to do so, (ii) fulfillment by the Borrower of the conditions precedent to the making of the Loan as set forth in this Agreement and (iii) subject to all other terms and conditions of this Agreement.

4. 

To request a Borrowing, the Borrower shall notify the Lender of such request by written Borrowing Request, not later than 11:00 a.m. (Toronto time) three Business Days before the date of the proposed borrowing.  Each Borrowing Request shall specify the aggregate amount of each requested Borrowing, the date of such Borrowing (which shall be a Business Day) and, if the Borrowing shall be by wire transfer, the location and number of the Borrower’ account to which funds are to be disbursed.

 

5. 

The Lender may, but shall have no obligation to, make the Loan, which Loan may be made by cheque or wire transfer directly to the Borrower as directed in the applicable Borrowing Request.

 

6. 

The indebtedness of the Borrower under this Agreement shall be evidenced by the accounts and records of the Lender.  Such accounts and records shall record the aggregate outstanding amount of the Loan (including all Borrowings) and all payments and prepayments made in respect thereof.  The Lender’s accounts and records shall constitute, in the absence of manifest error, prima facie evidence of the indebtedness of the Borrower to the Lender and such other information as may be set out therein.  The Loan and any Borrowing made under this Agreement shall be evidenced by a promissory note.

 

The Borrower hereby acknowledge and agree that each of the advances made by the Lender prior to the date hereof which are set forth on Schedule B constitute Borrowings under the Loan.

 

7. 

Unless previously terminated, the Loan shall terminate on the Termination Date.

 

8. 

The Borrower shall be obligated to repay the aggregate outstanding principal amount of the Loan (including all Borrowings), accrued interest thereon and all other amounts owing hereunder (including but not limited to any fees and expenses) on the earlier of (i) the Termination Date, and (ii) upon demand by the Lender.

 

Payments to the Lender shall be made to the following account or such other account as may be specified by the Lender in writing from time to time:

 

Bank:                             JP Morgan Chase Bank, N.A.

Address:                       1450 Brickell Avenue, Suite 3200, Miami, FL 33131

Account Holder:          EXCX Funding Corp.

Account No.:                 ###-###-####

 

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 Borrower 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 Borrower 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. 

CHI 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 “CHI Security Agreement”) in a form satisfactory to the Lender.

 

13. 

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

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

 

(i) the CHI Security Agreement; 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 Borrower in all jurisdictions where such registrations are required in order to perfect the security interest granted to the Lender pursuant to the CHI 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 Borrower shall not be in default under any agreement with respect to any indebtedness on the date of the advance of the Loan.

 

14. 

The Borrower 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 Borrower is solvent and neither of them is aware of any conditions that would render either of them insolvent;

 

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

 

(c) upon execution and delivery of the CHI 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 Borrower 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 Borrower 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 Borrower threatened, against them; and

 

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

 

15. 

The Borrower covenants that,

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

 

(b) the Borrower 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) the Borrower 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 Borrower agrees with the Lender:

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

 

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

 

(ii) the insolvency of the Borrower or the institution by the

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

 

17. 

All payments to be made by the Borrower hereunder shall be made without deduction, set-off or counterclaim by the Borrower.  The Lender may set-off any liabilities owing by it to the Borrower from time to time against all amounts owing by the Borrower hereunder.  For certainty, the provisions of the CHI Security Agreement 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 Borrower:

 

 

152 Boul. De Lucerne

Suite 201

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 Borrower 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 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 Borrower 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 Borrower.

 

24. 

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

 

Loan Agreement dated as of April __, 2011 made between the undersigned (the “Borrower”), and you, as Lender, (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”)