XML 31 R14.htm IDEA: XBRL DOCUMENT v3.19.1
Long-Term Loans, Related Party
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Long-Term Loans, Related Party
Long-Term Loans, Related Party
Subsidiary Revolving Loan Agreement
On November 30, 2018, Empire entered into a Revolving Loan Agreement (the “Sub Revolving Loan Agreement”) with Montreign Operating. The Sub Revolving Loan Agreement provides for loans (in the aggregate, the “Sub Revolving Loan”) to Montreign Operating in an aggregate principal amount of up to $10 million (the “Subsidiary Loan Amount”). Interest will accrue on outstanding borrowings at a rate of 7% per annum and will be payable beginning on the last day of each calendar quarter beginning on March 31, 2019. Of that interest, 1% will be payable in cash and 6% will accrue and remain outstanding until paid in full (and continue to bear interest). The Sub Revolving Loan, together with interest accrued and yet unpaid, will be due and payable on April 25, 2023.

As a condition to each advance under the Sub Revolving Loan, (i) Montreign Operating is required to deliver a written request for an advance three days before the date on which the advance is made; (ii) after giving effect to the advance, the principal amount outstanding will not exceed the Loan Amount, and (iii) no event of default will have occurred and be continuing, or would occur after giving effect to the advance, on the date of the advance request.

The Sub Revolving Loan Agreement contains customary representations and warranties and affirmative covenants, including representations, warranties and covenants on organization, authorization, enforceability and maintenance of existence. The Sub Revolving Loan is secured by a security interest in all personal property of Montreign Operating subject to the limitations and exceptions described in the Sub Revolving Loan Agreement. Obligations under the Sub Revolving Loan Agreement may be accelerated upon certain customary events of default, including, among others: nonpayment of principal, interest or fees; breach of any term, covenant, or agreement under the Sub Revolving Loan Agreement; a bankruptcy proceeding involving Montreign, whether voluntary or involuntary; or the acceleration of any indebtedness in excess of $10 million.

Montreign Operating agreed to indemnify Empire and its officers, partners, members, directors, employees and agents (together, the “Indemnified Parties” and each an “Indemnified Party”) against any and all damages arising out of any negligence or tortious acts or omissions by Montreign Operating or its agents, contractors, servants or employees, any failure by Montreign to comply with the terms of the Sub Revolving Loan Agreement, and any failure by Montreign Operating to comply with the law, except to the extent any such damages result from the gross negligence or willful misconduct of an Indemnified Party.

On November 30, 2018 and December 7, 2018, the Company advanced an aggregate of $10 million to Montreign Operating pursuant to a request for advance under the Sub Revolving Loan.

Loan Arrangements with Kien Huat Realty III Limited
Kien Huat Subordinate Loan Agreement
On June 25, 2018, Kien Huat and Empire entered into a loan agreement (the “Kien Huat Subordinate Loan Agreement”), providing for loans of up to $30 million (the “Kien Huat Subordinate Loan”). The Kien Huat Subordinate Loan is subordinate to the Bangkok Bank Loan. The proceeds of the Kien Huat Subordinate Loan may be used exclusively to make capital contributions to Montreign Operating. Montreign Operating may use such funds for marketing and general corporate purposes (including the payment of debt service). All amounts due under the Kien Huat Subordinate Loan will mature on December 28, 2020, which date may be extended for additional one-year periods if the Bangkok Bank Loan is similarly extended or accelerated in the event the Bangkok Bank Loan is accelerated. The maturity of the Kien Huat Subordinate Loan may also be extended for up to one year at the sole discretion of Kien Huat.
On July 5, 2018, the Company borrowed $5 million, and on July 31, 2018, the Company borrowed $5 million. The Company also borrowed an additional $10 million on each of September 11, 2018 and October 16, 2018. The Company paid Kien Huat a commitment fee of $300,000 (or 1% of the principal amount) out of the proceeds of the first advance. At December 31, 2018, $30 million was outstanding under the Kien Huat Subordinate Loan.
The Kien Huat Subordinate Loan bears interest at a rate of 12% per annum, compounded monthly, and will be payable at maturity. Prior to the maturity of the Kien Huat Subordinate Loan, interest will not be required to be paid in cash and will be added to the outstanding principal of the Kien Huat Subordinate Loan and will thereafter be deemed to be part of the principal indebtedness due thereunder upon maturity. The Kien Huat Subordinate Loan may be repaid in full or in part at any time without premium or penalty.
The Kien Huat Subordinate Loan Agreement contains customary representations and warranties and affirmative covenants, including a restriction on the use of the proceeds of the Kien Huat Subordinate Loan as described above. Obligations under the Kien Huat Subordinate Loan Agreement may be accelerated upon certain customary events of default (subject to grace periods, as applicable), including among others: nonpayment of principal, interest or fees; breach of the affirmative covenants; and a default in payment of or acceleration of the Bangkok Bank Loan. Additionally, any future amendments to the Bangkok Bank Loan Agreement relating to default provisions thereunder, prepayment provisions or an increase of the maximum principal amount thereunder will be subject to Kien Huat’s prior written consent.
The Company agreed to indemnify and defend Kien Huat and its affiliates from negligent acts or omissions of the Company and its affiliates, any failure of the Company to comply with the terms of the Kien Huat Subordinate Loan Agreement and any failure of the Company to comply with any laws, except to the extent resulting from the gross negligence or willful misconduct of Kien Huat or its affiliates.
        
Kien Huat Backstop Loan Agreement
Concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, on December 28, 2017, Empire and Kien Huat entered into a loan agreement (the “Kien Huat Backstop Loan Agreement”), providing for loans to Empire in an aggregate principal amount of up to $20 million (the “Kien Huat Backstop Loan”). Any amounts borrowed under the Kien Huat Backstop Loan will be used exclusively to make payments required under the Bangkok Bank Loan Agreement and will mature on the one-year anniversary of the Maturity Date of the Bangkok Bank Loan, or such earlier date that the Bangkok Bank Loan is terminated (the “Backstop Maturity Date”). As of December 31, 2018, no amounts had been borrowed under the Kien Huat Backstop Loan.

The Kien Huat Backstop Loan bears interest at a rate of 12% per annum. Prior to the Backstop Maturity Date, interest on any principal amount outstanding under the Kien Huat Backstop Loan will accrue and be added to the outstanding principal of the Kien Huat Backstop Loan on the first business day of each calendar month beginning on January 1, 2018 and will thereafter be deemed to be part of the principal indebtedness. The Kien Huat Backstop Loan, including all interest and any other amounts due under the Kien Huat Backstop Loan, will be payable in cash on the Backstop Maturity Date. Kien Huat was paid a commitment fee of $200,000 on December 28, 2017.

The Kien Huat Backstop Loan Agreement contains representations and warranties and affirmative covenants that are usual and customary, including representations, warranties and covenants that restrict the Company’s use of the proceeds of the Kien Huat Backstop Loan to pay amounts due and payable under the Bangkok Bank Loan. Obligations under the Kien Huat Backstop Loan Agreement may be accelerated upon certain customary events of default (subject to grace periods, as appropriate), including among others: nonpayment of principal, interest or fees; and breach of the affirmative covenants.

Kien Huat Montreign Loan Agreement and Kien Huat Note Exchange Agreement

On January 24, 2017, Montreign Holding entered into a loan agreement (the "Kien Huat Montreign Loan Agreement"). Pursuant to the Kien Huat Montreign Loan Agreement, Montreign Holding obtained from Kien Huat a loan in the principal amount of $32.3 million (the "Kien Huat Montreign Loan"). The net proceeds of the Kien Huat Montreign Loan were used as a capital contribution to Montreign Operating for use towards the expenses of the Development Projects. The obligations of Montreign Holding under the Kien Huat Montreign Loan Agreement were secured by a pledge of all the membership interests in Montreign Holding.
Concurrently with and as a condition to the closing of the Bangkok Bank Loan Agreement, on December 28, 2017, Empire, Montreign Holding, and Kien Huat entered into a Note Exchange Agreement (the “Kien Huat Note Exchange Agreement”). The Kien Huat Note Exchange Agreement provides for the issuance of 1,379,873 shares of common stock Kien Huat in full satisfaction of the Kien Huat Montreign Loan. In connection with the satisfaction in full of the Kien Huat Montreign Loan pursuant to the Kien Huat Note Exchange Agreement, Empire's pledge of its membership interests in Montreign Holding was released.
    
Kien Huat Construction Loan Agreement    
On October 13, 2016, Montreign Operating and Kien Huat entered into a loan agreement (the "Kien Huat Construction Loan Agreement"). Pursuant to the Kien Huat Construction Loan Agreement, Kien Huat agreed to make available to Montreign Operating up to an aggregate of $50 million of loans to pay the expenses of the Casino while the debt financing for the Development Projects was being finalized. In connection with the closing of the Term Loan Facility and the Kien Huat Montreign Loan, on January 24, 2017, the Kien Huat Construction Loan Agreement expired pursuant to its terms without being utilized by Montreign Operating. Montreign Operating paid Kien Huat a commitment fee of $500,000 upon execution of the Kien Huat Construction Loan. The commitment fee was capitalized and was included in "Other Assets" at December 31, 2016. It was charged to "Interest Expense" on the Consolidated Statement of Operations on January 24, 2017, upon the issuance of the Kien Huat Montreign Loan Agreement.     
    
Conversion of 2010 Kien Huat Note
On November 17, 2010, Empire entered into a loan agreement (the "2010 Kien Huat Loan Agreement") with Kien Huat pursuant to which Empire issued a convertible promissory note (the "2010 Kien Huat Note") in the original principal amount of $35 million, of which $17.4 million was outstanding as of December 31, 2015. On February 17, 2016, upon consummation of the January 2016 Rights Offering (as defined and discussed in Note I), the 2010 Kien Huat Note was converted into 1,332,058 shares of common stock in accordance with the terms of the 2010 Kien Huat Loan Agreement.
The Company recognized approximately $0.2 million in interest expense associated with the 2010 Kien Huat Note during the year ended December 31, 2016.