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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is
made as of the 20th day of October, 1995, by and between Sanwa
Business Credit Corporation, a Delaware corporation ("Lender"), and
Wico Corporation, a Delaware corporation ("Borrower").
W I T N E S S E T H:
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WHEREAS, Borrower desires to borrow funds and obtain
other financial accommodations from Lender, and Lender is willing
to make certain loans and provide other financial accommodations to
Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the terms and
conditions contained herein, and of any loans or extension of
credit heretofore, now or hereafter made to or for the benefit of
Borrower by Lender, the parties hereto hereby agree as follows:
1. DEFINITIONS.
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1.1 General.
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"Account Debtor" shall mean any Person who is or who may
become obligated to Borrower or Gaming Supply under, with respect
to, or on account of an Account or a Gaming Supply Account.
"Accounts" shall mean all accounts, contract rights,
chattel paper, instruments and documents, whether now owned or
hereafter acquired by Borrower.
"Accounts Report" shall mean a report delivered to Lender
by Borrower, as required by Section 6.2, specifying for each
Account Debtor obligated on the Accounts or the Gaming Supply
Accounts, such Account Debtor's name, address and outstanding
balance.
"Adjusted Net Worth" shall mean, as of any particular
date, the consolidated net worth of Conquest Industries Inc., a
Delaware corporation ("Conquest"), as of such date, as determined
in accordance with Generally Accepted Accounting Principles.
"Affiliate" shall mean any and all Persons (a) that
directly or indirectly, through one or more intermediaries, control
or are controlled by or are under common control with Borrower, (b)
that directly or beneficially own or hold 5% or more of any class
of the voting stock of Borrower, or (c) 5% or more of whose voting
stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) is owned directly or beneficially or
held by Borrower. For the purpose of this definition, "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a
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Person, whether through the ownership of voting securities, by
contract or otherwise.
"Ancillary Agreements" shall mean all Security Documents
and all agreements, instruments and documents, including without
limitation, the Gaming Disposition Side Letter and all notes,
guaranties, mortgages, deeds of trust, chattel mortgages, pledges,
powers of attorney, consents, assignments, contracts, notices,
security agreements, leases, financing statements, subordination
agreements and trust account agreements whether heretofore, now, or
hereafter executed by or on behalf of Borrower or any other
Guarantor or delivered to Lender or any Participant with respect to
this Agreement.
"Base Rate Option" shall mean the interest rate option
described in Section 2.3(A)(i).
"Base Rate Portion" shall mean the portion of the
Revolving Loan, if any, which bears interest at the rate described
in Section 2.3(A)(i).
"Business Day" shall mean (a) for all purposes other than
as covered by clause (b) below, any day, other than a Saturday or
Sunday, on which the main lobby of the Depository Bank and Lender
are open for business with the general public, and (b) with respect
to all notices, determinations, fundings and payments in connection
with any LIBOR Rate Portion of the Revolving Loans, any day that is
a Business Day described in clause (a) above and that it also a day
for trading by and between banks in U.S. Dollar deposits in the
applicable interbank LIBOR market.
"Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures including deposits (whether paid in
cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term
of all capital leases which are required to be capitalized on the
balance sheet) made by Borrower that, in conformity with Generally
Accepted Accounting Principles, are required to be included in the
property, plant or equipment, or similar fixed asset account, of
Borrower.
"Charges" shall mean all national, federal, state,
county, city, municipal, or other governmental (including, without
limitation, the Pension Benefit Guaranty Corporation) taxes,
levies, assessments, Charges, liens, Claims or encumbrances upon or
relating to (i) the Collateral, (ii) the Liabilities, (iii)
Borrower's and Gaming Supply's employees, payroll, income or gross
receipts, (iv) Borrower's and Gaming Supply's ownership or use of
any of its respective assets, or (v) any other aspect of Borrower's
or Gaming Supply's business.
"Collateral" shall mean all of the property and interests
in property described in Section 5.1 and all other property and
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interests in property, whether realty or personalty, which shall,
from time to time, secure any part of the Liabilities, including
without limitation the Accounts, Inventory, Equipment and General
Intangibles.
"Collateral Availability" shall have the meaning ascribed
to it in Section 2.1.
"Collateral Overadvance Facility" shall have the meaning
ascribed to it in Section 2.1.
"Debt Service Coverage" shall mean with respect to any
period, the ratio of (i) the consolidated Net Income of Parent for
such period, plus interest, income taxes, depreciation,
amortization and losses attributable to the sale of assets outside
of the ordinary course of business which were deducted in
determining Net Income for such period, to (ii) without
duplication, interest, capital lease, tax and preferred dividend
payments by Parent, principal payments with respect to Indebtedness
and Capital Expenditures scheduled to be paid during such period.
"Default" shall mean the occurrence or existence of any
one or more of the events described in Section 11.1.
"Depository Bank" shall mean the banking institution
which is referred to in Section 4.3 and which shall be the
signatory to the Special Deposit Agreement a form of which is
attached hereto as Exhibit 1.1.
"EBITDA" shall mean, with respect to any period, Parent's
consolidated net earnings (or loss) before interest expense, taxes,
depreciation and amortization for such period.
"Eligible Accounts" shall mean those Accounts included in
an Accounts Report which, as of the date of such Accounts Report
and at all times thereafter (i) satisfy the requirements for
eligibility as described in Section 3.1, (ii) do not violate the
negative covenants and other provisions of this Agreement and do
satisfy the affirmative covenants, warranties and other provisions
of this Agreement, and (iii) Lender, in its reasonable credit
judgment, deems to be Eligible Accounts.
"Eligible Inventory" shall mean those items of Inventory
included in an Inventory Report which, as of the date of such
Inventory Report and at all times thereafter (i) satisfy the
requirements for eligibility as described in Section 3.2, (ii) do
not violate the negative covenants and other provisions of this
Agreement and do satisfy the affirmative covenants, warranties and
other provisions of this Agreement, and (iii) Lender, in its
reasonable credit judgment, deems to be Eligible Inventory.
"Environmental Laws" shall mean any federal, state,
county, city, municipal or other laws, statutes, rules, regula-
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tions, orders, consent decrees, Permits or licenses, relating to
prevention, remediation, reduction or control of pollution, or
protection of the environment, natural resources and/or human
health and safety, including without limitation such laws,
statutes, rules, regulations, orders, consent decrees, permits or
licenses relating to (a) solid waste and/or Hazardous Materials
treatment, storage, disposal, generation and transportation, (b)
air, water and noise pollution, (c) soil, ground, water or
groundwater contamination, (d) the generation, handling, storage,
transportation or Release into the environment of Hazardous
Materials, and (e) regulation of underground and aboveground
storage tanks.
"Equipment" shall mean all of Borrower's now owned and
hereafter acquired equipment and fixtures, including without
limitation furniture, machinery, vehicles, trade fixtures and the
property described on Exhibit 1.2, together with any and all
accessories, parts and appurtenances thereto, substitutions
therefor and replacements thereof.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Event of Default" shall mean any event or condition
which, with the passage of time or the giving of notice or both,
would constitute a Default.
"Excess Availability" shall have the meaning ascribed to
it in Section 4.6(E).
"Financials" shall mean those financial statements
attached hereto as Exhibit 1.3 or delivered to Lender pursuant to
Section 10.1(F)(i) and 10.1(F)(ii).
"Gaming Disposition" shall mean the disposition of Gaming
Supply by Parent on the terms and conditions set forth in the
Gaming Disposition Side Letter.
"Gaming Disposition Side Letter" shall mean that certain
letter agreement of even date herewith among Borrower, Lender,
Gaming Supply, Parent and Conquest and pertaining to the Gaming
Disposition.
"Gaming Supply" shall mean Wico Gaming Supply Co., a
Delaware corporation and, as of the date of this Agreement, a
wholly-owned subsidiary of Parent.
"Gaming Supply Accounts" shall mean, for the period of
time in which Gaming Supply is a wholly-owned subsidiary of Parent,
all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter acquired by Gaming
Supply.
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"Gaming Supply Eligible Accounts" shall mean those Gaming
Supply Accounts included in an Accosts Report which, as of the
date of such Accounts Report and at all times thereafter (i)
satisfy the requirements for eligibility as described in Section
3.1, (ii) do not violate the negative covenants and other
provisions of this Agreement and the Ancillary Agreements and do
satisfy the affirmative covenants, warranties and other provisions
of this Agreement and the Ancillary Agreements, and (iii) Lender,
in its reasonable credit judgment, deems to be Gaming Supply
Eligible Accounts.
"Gaming Supply Eligible Inventory" shall mean those items
of Gaming Supply Inventory included in an Inventory Report which,
as of the date of such Inventory Report and at all times thereafter
(i) satisfy the requirements for eligibility as described in
Section 3.2, (ii) do not violate the negative covenants and other
provision of this Agreement and the Ancillary Agreements and do
satisfy the affirmative covenants, warranties and other provisions
of this Agreement and the Ancillary Agreements, and (iii) Lender,
in its reasonable credit judgment, deems to be Gaming Supply
Eligible Inventory.
"Gaming Supply Inventory" shall mean, for the period of
time in which Gaming Supply is a wholly-owned subsidiary of Parent,
all finished goods and component parts inventory of Gaming Supply,
including, without limitation, inventory in transit, wherever
located and whether now owned or hereafter acquired by Gaming
Supply which is or may at any time be held for sale or lease.
"General Intangibles" shall mean all choses in action,
general intangibles, causes of action and all other intangible
personal property of Borrower of every kind and nature (other than
Accounts) now owned or hereafter acquired by Borrower. Without in
any way limiting the generality of the foregoing, General
Intangibles specifically includes, without limitation, all
corporate or other business records, security deposits, inventions,
designs, patents, patent applications, trademarks, trade names,
trade secrets, goodwill, copyrights, copyright applications,
registrations, licenses, franchises and tax refund claims in which
Borrower has an interest and all letters of credit, guarantee
claims, security interests or other security held by or granted to
Borrower to secure payment by an Account Debtor of any Accounts.
"Generally Accepted Accounting Principles" shall mean
generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board that
are applicable to the circumstances as of the date of
determination.
"Guarantor" shall mean any Person, other than Borrower,
who is liable for the payment of any of the Liabilities, either
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primarily or secondarily (as a guarantor or an accommodation
party).
"Hazardous Materials" shall mean any flammable or
explosive materials, petroleum and petroleum derivatives (including
crude oil and its fractions), radioactive materials, hazardous
wastes, toxic substances or related materials, including without
limitation polychlorinated biphenyls, asbestos, ureaformaldehyde
insulation, industrial process and pollution control waste and any
substances defined as, or included in the definition of toxic or
hazardous substances, wastes or materials under any Environmental
Laws.
"Indebtedness" as applied to any Person, shall mean: (a)
all indebtedness for borrowed money; (b) that portion of
obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with
Generally Accepted Accounting Principles; (c) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation
owed for all or any part of the deferred purchase price of property
or services if the purchase price is due more than six (6) months
from the date the obligation is incurred or is evidenced by a note
or similar written instrument; and (e) all indebtedness secured by
any lien, claim, encumbrance or security interest on any property
or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person
or is nonrecourse to the credit of that Person. Without in anyway
limiting the generality of the foregoing, Indebtedness of Borrower
specifically includes (i) the Liabilities and (ii) all liabilities
evidenced by the NatWest Documents.
"Initial Term" shall have the meaning ascribed to it in
Section 2.4.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement of even date herewith between Lender and
NatWest and consented to by Borrower and Guarantors.
"Interest Coverage" shall mean with respect to any
period, the ratio of (i) consolidated Net Income of Parent for such
period, plus interest and income taxes deducted in determining Net
Income for such period, to (ii) interest of Borrower paid or
accrued during such period.
"Interest Period" shall have the meaning ascribed to such
term in Section 2.3(G).
Interest Rate Determination Date" shall have the meaning
ascribed to such term in Section 2.3(G).
"Inventory" shall mean all goods, inventory, merchandise
and other personal property, including, without limitation,
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inventory in transit, wherever located and whether now owned or
hereafter acquired by Borrower which is or may at any time be held
for sale or lease, furnished under any contract of service or held
as raw materials, work in process, supplies or materials used or
consumed in Borrower's business, and all such property the sale or
other disposition of which has given rise to Accounts and which has
been returned to or repossessed or stopped in transit by Borrower.
"Inventory Report" shall mean a report delivered to
Lender by Borrower, as required by Section 7.2, consisting of a
detailed listing of all Inventory and Gaming Supply Inventory as of
the date of such Inventory Report describing the kind, type,
quality, quantity, location and the market value (computed on a
first-in, first-out basis) of such Inventory and Gaming Supply
Inventory.
"Liabilities" shall mean all of Borrower's liabilities,
obligations, indebtedness, covenants and duties owing to Lender, of
any kind and nature, whether heretofore, now or hereafter owing,
arising, due or payable and howsoever created, incurred, acquired,
or owing, under this Agreement or any Ancillary Agreement, whether
primary, secondary, direct, absolute, contingent, fixed or
otherwise (including, without limitation, interest, charges,
expenses, reasonable attorneys fees and other sums chargeable to
Borrower by Lender, future advances made to or for the benefit of
Borrower and obligations of performance), whether arising by reason
of an extension of credit, loan, guaranty, indemnification,
reimbursement of any obligations with respect to any letter of
credit or letter of credit guaranty or in any other matter.
"LIBOR Rate" shall mean, for any LIBOR Rate Portion, the
per annum rate of interest which is ordinarily reported on page
3750 of the Telerate Matrix (in U.S. Dollars) for a principal
amount substantially equal to the amount of such LIBOR Rate Portion
and having a maturity comparable to the Interest Period proposed to
be applicable to such LIBOR Rate Portion, as quoted to Borrower by
Lender; provided, however, if, for whatever reason, Lender shall be
unable to ascertain the LIBOR Rate pursuant to the preceding
provisions, the LIBOR Rate in such circumstances shall be the rate
per annum determined by Lender by dividing (the resulting quotient
to be rounded upward to the nearest 1/100 of one percent) (i) the
per annum rate of interest at which deposits in U.S. Dollars in an
amount substantially equal to such LIBOR Rate Portion and having a
maturity Comparable to the Interest Period proposed for such LIBOR
Rate Portion, are offered Lender or its affiliates in the London
interbank market at approximately 11:00 a.m. (London time) on the
applicable Interest Rate Determination Date, by (ii) a number equal
to 1.0 minus the aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect
on the day whiCh is two (2) Business Days prior to the beginning of
such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations
of the Board of Governors of the Federal Reserve System or other
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governmental authority having jurisdiction with respect thereto, as
now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation
D of such Board) which are required to be maintained by a member
bank of the Federal Reserve System.
"LIBOR Rate Option" shall mean the interest rate option
described in Section 2.3(A)(ii).
"LIBOR Rate Portion" shall mean the portion of the
Revolving Loan, if any, which bears interest at the rate described
in subsection 2.3(A)(ii).
"Loan Account" shall have the meaning ascribed to it in
Section 4.1.
"Maximum Rate" shall have the meaning ascribed to it in
Section 2.3(E).
"Maximum Revolving Facility" shall mean Fourteen Million
Dollars ($14,000,000).
"NatWest" shall mean NatWest Bank N.A., a national
banking association.
"NatWest Documents" shall mean (i) that certain Amended
and Restated Loan Agreement between Borrower and NatWest of even
date herewith (the "NatWest Loan Agreement") and (ii) all
documents, instruments and agreements contemplated by the NatWest
Loan Agreement, including without limitation the "Note", as such
term is defined in the NatWest Loan Agreement.
"Net Income" shall mean the consolidated net income of
Parent calculated in accordance with Generally Accepted Accounting
Principles.
"Notice of Conversion/Continuation" shall mean a notice
in the form of Exhibit 2.3(C).
"Overadvance Elimination Period" shall have the meaning
ascribed to it in Section 2.1.
"Parent" shall have the meaning ascribed to it in Section
10.2(C).
"Participant" shall mean any Person, now or at any time
or times hereafter, participating with Lender in the loans made by
Lender to Borrower pursuant to this Agreement and the Ancillary
Agreements.
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"Permitted Liens" shall mean:
(i) the liens created in favor of Lender, whether
pursuant to this Agreement or any of the Ancillary
Agreements or otherwise;
(ii) liens for taxes, assessments, governmental
charges or claims and unfunded liabilities under ERISA
not yet due and payable or which are being contested in
good faith and for which adequate reserves for the
payment thereof (as reasonably determined by Lender) have
been established by Borrower;
(iii) mechanics', materialmen's, carriers',
warehousemen's, suppliers' or other like liens arising by
operation of law and in the ordinary course of business
and securing obligations of a Person that are not overdue
or are being contested in good faith and for which
adequate reserves for the payment thereof (as reasonably
determined by Lender) have been established by Borrower;
(iv) liens arising or deposits made in connection
with worker's compensation, unemployment insurance, old
age pensions, social security and other similar benefits
which are not overdue or are being contested in good
faith and for which adequate reserves for the payment
thereof (as reasonably determined by Lender) have been
established by Borrower;
(v) such imperfections of title, covenants,
restrictions (including, without limitation, zoning
restrictions), easements, rights-of-way, minor defects or
irregularities in title and encumbrances on real property
which do not interfere with or impair in any material
respect the utility, operation, value or marketability of
the real property on which any such lien is imposed;
(vi) liens in connection with the acquisition of
Equipment after the date hereof by way of purchase money
security interest financing, and attaching only to the
Equipment being acquired, so long as (i) the Indebtedness
secured by purchase money security interest liens at any
time does not exceed Twenty-Five Thousand Dollars
($25,000.00) with respect to any single acquisition of
Equipment and (ii) the aggregate amount of Indebtedness
secured by all purchase money security interest liens at
any time does not exceed Fifty Thousand Dollars
($50,000.00);
(vii) liens in favor of NatWest described in, and
subject to the terms of, the Intercreditor Agreement; and
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(viii) liens existing on the date hereof and listed on
Exhibit 1.4 hereto.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or
department thereof).
"Private Placement Notes" shall have the meaning ascribed
to it in Section 10.2(C).
"Prime Rate" shall mean the highest "Prime Rate" of
interest quoted, from time to time, by The Wall Street Journal,
provided, however, that in the event that The Wall Street Journal
ceases quoting a "Prime Rate", "Prime Rate" shall mean the per
annum rate of interest quoted as the "Bank Prime Loan" rate for the
most recent weekday for which such rate is quoted in Statistical
Release H.15(519) published from time to time by the Board of
Governors of the Federal Reserve System, provided further that in
the event that both of the aforesaid indices cease to be published
or to quote rates of the aforesaid types, "Prime Rate" shall be
determined from a comparable index chosen by Lender in good faith.
The "Prime Rate" shall change effective on the date of the
publication of any change in the applicable index by which such
"Prime Rate" is determined.
"Release" shall mean any actual or threatened past,
present or future releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, seeping, injecting, escaping,
leaching, dumping or disposing, whether intentional or not.
"Reportable Event" shall have the meaning ascribed to it
in Section 9.1(0).
"Revolving Loan" shall have the meaning ascribed to it in
Section 2.1.
"Security Documents" shall mean this Agreement and all
other agreements, instruments, documents, financing statements,
notices of assignment, schedules, assignments, mortgages and other
written matter necessary or requested by Lender to create, perfect
and maintain perfected security interests in the Collateral.
"Special Collateral" shall have the meaning ascribed to
it in Section 5.3.
1.2 ACCOUNTING TERMS. Any accounting terms used in this
Agreement which are not specifically defined shall have the
meanings customarily given them in accordance with Generally
Accepted Accounting Principles.
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1.3 OTHER TERMS. All other terms contained in this
Agreement which are not otherwise defined in this Agreement shall,
unless the context indicates otherwise, have the meanings provided
for by the Uniform Commercial Code of the State of Illinois to the
extent the same are used or defined therein.
2. LOANS; GENERAL TERMS.
2.1 TOTAL FACILITY. Subject to the terms and conditions
of this Agreement, Lender shall make available for Borrower,s use
from time to time during the term of this Agreement, upon
Borrower's request therefor, a revolving line of credit consisting
of advances against Eligible Accounts, Gaming Supply Eligible
Accounts, Eligible Inventory and Gaming Supply Eligible Inventory
(the "Revolving Loan") in an aggregate principal amount not to
exceed, at any time outstanding, the lesser of (A) the Maximum
Revolving Facility, and (B) the outstanding amount of Collateral
Availability. As used in this Agreement, "Collateral Availability"
shall mean and, at any particular time and from time to time, be
equal to the sum of:
(i) Eighty-Five percent (85%) of the net amount of
Eligible Accounts and Gaming Supply Eligible Accounts,
plus
(ii) the lesser of:
(a) Six Million Dollars ($6,000,000) and
(b) the sum of (x) Fifty-Five percent (55%)
of the aggregate market value of Eligible Inventory
and Gaming Supply Eligible Inventory (determined on
a first-in, first-out basis) consisting of finished
goods and (y) the lesser of (A) Three Hundred
Thousand Dollars ($300,000) and (B) Twenty percent
(20%) of the aggregate market value of Eligible
Inventory and Gaming Supply Eligible Inventory
(determined on a first-in, first-out basis)
consisting of component parts to be assembled into
finished goods by Borrower, plus
(iii) Five Hundred Thousand Dollars ($500,000) (the
"Collateral Overadvance Facility"), minus
(iv) such reserves as Lender deems proper and
necessary from time to time,
provided, that (a) Collateral Availability attributable
to the value of Gaming Supply Eligible Accounts and the
value of Gaming Supply Eligible Inventory shall at no
time exceed (i) Four Hundred Thousand Dollars ($400,000)
from the date hereof through and including February 20,
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1996; (ii) Two Hundred Sixty-Six Thousand Two Hundred and
Sixty-Seven Dollars ($266,267) from February 21, 1996
through and including March 20, 1996; (iii) One Hundred
Thirty-Three Thousand Three Hundred Thirty Three Dollars
($133,333) from March 21, 1996 through and including
April 20, 1996 and (iv) zero (0) from and after April 21,
1996 and (b) the Collateral Overadvance Facility shall be
reduced to zero for a minimum of thirty (30) consecutive
Business Days (the "Overadvance Elimination Period")
selected by Borrower during each fiscal year of Borrower
commencing with Borrower's fiscal year ending September
30, 1996. In the event Borrower fails to select an
Overadvance Elimination Period before the thirtieth
(30th) Business Day prior to the end of any fiscal year
of Borrower, the Overadvance Elimination Period shall
cover the last thirty (30) Business Days of such fiscal
year.
Notwithstanding anything to the contrary in this Section
2.1, Lender may, in good faith and in the reasonable exercise of
Lender's credit judgment at any time and from time to time,
increase or decrease the advance percentages to be applied to
Eligible Accounts, Eligible Inventory, Gaming Supply Eligible
Accounts and Gaming Supply Eligible Inventory which are contained
in this Section 2.1.
2.2 ADVANCES TO CONSTITUTE ONE LOAN; LOAN PURPOSE. All
loans and advances by Lender to Borrower under this Agreement and
the Ancillary Agreements shall constitute one loan and all
indebtedness and obligations of Borrower to Lender under this
Agreement and the Ancillary Agreements shall constitute one general
obligation secured by the Collateral.
2.3 INTEREST.
(A) RATE OF INTEREST. The Revolving Loans shall
bear interest on the unpaid principal amount thereof from
the date such Revolving Loans are made and until paid in
full at the following rates, as selected by Borrower from
time to time as provided in Section 2.3(C):
(i) BASE RATE OPTION. That portion of the
outstanding principal balance of the Revolving
Loans subject to this option shall bear interest at
a fluctuating rate per annum equal at all times to
one and one-half percent (1.50%) in excess of the
Prime Rate; provided, that (x) the rate of interest
applicable to the Revolving Loans subject to this
option shall be decreased to one percent (1.0%)
above the Prime Rate if the audited financial
statements delivered by Borrower to Lender pursuant
to Section 10.1(F)(i) demonstrate that Parent had
Net Income greater than Two Million Two Hundred
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Fifty Thousand Dollars ($2,250,000) for any fiscal
year of Parent ending on or after September 30,
1996 and no Default and no Event of Default then
exists, such rate change to be effective as of the
first day of the next calendar month after Lender
receives such financial statements, and (y) any
portion of the Revolving Loans subject to this
option predicated on the Collateral Overadvance
Facility shall bear interest on the unpaid
principal amount thereof at the rate per annum of
three percent (3.0%) above the Prime Rate.
(ii) LIBOR Rate Option. That portion of the
outstanding principal balance of the Revolving Loan
subject to this option shall bear interest at a
fixed rate per annum equal to four and one quarter
percent (4.25%) in excess of the LIBOR Rate
applicable to such LIBOR Rate Portion; provided,
that (x) the rate of interest applicable to the
Revolving Loans subject to this option shall be
decreased to three and three quarters percent
(3.75%) above the LIBOR Rate if the audited
financial statements delivered by Borrower to
Lender pursuant to Section 10.1(F)(i) demonstrate
that Parent had Net Income greater than Two Million
Two Hundred Fifty Thousand Dollars ($2,250,000) for
any fiscal year of Parent ending on or after
September 30, 1996 and no Default and no Event of
Default then exists, such rate change to be
effective as of the first day of the next calendar
month after Lender receives such financial
statements, and (y) any portion of the Revolving
Loans subject to this option predicated on the
Collateral Overadvance Facility shall bear interest
on the unpaid principal amount thereof at the rate
per annum of five and three quarters percent
(5.75%) above the LIBOR Rate.
For purposes of this Agreement, outstanding Revolving
Loans shall be deemed to be made first against the
Collateral Availability described in subsections (i) and
(ii) of the definition of Collateral Availability and
then against the Collateral Overadvance Facility. If on
any day notice has not been timely delivered by Borrower
to Lender in accordance with the terms of this Agreement
specifying the basis for determining the rate of interest
on that day, then for that day Borrower shall be deemed
to have selected the Base Rate Option. The outstanding
principal balance of Liabilities other than the Revolving
Loan shall bear interest from the date such Liabilities
are incurred until paid in full at the Base Rate Option.
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14
(B) INTEREST PAYMENTS. With respect to any Base
Rate Portion, accrued interest shall be payable, in
arrears, (i) on the first day of each calendar month, and
(ii) at maturity (whether by acceleration or otherwise)
of the Revolving Loans. With respect to any LIBOR Rate
Portion, accrued interest shall be payable (i) on the
last day of the applicable Interest Period for such LIBOR
Rate Portion, and (ii) at maturity (whether by accelera-
tion or otherwise) of the Revolving Loans.
(C) CONVERSION OR CONTINUATION.
(i) Subject to the provisions of this
Agreement, Borrower shall have the option (a) as of
any date to convert all or any part of its
outstanding Base Rate Portion, if any, into one or
more LIBOR Rate Portions; (b) as of the last day of
its applicable Interest Period, to convert all or
any part of a LIBOR Rate Portion to a Base Rate
Portion on such expiration date; or (c) as of the
last day of any Interest Period, to continue all or
any part of a LIBOR Rate Portion, and, in the case
of clauses (b) and (c) of this paragraph, the
succeeding Interest Period of such continued LIBOR
Rate Portion shall commence on such expiration
date; provided, however, no outstanding portion of
the Revolving Loans may be continued as, or be
converted into, a LIBOR Rate Portion (x) if the
continuation of, or the conversion into such LIBOR
Rate Portion, would violate any of the provisions
of Section 2.3(G) or (y) if as of such date an
Event of Default or Default would occur or has
occurred and is continuing. Notwithstanding any of
the foregoing, Borrower may not select the LIBOR
Rate Option until ten (10) days after the initial
funding hereunder.
(ii) To convert or continue a LIBOR Rate
Portion under this Section 2.3(C), Borrower shall
deliver a Notice of Conversion/Continuation in the
form of Exhibit 2.3(C) to Lender no later than
12:00 noon (Chicago time) at least three (3)
Business Days in advance of the proposed
conversion/continuation date. A Notice of
Conversion/Continuation shall specify (a) the
proposed conversion/continuation date (which shall
be a Business Day), (b) the amount of the principal
portion of the Revolving Loans to be
converted/continued, and (c) whether such portion
shall be converted and/or continued. In lieu of
delivering a Notice of Conversion/Continuation,
Borrower may give Lender telephonic notice of any
proposed conversion/continuation by the time
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required under this Section 2.3(C) and such notice
shall be confirmed in writing delivered to Lender
promptly (but in no event later than 5:00 p.m.
(Chicago time) on the same Business Day). Any
Notice of Conversion/Continuation delivered by
Borrower (or telephonic notice in lieu thereof)
shall be irrevocable when given pursuant to this
clause (ii) (whether given in writing or by
telephone), and Borrower shall be bound to convert
or continue in accordance therewith.
(D) COMPUTATION OF INTEREST. Interest on all
principal Liabilities shall be computed on the basis of
the actual number of days elapsed in the period during
which interest accrues and a year of three hundred sixty
(360) days. In computing such interest, the date of the
making of the Revolving Loans, the first day of an
Interest Period or the date of any conversion into the
Base Rate Portion, as the case may be, shall be included
and the date of payment, the expiration date of the
Interest Period or the date of any conversion from the
Base Rate Portion, as the case may be, shall be excluded
so long as payment is timely received in accordance with
this Agreement.
(E) DEFAULT RATES. Notwithstanding the rates of
interest specified above, effective immediately upon the
occurrence of a Default and during the continuance
thereof, the principal balance of the Liabilities shall
bear interest payable upon Lender's demand therefor, at
a rate which is two percent (2%) in excess of the rate
otherwise payable under this Agreement. Following the
occurrence of a Default, and notwithstanding the payment
dates set forth above, Borrower shall pay interest on the
Liabilities upon Lender's demand therefor or, so long as
no demand has been made, monthly in arrears on the first
day of each month.
(F) MAXIMUM INTEREST RATE. In no event shall any
interest rate otherwise payable hereunder exceed the
maximum rate permissible by applicable law (the "Maximum
Rate"). If, in any month, any interest rate otherwise
payable hereunder, absent such limitation, would have
exceeded the Maximum Rate, and, if in future months, that
interest rate would otherwise be less than the Maximum
Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum
Rate. In the event that, upon payment in full of the
Liabilities under this Agreement, the total amount of
interest paid or accrued under the terms of this Agree-
ment is less than the total amount of interest which
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16
would have been paid or accrued if the interest rates set
forth in this Agreement had at all times been in effect,
then Borrower shall, to the extent permitted by appli-
cable law, pay Lender an amount equal to the difference
between (i) the lesser of (a) the amount of interest
which would have been charged if the Maximum Rate had, at
all times from and after the date hereof, been in effect,
and (b) the amount of interest which would have accrued
had the interest rates set forth in this Agreement, at
all times, been in effect, and (ii) the amount of
interest actually paid or accrued under this Agreement.
In the event that Lender has received or provided for
interest and Other charges hereunder that constitute
interest in excess of the Maximum Rate, then Borrower
shall not be obligated to pay the amount of such excess
as interest and any excess shall be deemed a mistake and
cancelled automatically, and if theretofore paid by
Borrower such excess payments hereunder shall be deemed
received on account of, and shall automatically be
applied to reduce, the principal balance of Liabilities
in the inverse order of maturity, and if there are no
such Liabilities outstanding, Lender shall refund such
excess to Borrower.
(G) SPECIAL PROVISIONS GOVERNING BORROWER'S
SELECTION OF THE LIBOR RATE OPTION. With respect to the
LIBOR Rate Portion:
(i) AMOUNT OF LIBOR RATE PORTION. Each LIBOR
Rate Portion shall be for a minimum amount of Five
Hundred Thousand Dollars ($500,000) and in integral
multiples of One Hundred Thousand Dollars
($100,000) in excess of that amount.
(ii) DETERMINATION OF INTEREST PERIOD. By
giving notice as set forth in Section 2.3(C),
Borrower shall have the option, subject to the
other provisions of this Section 2.3(G), to select
an interest period (each, an "Interest Period") to
apply to each LIBOR Rate Portion described in such
notice, subject to the following provisions:
(a) Borrower may only select, as to a parti-
cular LIBOR Rate Portion, an Interest
Period of one (1), two (2) or three (3)
months in duration;
(b) In the case of immediately successive
Interest Periods applicable to the LIBOR
Rate Portion, each successive Interest
Period shall commence on the day on which
the next preceding Interest Period
expires;
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(c) If any Interest Period would otherwise
expire on a day which is not a Business
Day, such Interest Period shall be
extended to expire on the next succeeding
Business Day if the next succeeding
Business Day occurs in the same calendar
month, and if there will be no succeeding
Business Day in such calendar month, the
Interest Period shall expire on the
immediately preceding Business Day;
(d) Borrower may not select an Interest
Period as to any LIBOR Rate Portion if
such Interest Period expires after a
scheduled date of termination of this
Agreement; and
(e) There shall be no more than two (2)
Interest Periods in effect at any one
time if, after giving effect to such
request under Section 2.3(C), there
exists a Base Rate Portion; or there
shall be no more than three (3) Interest
Periods in effect at any one time if,
after giving effect to any request under
Section 2.3(C), no Base Rate Portion
shall exist.
(iii) DETERMINATION OF LIBOR RATE. As soon as
practicable on the second Business Day prior to the
first day of each Interest Period (the "Interest
Rate Determination Date"), Lender shall determine
(pursuant to the definition of "LIBOR Rate") the
interest rate which shall apply to the LIBOR Rate
Portion for which an interest rate is then being
determined and shall promptly give notice thereof
(in writing or by telephone confirmed in writing)
to Borrower. Lender's determination shall be
presumed to be correct, absent manifest error, and
shall be binding upon Borrower.
2.4 TERM OF AGREEMENT; PREPAYMENT PREMIUM. This
Agreement shall be in effect until three (3) years from the date
hereof (the "Initial Term") and shall be automatically renewed
thereafter for successive periods of one year (the "Renewal Term")
unless terminated as provided below. Either party shall have the
right to terminate this Agreement at the end of the Initial Term or
at the end of any Renewal Term by giving the other party at least
ninety (90) days prior written notice of such termination. In
addition, Borrower may terminate this Agreement prior to the end of
the Initial Term or any Renewal Term subject to the payment of the
prepayment premium described below. This Agreement may also be
terminated by Lender upon the occurrence of a Default as provided
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in Section 11. Upon the effective date of termination, all of the
Liabilities shall become immediately due and payable without
presentment, notice or demand. Notwithstanding any termination,
until all of the Liabilities shall have been fully paid and
satisfied, Lender shall be entitled to retain its security interest
in the Collateral, Borrower shall continue to remit collections of
Accounts and proceeds of Collateral as provided in this Agreement,
and Lender shall retain all of its rights and remedies under this
Agreement and the Ancillary Agreements. If, during the Initial
Term or any Renewal Term, this Agreement is terminated by Borrower,
Borrower shall pay to Lender a prepayment premium equal to (i)
three percent (3.0%) of the Maximum Revolving Facility, if such
termination occurs on or prior to the first anniversary of the date
hereof, (ii) two percent (2.0%) of the Maximum Revolving Facility,
if such termination occurs after the first anniversary but on or
prior to the second anniversary of the date hereof, and (iii) one
percent (1.0%) of the Maximum Revolving Facility, if such
prepayment occurs after the second anniversary of the date hereof
but prior to the third anniversary of the date hereof, or after the
third anniversary of the date hereof but prior to the end of the
then current Renewal Term.
2.5 CREDIT AVAILABILITY CHARGE. Lender has determined
that it cannot profitably extend financing accommodations to
Borrower unless Lender earns at least Thirty-Five Thousand Dollars
($35,000) in interest upon the Maximum Revolving Facility during
each month of the Initial Term and each Renewal Term. To
compensate Lender for the costs of being prepared to make funds
available to Borrower, Borrower agrees that if, during any such
month, the total amount of interest earned with respect to the
Maximum Revolving Facility is less than Thirty-Five Thousand
Dollars ($35,000), then Borrower shall pay to Lender at the end of
each such month a Credit Availability Charge equal to the positive
difference between the amount of interest accrued during such month
and Thirty-Five Thousand Dollars ($35,000). The aforesaid Credit
Availability Charge is in addition to any other applicable fees and
charges and shall be payable monthly during the Initial Term and
during each Renewal Term or immediately upon termination if this
Agreement is terminated prior to the end of the Initial Term or a
Renewal Term.
2.6 CLOSING FEE. Borrower shall pay to Lender a non-
refundable closing fee equal to One Hundred Forty Thousand Dollars
($140,000) fully earned and payable on the date hereof.
3. ELIGIBLE ACCOUNTS; ELIGIBLE INVENTORY.
3.1 ELEGIBLE ACCOUNTS. Upon Borrower's delivery to
Lender of an Accounts Report, Lender shall, in its reasonable
credit judgment, determine which individual Accounts and Gaming
Supply Accounts listed thereon are Eligible Accounts or Gaming
Supply Eligible Accounts. Without limiting Lender's discretion to
make such determination, the following Accounts and Gaming Supply
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Accounts shall not be deemed to be Eligible Accounts or Gaming
Supply Eligible Accounts:
(A) Any Account and any Gaming Supply Account which
does not arise from the sale of goods that have been
shipped or delivered on open account and on an absolute
sale basis and accepted by the appropriate party;
(B) Any Account and any Gaming Supply Account with
respect to which the Account Debtor's obligation to pay
such Account or Gaming Supply Account is conditioned upon
the Account Debtor's approval of the goods the sale of
which gave rise to such Account or Gaming Supply Account
or is otherwise subject to any repurchase obligation or
return right as with sales made on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval or
consignment basis;
(C) Any Account and any Gaming Supply Account with
respect to which the Account Debtor has returned or
rejected all or a part of the goods the sale of which
gave rise to such Account or Gaming Supply Account, but
only to the extent of that portion of such Account or
Gaming Supply Account attributable to the returned or
rejected goods;
(D) Any Account and any Gaming Supply Account which
is evidenced by chattel paper or an instrument of any
kind;
(E) Any Account and any Gaming Supply Account with
respect to which the Account Debtor is insolvent or the
subject of any bankruptcy or insolvency proceeding of any
kind or Lender is not satisfied with the creditworthiness
of such Account Debtor;
(F) Any Account and any Gaming Supply Account owing
from an Account Debtor located outside the United States,
unless such Account Debtor has furnished Borrower or
Gaming Supply (as applicable) with either (i) an
irrevocable letter of credit which has been issued or
confirmed by a financial institution acceptable to
Lender, is in form and substance acceptable to Lender,
has been assigned to Lender, is payable in U.S. Dollars
in an amount not less than the face value of such Account
or Gaming Supply Account and is otherwise an Eligible
Account or Gaming Supply Eligible Account or (ii)
provided that such Account or Gaming Supply Account is in
excess of $25,000, a guaranty, in form and substance
satisfactory to Lender, of such Account or Gaming Supply
Account executed and delivered by a Person (x) domiciled
in any state in the United States; (y) owning all of the
outstanding capital stock of such Account Debtor and (z)
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with financial condition and creditworthiness
satisfactory to Lender;
(G) Any Account and any Gaming Supply Account which
is not the valid, legally enforceable obligation of the
Account Debtor with respect thereto or any Account and
any Gaming Supply Account subject to a contra or with
respect to which the Account Debtor has asserted any
offset, counterclaim or defense denying liability
thereunder;
(H) Any Account and any Gaming Supply Account which
is not subject to and covered by Lender's security
interest or is subject to any other lien, claim,
encumbrance or security interest other than a lien,
claim, encumbrance or security interest in favor of
NatWest and subordinated in favor of Lender pursuant to
the Intercreditor Agreement;
(I) Any Account and any Gaming Supply Account which
is not evidenced by an invoice or other documentation in
form acceptable to Lender;
(J) Any Account and any Gaming Supply Account which
remains unpaid more than Sixty (60) days from its due
date (not to exceed One Hundred Twenty (120) days past
invoice date);
(K) All Accounts and all Gaming Supply Accounts
owing from an Account Debtor if fifty percent (50%) or
more of such Accounts or Gaming Supply Accounts are
unpaid more than sixty (60) days from their due date (not
to exceed One Hundred Twenty (120) days past their
invoice date);
(L) Any Account and any Gaming Supply Account with
respect to which the Account Debtor is located in the
State of New Jersey or Minnesota, unless Borrower or
Gaming Supply, as applicable, has filed a Notice of
Business Activities Report with the New Jersey Division
of Taxation or Minnesota Department of Revenue, as appli-
cable, for the then current year;
(M) Any Account and any Gaming Supply Account with
respect to which the representations and warranties set
forth in Section 9.2 have not been reaffirmed and
ratified as of the date of the most recent Accounts
Report delivered to Lender;
(N) Any Account and any Gaming Supply Account which
is owing from an employee, officer, agent, director,
stockholder or other Affiliate or from the United States
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of America or any department, agency or instrumentality
thereof;
(O) Any Account and any Gaming Supply Account
against which Lender is not legally permitted to make
Revolving Loans; and
(P) Any Gaming Supply Account after the earlier to
occur of (i) the Gaming Disposition or (ii) the date six
(6) months from the date hereof.
3.2 ELIGIBLE INVENTORY. Upon Borrower's delivery to
Lender of an Inventory Report, Lender shall, in its reasonable
credit judgment, determine which items of Inventory and Gaming
Supply Inventory listed thereon are Eligible Inventory and Gaming
Supply Eligible Inventory. Without limiting Lender's discretion to
make such determination, the following Inventory and Gaming Supply
Inventory shall not be deemed to be Eligible Inventory and Gaming
Supply Eligible Inventory:
(A) Any Inventory and any Gaming Supply Inventory
which is slow moving, is not in good condition, does not
meet all standards imposed by any governmental agency, or
department or division thereof, having regulatory
authority over such goods (including the use or sale
thereof), is not currently useable or currently saleable
in the ordinary course of Borrower's or Gaming Supply's
businesses, or is otherwise unacceptable to Lender due to
age, type, category or quantity;
(B) Any Inventory and any Gaming Supply Inventory
which (i) is not located at one of the locations listed
on Exhibit 3.2(B) attached hereto, (ii) is in the
possession of, or located on the premises of, a bailee,
warehouseman, processor, vendor or other third party,
unless Borrower has delivered to Lender an appropriate
waiver from such party in form and substance satisfactory
to Lender, (iii) is not subject to and covered by
Lender's security interest or (iv) is subject to any
other lien, claim, encumbrance or security interest other
than liens, claims, encumbrances or security interests in
favor of NatWest and subject to the terms of the
Intercreditor Agreement;
(C) Any Inventory and any Gaming Supply Inventory
which has been consigned, bailed, sold or leased to any
Person;
(D) Any Inventory and Gaming Supply Inventory with
respect to which the representations and warranties set
forth in Section 9.3 have not been reaffirmed and
ratified as of the date of the most recent Inventory
Report delivered to Lender;
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(E) Any Inventory and any Gaming Supply Inventory
which was purchased by Borrower or Gaming Supply in or as
part of a "bulk" transfer or sale of assets unless
Borrower or Gaming Supply, as applicable, and the seller
of such Inventory or Gaming Supply Inventory have
complied with all applicable bulk transfer laws;
(F) Any Inventory and any Gaming Supply Inventory
consisting of raw materials or work-in-process; and
(G) Any Gaming Supply Inventory after the earlier
to occur of (i) the Gaming Disposition or (ii) the date
six (6) months from the date hereof.
4. PAYMENTS.
---------
4.1 LOAN ACCOUNT; METHOD OF MAKING PAYMENTS. Lender
shall maintain a loan account (the "Loan Account") on its books in
which shall be recorded (i) all loans and advances made by Lender
to Borrower pursuant to this Agreement, (ii) all payments made by
Borrower on all such loans and advances, and (iii) all other
appropriate debits and credits as provided in this Agreement,
including, without limitation, all fees, charges, expenses and
interest. All entries in the Loan Account shall be made in
accordance with Lender's customary accounting practices as in
effect from time to time. Unless otherwise agreed to in writing
from time to time hereafter, all payments which Borrower is
required to make to Lender under this Agreement or under any of the
Ancillary Agreements shall be made by appropriate debits to the
Loan Account. Lender may, in its sole and absolute discretion,
elect to xxxx Borrower for any such amounts, in which case the
amounts so billed shall be immediately due and payable with
interest thereon at the rate set forth in Section 2.3.
4.2 PAYMENT TERMS. All of the Liabilities shall be
payable to Lender at the address set forth in Section 12.10 or such
other place as Lender may designate from time to time. The
Liabilities will be repayable as follows: (i) interest shall be
payable as provided in Section 2.3, (ii) fees, costs, expenses and
similar charges shall be payable as and when provided for in this
Agreement and the Ancillary Agreements, (iii) the Revolving Loan
and other Liabilities shall be payable in full on the effective
date of termination of this Agreement, and (iv) if at any time
Lender provides written notice to Borrower that the outstanding
principal balance of the Revolving Loan exceeds the Collateral
Availability or the outstanding principal balance of all of the
Liabilities exceeds the Maximum Revolving Facility, Borrower shall
immediately pay to Lender such amount as is necessary to eliminate
such excess. At Lender's option, all interest, fees, costs,
expenses and similar charges required to be made by Borrower to
Lender under this Agreement or any of the Ancillary Agreements may
be paid by debiting the Loan Account for such interest, fee, cost,
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expense or charge and crediting the principal balance of the
Revolving Loan in the Loan Account.
4.3 COLLECTION OF ACCOUNTS AND PAYMENTS. During the
term of this Agreement, Borrower shall maintain one or more lock
boxes and special accounts in Borrower's name with such bank or
banks as Lender may from time to time direct ("Depository Bank") to
which Borrower will direct its Account Debtors to immediately
deposit all remittances and proceeds of the Collateral. In the
case of deposits by Borrower, they shall be made to the special
accounts in the identical form in which such payment was made,
whether by cash or check. Each Depository Bank shall acknowledge
and agree, in a manner satisfactory to Lender, that all payments
made to a lock box or special account under its administration are
the sole and exclusive property of Lender, that Depository Bank has
no right of setoff against the funds in such lock box or special
account and that after deposit of any funds to the special account,
Depository Bank will wire, or otherwise transfer to Lender, in a
manner satisfactory to Lender, all funds deposited in the special
account. Borrower hereby agrees that all payments made to such
lock box or special account or otherwise received by Lender,
whether on the Accounts or as proceeds of other Collateral or
otherwise, will be the sole and exclusive property of Lender, and
will be applied on account of the Liabilities (conditional upon
final collection) as provided in Section 4.4 two (2) Business Days
after receipt by Lender of immediately available funds with respect
thereto. Lender agrees to promptly return to Borrower the balance
of any payments remitted to Lender at any time there exist no
Liabilities. Borrower and any Affiliates, partners, directors,
officers, employees, agents of Borrower and all Persons acting for
or in concert with Borrower shall, acting as trustee for Lender,
receive, as the sole and exclusive property of Lender, any monies,
checks, notes, drafts or any other payments relating to or proceeds
of Accounts or other Collateral which come into their possession or
under their control and immediately upon receipt thereof, shall
remit the same or cause the same to be remitted, in kind, to
Lender, at Lender's address set forth in Section 12.10 or such
other place as Lender may designate from time to time. Borrower
agrees to pay to Lender any and all fees, costs and expenses (if
any) which Lender incurs in connection with opening and maintaining
the lock box and special account and depositing for collection by
Lender any check or item of payment received or delivered to
Depository Sank or Lender on account of the Liabilities and
Borrower further agrees to reimburse Lender for any claims asserted
by Depository Bank in connection with the lock box and special
account or any returned or uncollected checks received by Deposit-
ory Bank for deposit in the lock box or special account.
4.4 APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower
irrevocably waives the right to direct the application of payments
and collections received by Lender from or on behalf of Borrower,
and Borrower agrees that Lender shall have the continuing exclusive
right to apply and reapply any and all such payments and collec-
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tions against the Liabilities in such manner as Lender may deem
appropriate, notwithstanding any entry by Lender upon any of its
books and records. To the extent that Borrower makes a payment or
payments to Lender or Lender receives any payment or proceeds of
the Collateral for Borrower's benefit, which payment(s) or proceeds
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other Person under any bankruptcy act,
state or federal law, common law or equitable cause, then, to the
extent of such payment(s) or proceeds received, the Liabilities or
part thereof intended to be satisfied shall continue in full force
and effect, as if such payment(s) or proceeds had not been received
by Lender.
4.5 STATEMENTS. All advances to Borrower, and all other
debits and credits provided for in this Agreement, shall be
evidenced by entries made by Lender in its internal data control
systems showing the date, amount and reason for each such debit and
credit. Until such time as Lender shall have rendered to Borrower
written statements of account as provided herein, the balance in
the Loan Account, as set forth on Lender's most recent statement,
shall be rebuttably presumptive evidence of the amounts due and
owing to Lender by Borrower. Not less than ten (10) days after the
last day of each calendar month, Lender shall render to Borrower a
statement setting forth the balance of the Loan Account, including
principal, interest, expenses and fees. Each such statement shall
be subject to subsequent adjustment by Lender but shall, absent
manifest errors or omissions, be presumed correct and binding upon
Borrower and shall constitute an account stated unless, within
thirty (30) days after receipt of any statement from Lender,
Borrower shall deliver to Lender written objection thereto
specifying the error or errors, if any, contained in such state-
ment. In the absence of a written objection delivered to Lender as
set forth above, Lender's statement of Borrower's Loan Account
shall be conclusive evidence of the amount of Borrower's Liabili-
ties.
4.6 CONDITIONS TO ADVANCES. Notwithstanding any other
provisions contained in this Agreement, the making of any Revolving
Loan provided for in this Agreement shall be conditioned upon the
following:
(A) Lender shall have received by at least 10:00
A.M. Chicago time on the day the advance is requested to
be made hereunder, a telephonic request from an officer
of Borrower (or any Person authorized by Borrower
pursuant to a written list provided to Lender) for an
advance to Borrower in a specific amount.
Notwithstanding the foregoing, requests for LIBOR Rate
Portions shall be made as provided in Section 2.3. In
addition, Lender shall also have received such Accounts
Reports, Inventory Reports, financial reports and other
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25
information as Lender shall have requested. Advances
shall only be made on Business Days;
(B) No material adverse change, as reasonably
determined by Lender, in the financial condition or
operations of Borrower shall have occurred since the date
hereof;
(C) Neither a Default nor an Event of Default shall
have occurred and be continuing;
(D) Lender shall have received, in form and
substance reasonably satisfactory to Lender, all
certificates, orders, authorities, consents, affidavits,
schedules, instruments, security agreements, financing
statements, mortgages and other documents which are
provided for hereunder, or which Lender may at any time
reasonably request; and
(E) Solely with respect to the initial Revolving
Loans to be made by Lender on the date hereof, Lender
shall have received evidence, in form and substance
reasonably satisfactory to Lender, that Borrower has at
least $750,000 in Excess Availability. For purposes of
this Section 4.6(E), "Excess Availability" shall mean the
amount equal to (x) the lesser of (i) the Maximum
Revolving Facility and (ii) the amount of the Revolving
Loans available to Borrower as of the date hereof based
on the applicable lending formulas, and subject to the
sublimits and reserves set forth in Section 2.1 on the
date hereof (including, without limitation, a reserve of
Four Hundred Fifty Thousand Dollars ($450,000) for
inventory replenishment), minus the sum of (i) the amount
of then outstanding and unpaid Liabilities after giving
effect to the making of the initial Revolving Loans
hereunder, (ii) the amount of all accounts payable of
Borrower and Gaming Supply and taxes owing by Borrower
and Gaming Supply not current after giving effect to the
making of the initial Revolving Loans hereunder and (iii)
the payment of all closing and transaction fees and
expenses due and payable on the date hereof.
4.7 SPECIAL PROVISIONS GOVERNING LIBOR RATE PORTIONS.
Notwithstanding any other provision of this Agreement, the
following provisions shall govern with respect to LIBOR Rate
Portions as to the matters covered:
(A) In the event Lender shall have determined
(which determination shall be final and conclusive and
binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any LIBOR Rate
Portions, that by reason of circumstances affecting the
interbank Eurodollar market, adequate and fair means do
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26
not exist for determining the interest rate applicable to
such LIBOR Rate Portions on the basis provided for in the
definition of LIBOR Rate, Lender shall on such date give
notice (by telecopy or by telephone confirmed in writing)
to Borrower of such determination, whereupon (i) no
Revolving Loans may be made as, or converted into, LIBOR
Rate Portions until such time as Lender notifies Borrower
that the circumstances giving rise to such notice no
longer exist and (ii) any Notice of Conversion/Continuation
Conversion/Continuation given by Borrower with respect to
the Loans in respect of which such determination was made
shall be deemed to be modified by Borrower and the LIBOR
Rate Portions then being requested shall be made or
continued by Lender as Base Rate Portions.
(B) If Lender shall have determined (which deter-
mination shall be final and conclusive and binding upon
all parties), with respect to any LIBOR Rate Portion and
any pending Interest Period that by reason of (i) any
change after the date hereof in any applicable law or
governmental rule, regulation or order (or any interpre-
tation thereof and including the introduction of any new
law or governmental rule, regulation or order) or (ii)
other circumstances affecting Lender or the LIBOR market
or the position of Lender or its affiliates in such
market (such as for example, but not limited to, official
reserve requirements required by Regulation D to the
extent not given effect in the LIBOR Rate), the LIBOR
Rate shall not represent the effective pricing to Lender
for U.S. Dollar deposits of comparable amounts for the
relevant period, then, and in any such event, Lender
shall promptly (and in any event as soon as possible
after being notified of a borrowing, conversion or
continuation) give notice (by telephone confirmed in
writing) to Borrower of such determination. Thereafter,
Borrower shall pay to Lender, upon written demand
therefor, such additional amounts in the form of an
increased rate of, or a different method of calculating,
interest or otherwise as Lender in its sole discretion
shall determine. A certificate as to additional amounts
owed Lender, showing in reasonable detail the basis for
the calculation thereof, submitted in good faith to
Borrower by Lender shall, absent manifest error, be final
and conclusive and binding upon all of the parties
hereto.
(C) If on any date Lender shall have reasonably
determined (which determination shall be final and
conclusive and binding upon all parties) that the making
or continuation of its LIBOR Rate Portions has become
unlawful or impossible under any law, governmental rule,
regulation or order with which Lender believes, in good
faith, it must comply (whether or not having the force of
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law and whether or not failure to comply therewith would
be unlawful), then, and in any such event, Lender shall
promptly give notice (by telephone confirmed in writing)
to Borrower of that determination. Subject to the prior
withdrawal of a Notice of Conversion/Continuation or
prepayment of the LIBOR Rate Portions as contemplated by
the following subsection, the obligation of Lender to
make or maintain the LIBOR Rate Portions during any such
period shall be terminated at the earlier of the termina-
tion of the Interest Period then in effect or when
required by law and Borrower shall no later than the
termination of the Interest Period in effect at the time
any such determination pursuant to this subsection is
made or, earlier, when required by law, repay or prepay
the LIBOR Rate Portions, together with all interest
accrued thereon.
(D) In lieu of paying Lender such additional moneys
as are required by Section 4.7(B) or the prepayment of
Lender required by Section 4.7(C), Borrower may exercise
any one of the following options:.
(i) If the determination by Lender relates
only to LIBOR Rate Portions then being requested by
Borrower pursuant to a Notice of
Conversion/Continuation, Borrower may by giving
notice (by telephone confirmed in writing) to
Lender no later than the date immediately prior to
the date on which such LIBOR Rate Portions are to
be made, withdraw that Notice of Conversion/Con-
tinuation and the LIBOR Rate Portions then being
requested shall be made by Lender as Base Rate
Portions; or
(ii) Upon written notice to Lender, Borrower
may terminate the obligations of Lender to make or
maintain the Revolving Loans as, and to convert the
Revolving Loans into, LIBOR Rate Portions and in
such event, Borrower shall, prior to the time any
payment pursuant to Section 4.7(C) is required to
be made or, if the provisions of Section 4.7(B) are
applicable, at the end of the then current Interest
Period, convert all of the LIBOR Rate Portions into
Base Rate Portions but without satisfying the
advance notice requirements therein.
(E) Borrower shall compensate Lender, upon written
request by Lender (which request shall set forth in
reasonable detail the basis for requesting such amounts
and which shall, absent manifest error, be conclusive and
binding upon all parties hereto), for all reasonable
losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) sustained
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by Lender in connection with the re-employment of such
funds) Lender may sustain: (1) if for any reason (other
than a default by Lender) a borrowing of any LIBOR Rate
Portion does not occur on a date specified therefor in a
Notice of Conversion/Continuation or a telephonic request
for borrowing or conversion/ continuation therefor is
given pursuant to Section 2.3; (2) if any prepayment of
any LIBOR Rate Portion occurs on a date that is not the
last day of an Interest Period applicable to that LIBOR
Rate; (3) if any prepayment of any LIBOR Rate Portion is
not made on any date specified in a notice of prepayment
given by Borrower; or (4) as a consequence of any other
default by Borrower to repay any LIBOR Rate Portions when
required by the terms of this Agreement; PROVIDED, that
during the period while any such amounts have not been
paid, Lender shall reserve an equal amount from amounts
otherwise available to be borrowed under the Revolving
Loans.
(F) Except as provided in Section 4.7(B) with
respect to certain determinations on Interest Rate
Determination Dates, if, after the date hereof by reason
of, (1) the introduction of or any change (including,
without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpre-
tation of any treaty, law, rule, or regulation, or (2)
the compliance with any guideline or request from any
central bank or other governmental authority or quasi-
governmental authority exercising control over banks or
financial institutions generally (whether or not having
the force of law):
(i) Lender (or its applicable lending office)
shall be subject to any tax, duty, levy, cost or
other charge (except for taxes on the overall net
income or alternative minimum taxable income of
Lender or its applicable lending offiCe imposed by
the jurisdiction in which Lender's principal execu-
tive office or applicable lending office is organ-
ized, located or is doing business) with respect to
any LIBOR Rate Portions or its obligation to make
LIBOR Rate Portions, or the recording, registra-
tion, notarization or other formalization of the
LIBOR Rate Portions or the basis of taxation of
payments to Lender of the principal of or interest
or commitment fees or any amount payable on any
LIBOR Rate Portions or its obligation to make LIBOR
Rate Portions shall change; or
(ii) any reserve (including, without limita-
tion, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar
requirement against assets of, deposits with or for
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the account of, or credit extended by, Lender's
applicable lending office shall be imposed on
Lender or its applicable lending office or the
interbank LIBOR market,
and as a result thereof there shall be any increase in
the cost to Lender of agreeing to make or making, funding
or maintaining LIBOR Rate Portions, or there shall be a
reduction in the amount received or receivable by Lender
or its lending office, then Borrower shall from time to
time, upon written notice from and demand by Lender, pay
to Lender, within five (5) Business Days after receipt of
such notice, demand and appropriate proof of such cost,
additional amounts sufficient to indemnify Lender against
such increased cost or reduced amount. A certificate as
to the amount of such increased cost or reduced amount,
submitted to Borrower by Lender, shall, except for
manifest error, be final, conclusive and binding for all
purposes. Any payments to be made by Borrower under
Section 4.7(B), 4.7(E) or 4.7(F) in respect of LIBOR Rate
Portions are to be without duplication.
(G) Calculation of all amounts payable to Lender
under this Section 4.7 shall be made as though Lender had
actually funded its LIBOR Rate Portion through the
purchase of a LIBOR deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of that LIBOR Rate
Portion and having a maturity comparable to the relevant
Interest Period and through the transfer of such LIBOR
deposit from an offshore office to a domestic office in
the United States of America; PROVIDED, HOWEVER, that
Lender may fund each of its LIBOR Rate Portion in any
manner it sees fit and the foregoing assumption shall be
utilized only for the calculation of amounts payable
under this Section 4.7.
5. COLLATERAL: GENERAL TERMS.
---------------------------
5.1 SECURITY INTEREST. To secure the prompt payment and
performance of the Liabilities, Borrower hereby grants to Lender a
continuing security interest in and to all of the following
property and interest in property of Borrower, whether now owned or
existing or hereafter acquired or arising and wherever located:
(i) all Accounts, Inventory, Equipment, General Intangibles, tax
refunds, chattel paper, instruments, letters of credit, documents
and documents of title; (ii) all of Borrower's now owned or
hereafter acquired investment property including, without
limitation, all securities (certificated and uncertificated),
securities accounts and securities entitlements; (iii) all of
Borrower's deposit accounts (general or special) with any credits
and other claims against Depository Bank or Lender, or any other
financial institutions with which Borrower maintains deposits; (iv)
all of Borrower's now owned or hereafter acquired monies, and any
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and all other property of Borrower now or hereafter coming into the
actual possession, custody or control of Lender or any agent or
affiliate of Lender in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or
otherwise); (v) all insurance proceeds of or relating to any of the
foregoing; (vi) all of Borrower's books and records relating to any
of the foregoing; and (vii) all accessions and additions to,
substitutions for, and replacements, products and proceeds of any
of the foregoing.
5.2 DISCLOSURE OF SECURITY INTEREST. Borrower shall
make appropriate entries upon its financial statements and books
and records disclosing Lender's security interest in the Colla-
teral.
5.3 SPECIAL COLLATERAL. If requested by Lender,
immediately upon Borrower's receipt of any Collateral which is
evidenced or secured by an agreement, chattel paper, letter of
credit, instrument or document, including, without limitation,
promissory notes, documents of title and warehouse receipts (the
"Special Collateral"), Borrower shall deliver the original thereof
to Lender or to such agent of Lender as Lender shall designate,
together with appropriate endorsements, the documents required to
draw thereunder (as may be relevant to letters of credit) or other
specific evidence (in form and substance acceptable to Lender) of
assignment thereof to Lender.
5.4 FURTHER ASSURANCES. At Lender's request, Borrower
shall, from time to time, (i) execute and deliver to Lender all
Security Documents that Lender may reasonably request, in form and
substance acceptable to Lender, and pay the costs of any recording
or filing of the same, and (ii) take such other actions as Lender
may request, in order to fully effect the purposes of this
Agreement and to protect Lender's interest in the Collateral. Upon
the occurrence of any Default, Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by
Lender for that purpose) as Borrower's true and lawful attorney and
agent-in-fact to sign the name of Borrower on any of the Security
Documents and to deliver any of the Security Documents to such
Persons as Lender, in its sole discretion, may elect. Borrower
agrees that a carbon, photographic, photostatic, or other reproduc-
tion of this Agreement or of a financing statement is sufficient as
a financing statement.
5.5 INSPECTION. Lender (by any of its officers,
employees or agents) shall have the right, at any time or times
during Borrower's usual business hours, without prior notice, to
inspect the Collateral, all records related thereto (and to make
extracts from such records) and the premises upon which any of the
Collateral is located, to discuss Borrower's affairs and finances
with any Person for the purpose of determining or effectuating
Borrower's compliance with this Agreement (including Borrower,s
independent certified public accountants) and to verify the amount,
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quality, value and condition of, or any other matter relating to,
the Collateral; PROVIDED, that Lender shall give Borrower notice
prior to discussing Borrower's affairs and finances with any
supplier to Borrower.
5.6 PERFECTION AND PRIORITY; LOCATION OF COLLATERAL.
Borrower's chief executive office, principal place of business and
all other offices and locations of the Collateral and books and
records related thereto (including, without limitation, computer
programs, printouts and other computer materials and records
concerning the Collateral) are set forth on EXHIBIT 3.2(B) attached
hereto. Borrower shall not remove its books and records or the
Collateral from any such locations (except for removal of items of
Inventory upon its sale in accordance with the terms of this
Agreement) and shall not open any new offices or relocate any of
its books and records or the Collateral except within the xxxxx-
nental United States of America and upon at least thirty (30) days
prior notice thereof to Lender.
5.7 LENDER'S PAYMENT OF CLAIMS ASSERTED AGAINST
BORROWER. Lender may, but shall not be obligated to, at any time
or times hereafter, in its sole discretion, and without waiving any
Default or waiving or releasing any obligation, liability or duty
of Borrower or any Guarantor under this Agreement or the Ancillary
Agreements, pay, acquire or accept an assignment of any security
interest, lien, claim or other encumbrance asserted by any Person
against the Collateral except for those security interests, liens,
claims or other encumbrances being contested in good faith by
Borrower and for which reserves or other appropriate provisions
have been made. All sums paid by Lender under this Section 5.7,
including all costs, fees (including without limitation reasonable
attorneys' fees and paralegals' fees and court costs), expenses and
other charges relating thereto, shall be payable by Borrower to
Lender on demand and shall be additional Liabilities secured by the
Collateral.
6. COLLATERAL: ACCOUNTS.
----------------------
6.1 VERIFICATION OF ACCOUNTS. Any of Lender's officers,
employees or agents shall have the right, at any time or times
hereafter, in Lender's or Borrower's name or in the name of a firm
of independent certified public accountants acceptable to Lender,
to verify the validity, amount or any other matters relating to any
Accounts by mail, telephone, telegraph or otherwise.
6.2 ASSIGNMENTS, RECORDS AND ACCOUNTS REPORT. Borrower
shall keep accurate and complete records of its Accounts, and shall
cause Gaming Supply to keep accurate and Complete records of its
Gaming Supply Accounts, and as frequently as Lender shall require,
but not less frequently than twice per week, Borrower shall deliver
to Lender an Accounts Report and formal written assignments of all
Accounts, together with copies of the sales and collection
registers and, if requested by Lender, the invoices related
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thereto. Borrower shall immediately notify Lender of any Account
and any Gaming Supply Account that Borrower knows has ceased to be
an Eligible Account or Gaming Supply Eligible Account,
respectively. Borrower shall also deliver to Lender, upon demand,
the original copy of all documents, including, without limitation,
repayment histories, present status reports and shipment reports,
relating to the Accounts and Gaming Supply Accounts included in any
Accounts Report and such other matters and information relating to
the status of then existing Accounts and Gaming Supply Accounts as
Lender shall reasonably request. Borrower shall give Lender prompt
notice of all single Accounts and Gaming Supply Accounts in excess
of Ten Thousand Dollars ($10,000) at any time or from time to time
which are in dispute between any Account Debtor and either of
Borrower or Gaming Supply. Each Accounts Report shall identify all
disputed Accounts and Gaming Supply Accounts in excess of such
amount and disclose with respect thereto, in reasonable detail, the
reason for the dispute, all claims related thereto and the amount
in controversy.
Borrower shall further deliver to Lender as frequently as
Lender shall require, but not less frequently than once per month,
(A) an aged trial balance of all Accounts and Gaming Supply
Accounts setting forth the aging of all Accounts and Gaming Supply
Accounts as well as the Account Debtor's name, address and
outstanding balance and (B) an aged trial balance of all accounts
payable of Borrower and Gaming Supply setting forth the aging of
all such accounts payable as well as each payees name, address and
the outstanding amount owing to each such payee.
7. COLLATERAL: INVENTORY.
-----------------------
7.1 SALE OF INVENTORY. Unless a Default occurs and
Lender directs Borrower to do otherwise as allowed under Section
11, Borrower may sell Inventory, and may permit Gaming Supply to
sell Gaming Supply Inventory, in the ordinary course of their
respective businesses (which, except in connection with the Gaming
Disposition, does not include any transfer in partial or total
satisfaction of Indebtedness, sales in bulk, sale on consignment or
sales on an approval or sale or return basis). All proceeds of
sales by Borrower shall be part of the Collateral and remitted to
the special account referred to in Section 4.3. Borrower shall
not, and shall not permit Gaming Supply to, rent, lease or
otherwise transfer or dispose of any of the Inventory and Gaming
Supply Inventory without Lender's prior written consent, except as
set forth in this Section 7.1.
7.2 RECORDS AND SCHEDULES OF INVENTORY. Borrower shall,
and shall cause Gaming Supply to, keep correct and accurate monthly
records on a first-in, first-out basis, itemizing and describing
the kind, type, quality and quantity of Inventory and Gaming Supply
Inventory (as applicable), Borrower's or Gaming Supply's cost
therefor, and the withdrawals therefrom and additions thereto and
Inventory and Gaming Supply Inventory then on consignment (if any,
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33
provided that Lender's prior written consent to such consignment
must be obtained), and shall furnish to Lender, monthly (weekly, if
any Revolving Loans are predicated on the Collateral Overadvance
Facility) a current updated Inventory Report, based on the value of
Inventory and Gaming Supply Inventory (determined on a first-in,
first-out basis). A physical count of the Inventory and, prior to
the Gaming Disposition, Gaming Supply Inventory shall be conducted
no less than annually and a report based on such count of the
Inventory and Gaming Supply Inventory shall promptly thereafter be
provided to Lender together with such supporting information
including, without limitation invoices relating to Borrower's
purchase of goods listed in said report, as Lender shall request.
7.3 RETURNED AND REPOSSESSED INVENTORY. If at any time
prior to the occurrence of a Default, any Account Debtor returns
any of the Inventory to Borrower or any of the Gaming Supply
Inventory to Gaming Supply, Borrower shall promptly determine the
reason for such return and, if Borrower or Gaming Supply accepts
such return, issue (or cause Gaming Supply to issue) a credit
memorandum (with a copy to be included in the Accounts Report) in
the appropriate amount to such Account Debtor. Borrower shall, in
all cases, immediately notify Lender of the return of any Inventory
and any Gaming Supply Inventory in excess of Ten Thousand Dollars
($10,000), specifying the reason for such return and the location
and condition of the returned Inventory or Gaming Supply Inventory.
Borrower shall also immediately notify Lender Of any Inventory and
any Gaming Supply Inventory that Borrower knows has ceased to be
Eligible Inventory or Gaming Supply Eligible Inventory.
7.4 INVENTORY CONDITION. Borrower shall maintain the
Inventory in good and saleable condition and shall cause Gaming
Supply to maintain the Gaming Supply Inventory in good and saleable
condition. Lender shall not be responsible for (i) the safekeeping
of the Inventory or Gaming Supply Inventory; (ii) any loss or
damage thereto or destruction thereof occurring or arising in any
manner or fashion from any cause; (iii) any diminution in the value
of Inventory or Gaming Supply Inventory or (iv) any act or default
of any carrier, warehouseman, bailee or forwarding agency or any
other Person in any way dealing with or handling the Inventory or
Gaming Supply Inventory. All risk of loss, damage, distribution or
diminution in value of the Inventory and Gaming Supply Inventory
shall be borne by Borrower and Gaming Supply.
7.5 EVIDENCE OF OWNERSHIP OF INVENTORY. Upon Lender's
request, Borrower shall deliver to Lender evidence, in form and
substance satisfactory to Lender, of Borrower's and Gaming Supply's
ownership of all of the Inventory and Gaming Supply Inventory,
respectively.
8. COLLATERAL: EQUIPMENT.
----------------------
8.1 EQUIPMENT RECORDS. Borrower shall at all times
hereafter keep correct and accurate records itemizing and
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describing the kind, type, age and condition of the Equipment,
Borrower's cost therefor and accumulated depreciation thereof; and
any retirements, sales, or other dispositions thereof, all of which
records shall be available during Borrower's usual business hours
at the request of any of Lender's officers, employees or agents.
8.2 EQUIPMENT CONDITION. Borrower shall maintain the
Equipment in good condition and repair, ordinary wear and tear
excepted. Lender shall not be responsible for (i) safekeeping of
Equipment; (ii) any loss or damage thereto or destruction thereof
occurring or arising in any manner or fashion from any cause; (iii)
any diminution in the value of Equipment or (iv) any act or default
of any carrier, warehousemen, bailee or forwarding agency or any
other Person in any way dealing with or handling the Equipment.
All risk of loss, damage, distribution or diminution in the value
of Equipment shall be borne by Borrower.
8.3 VEHICLES. Borrower shall, at the request of Lender,
deliver to Lender the original title certificates for all of the
vehicles owned by Borrower. Borrower agrees to take all steps
necessary to keep each vehicle title in full force and effect in
its State of registration. At the request of Lender, Borrower
shall execute such agreements and documents as are necessary to
reflect Lender's liens on the vehicles.
9. WARRANTIES AND REPRESENTATIONS.
-------------------------------
9.1 GENERAL WARRANTIES AND REPRESENTATIONS. Borrower
warrants and represents that:
(A) (i) Borrower is a Delaware corporation, duly
incorporated and validly existing and in good standing
under the laws of the State of Delaware and is qualified
or licensed as a foreign entity to do business in all
other countries, states and provinces in which the laws
thereof require Borrower to be so qualified or licensed,
except for those other countries, states and provinces in
which the failure to be qualified could not reasonably be
expected to have a material adverse effect on Borrower's
business, operations, assets or financial condition; (ii)
Gaming Supply is a Delaware corporation, duly
incorporated and validly existing and in good standing
under the laws of the State of Delaware, and is qualified
or licensed as a foreign entity to do business in all
other countries, states and provinces in which the laws
thereof require Gaming Supply to be so qualified or
licensed, except for those other counties, states and
provinces in which the failure to be qualified could not
reasonably be expected to have a material adverse effect
on Gaming Supply's business, operations, assets or
financial condition;
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35
(B) Neither Borrower nor Gaming Supply has used,
during the five (5) year period preceding the date of
this Agreement, and neither Borrower nor Gaming Supply
intends to use, any fictitious name, except as disclosed in
EXHIBIT 9.1(B) attached hereto;
(C) Each of Borrower and Gaming Supply has the
right and power and is duly authorized and empowered to
enter into, execute, deliver and perform this Agreement
(in the case of Borrower) and the Ancillary Agreements to
which it is a party;
(D) The execution, delivery and performance by
Borrower and Gaming Supply of this Agreement and the
Ancillary Agreements to which it is a party shall not, by
their execution or performance, the lapse of time, the
giving of notice or otherwise, constitute a violation of
any applicable law, rule, regulation, judgment, order or
decree or a breach of any provision contained in
Borrower's or Gaming Supply's organizational documents or
contained in any agreement, instrument, indenture or
other document to which Borrower or Gaming Supply is now
a party or by which it is bound;
(E) Borrower's use of the proceeds of any advances
made by Lender are, and will continue to be, legal and
proper uses (duly authorized), in accordance with
applicable laws, rules and regulations, as in effect as
of the date hereof;
(F) Each of Borrower and Gaming Supply has, and is
current and in good standing with respect to all
governmental approvals, permits, certificates,
inspections, consents and franchises (collectively,
"Governmental Approvals") necessary to conduct its
business as heretofore conducted by it and to own or
lease and operate its properties as now owned or leased
and operated by it, except for those Governmental
Approvals the failure to be current and in good standing
with could not reasonably be expected to have a material
adverse effect on Borrower's or Gaming Supply's business,
operations, assets or financial condition;
(G) None of said approvals, permits, certificates,
consents or franchises contain any material term,
provision, condition or limitation materially more
burdensome than such as are generally applicable to
Persons engaged in the same or similar businesses as
Borrower and Gaming Supply;
(H) Each of Borrower and Gaming Supply now has
capital sufficient to carry on its business and
transactions and all businesses and transactions in which
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36
it is about to engage and is now solvent and able to pay
its debts as they mature and Borrower now owns property
the fair saleable value of which is greater than the
amount required to pay Borrower's debts;
(I) Except as disclosed on EXHIBIT 9.1(I) attached
hereto, neither Borrower nor Gaming Supply has any
litigation pending, or to the best of its knowledge,
threatened, and neither Borrower nor Gaming Supply has
any Indebtedness (except for trade payables arising in
the ordinary course of its business) and has not
guaranteed the obligations of any other Person;
(J) Except as disclosed on EXHIBIT 9.1(J) attached
hereto, (i) neither Borrower nor Gaming Supply is a party
to any contract or agreement or subject to any charge,
restriction, judgment, decree or order materially and
adversely affecting its business, property, assets,
operations or condition, financial or otherwise; and (ii)
neither Borrower nor Gaming Supply is a party to any
labor dispute and there are no lockouts, strikes or
walkouts relating to any labor contracts and no such
contract is scheduled to expire during the Initial Term;
(K) Borrower has good, indefeasible and merchant-
able title to and ownership of the Collateral, free and
clear of all liens, claims, security interests and other
encumbrances, except for the Permitted Liens;
(L) Neither Borrower nor Gaming Supply is in
violation of any applicable statute, rule, regulation or
ordinance of any governmental entity, including, without
limitation, the United States of America, any state,
city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, in any respect
materially and adversely affecting the Collateral or
either such entity's business, property, assets,
operations or condition, financial or otherwise;
(M) Neither Borrower nor Gaming Supply is in
default under any indenture, loan agreement, mortgage,
lease, trust deed, deed of trust or other similar
agreement relating to the borrowing of monies to which it
is a party or by which it is bound;
(N) The Financials fairly present the assets,
liabilities and financial condition and results of
operations of Parent and such other Persons described
therein as of the dates thereof; there are no omissions
or other facts or circumstances which are material and
there has been no material and adverse change in the
assets, liabilities or financial or other condition of
Parent since the date of the Financials; there exist no
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37
equity or investments in or outstanding advances to any
Person not reflected in the Financials; there are no
actions or proceedings which are pending or, to the best
of Borrower's knowledge, threatened, against Borrower or
any other Person which might result in any material
adverse change in Borrower's financial condition or
materially and adversely affect Borrower's business,
property, assets or operations or the Collateral;
(O) Neither Borrower nor Gaming Supply has received
notice to the effect that it is not in full compliance
with any of the requirements of ERISA and the regulations
promulgated thereunder and, to the best of its knowledge
there exists no event described in Section 4043 of ERISA,
excluding subsections 4043(b)(2) and 4043(b)(3) thereof
(a "Reportable Event");
(P) Each of Borrower and Gaming Supply has filed
all federal, state and local tax returns and other
reports, or has been included in consolidated returns or
reports filed by an Affiliate (provided that in the event
that Borrower files a return with an Affiliate,
Borrower's contribution with respect to taxes as a result
of the filing of such consolidated return shall not be
greater, nor the receipt of tax benefits less, than they
would have been had Borrower not filed a consolidated
return with an Affiliate), which such entity is required
by law, rule or regulation to file and all Charges that
are due and payable have been paid;
(Q) Borrower's execution and delivery of this
Agreement or any of the Ancillary Agreements does not
directly or indirectly violate or result in a violation
of any applicable laws, rules or regulations, including
without limitation, the Securities Exchange Act of 1934,
as amended, and Regulations U, G, T and X of the Board of
GovernOrs of the Federal Reserve System (12 CFR 221, 207,
220 and 224, respectively), and Borrower does not own or
intend to purchase or carry any "margin security," as
defined in such Regulations; and
(R) Except as set forth in EXHIBIT 9.1(R), each of
Borrower and Gaming Supply is in compliance in all
respects with all Environmental Laws, and neither
Borrower nor Gaming Supply is subject to any actual or
threatened judicial or administrative proceeding,
investigation or inquiry into the possibility of
violation of any Environmental Laws; neither Borrower nor
Gaming Supply is the subject of actual or threatened
investigation or inquiry evaluating whether any remedial
action is needed to respond to a Release of any Hazardous
Material into the environment, nor does either such
entity have knowledge or notice of the presence on or
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under any property owned or operated by it, or of the
Release of, any Hazardous Material; there is no claim
pending or threatened against Borrower or Gaming Supply
relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from the Release
of, or exposure to, any Hazardous Material; neither
Borrower, Gaming Supply, nor, to the best of Borrower's
knowledge, any predecessor of Borrower or Gaming Supply,
has filed, or was required to file, any notice indicating
past or present Release, generation, transportation,
treatment, storage or disposal of a Hazardous Material
nor has Borrower, Gaming Supply, or, to the best of
Borrower's knowledge, any predecessor of such entity,
engaged in such activity; neither Borrower nor Gaming
Supply has known contingent liability in connection with
any Release of any Hazardous Material into the
environment; and neither Borrower nor Gaming Supply has
received notice, nor has reason to expect notice, of any
potential liability under any Environmental Laws.
9.2 ACCOUNT WARRANTIES AND REPRESENTATIONS. Borrower
warrants and represents that Lender may rely, in determining which
Accounts and Gaming Supply Accounts listed on any Accounts Report
are Eligible Accounts and Eligible Gaming Supply Accounts,
respectively, without independent investigation, on all statements,
warranties and representations made by Borrower or Gaming Supply on
or with respect to any such Accounts Report and, unless otherwise
indicated in such Accounts Report, that:
(A) Such Accounts and Gaming Supply Accounts are
genuine, are in all respects what they purport to be, are
not reduced to a judgment and, if evidenced by any
instrument, item of chattel paper, agreement, contract or
documents, are evidenced by only one executed original
instrument, item of chattel paper, agreement, contract or
document and, if requested by Lender, such original has
been endorsed and delivered to Lender;
(B) Such Accounts and Gaming Supply Accounts
represent undisputed, bona fide transactions completed in
accordance with the terms and provisions contained in any
documents related thereto,;
(C) Except for credits issued to any Account Debtor
in the ordinary course of Borrower's or Gaming Supply's
business for Inventory or Gaming Supply Inventory
returned pursuant to Section 7.3, the amounts shown on
the Accounts Report, and all invoices and statements
delivered to Lender with respect to any Account and any
Gaming Supply Account, are actually and absolutely owing
to Borrower or Gaming Supply, respectively, and are not
contingent for any reason;
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(D) There are no setoffs, counterclaims or disputes
existing or asserted with respect to any Accounts and any
Gaming Supply Accounts included on an Accounts Report,
and neither Borrower nor Gaming Supply has made any
agreement with any Account Debtor for any deduction from
such Account or Gaming Supply Account, respectively,
except for discounts or allowances allowed by Borrower
and Gaming Supply in the ordinary course of its business
for prompt payment, which discounts and allowances have
been disclosed to Lender and are reflected in the
calculation of the invoice related to such Account or
Gaming Supply Account;
(E) To the best of Borrower's knowledge, there are
no facts, events or occurrences which in any way impair
the validity or enforcement of any of the Accounts or
Gaming Supply Accounts or tend to reduce the amount
payable thereunder from the amount of the invoice shown
on any Accounts Report or on any contracts, invoices and
statements delivered to Lender with respect thereto;
(F) To the best of Borrower's knowledge, all
Account Debtors are solvent and had the capacity to
contract at the time any contract or other document
giving rise to or evidencing the Accounts and Gaming
Supply Accounts was executed;
(G) The goods, the sale of which gave rise to the
Accounts and Gaming Supply Accounts, (i) were produced in
full compliance with the Federal Labor Standards Act, 29
U.S.C. SEC. SEC 207 et seq. as amended from time to time, and
(ii) are not, and were not at the time of the sale
thereof, subject to any lien, claim, security interest or
other encumbrance, except Permitted Liens;
(H) Borrower has no knowledge of any fact or
circumstances which would impair the validity or
collectibility of any of the Accounts and Gaming Supply
Accounts;
(I) To the best of Borrower's knowledge, there are
no proceedings or actions which are threatened or pending
against any Account Debtor which might result in any
material adverse change in such Account Debtor's
financial or other condition; and
(J) The Accounts and Gaming Supply Accounts have
not been pledged or sold to any Person or otherwise
encumbered and Borrower or Gaming Supply is the owner of
the Accounts or Gaming Supply Accounts, respectively,
free of all liens and encumbrances except for the
Permitted Liens.
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9.3 INVENTORY WARRANTIES AND REPRESENTATIONS. Borrower
warrants and represents that Lender may rely, in determining which
items of Inventory and Gaming Supply Inventory listed on any
Inventory Report are Eligible Inventory and Gaming Supply Eligible
Inventory, without independent investigation, on all statements,
warranties end representations made by Borrower or Gaming Supply on
or with respect to any such Inventory Report and, unless otherwise
indicated in such Inventory Report, that:
(A) All Inventory and Gaming Supply Inventory is
located on premises listed on EXHIBIT 3.2(B) or is
Inventory or Gaming Supply Inventory which is in transit
and is so identified on the relevant Inventory Report;
(B) The Inventory and Gaming Supply Inventory has
been produced in full compliance with all requirements of
the Federal Labor Standards Act, 29 U.S.C. +SC+SC 207 et
seq., as amended from time to time;
(C) Except as specified on EXHIBIT 3.2(B), no
Inventory and no Gaming Supply Inventory is now, and
shall not at any time or times hereafter be, stored with
a bailee, warehouseman or similar party without Lender's
prior written consent and, if Lender gives such consent,
Borrower will concurrently therewith cause any such
bailee, warehouseman or similar party to issue and
deliver to Lender, in form and substance acceptable to
Lender, warehouse receipts therefor in Lender's name; and
(D) Borrower and Gaming Supply are the owners of
all of the Inventory and Gaming Supply Inventory,
respectively, free and clear of all claims, liens and
encumbrances except for the Permitted Liens and none of
the Inventory and Gaming Supply Inventory has been
leased, rented, transferred or sold, either on
consignment, on a sale or return basis, on approval, or
otherwise.
9.4 AUTOMATIC WARRANTY AND REPRESENTATION AND REAFFIRMA-
TION OF WARRANTIES AND REPRESENTATIONS. Each request for an
advance made by Borrower pursuant to this Agreement or the
Ancillary Agreements shall constitute (i) an automatic warranty and
representation by Borrower to Lender that there does not then exist
a Default or an Event of Default, and (ii) a reaffirmation as of
the date of said request of all of the warranties and represen-
tations of Borrower or any other Person contained in this Agreement
and in the Ancillary Agreements.
9.5 SURVIVAL OF WARRANTIES AND REPRESENTATIONS.
Borrower covenants, warrants and represents to Lender that all
representations and warranties of Borrower contained in this
Agreement and the Ancillary Agreements shall be true at the time of
Borrower's execution of this Agreement and the Ancillary Agree-
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ments, and shall survive the execution, delivery and acceptance
hereof and thereof by the parties thereto and the closing of the
transactions described herein and therein or related hereto or
thereto.
10. COVENANTS AND CONTINUING AGREEMENTS.
------------------------------------
10.1 AFFIRMATIVE COVENANTS. Borrower covenants that it
shall, unless Lender consents in writing otherwise:
(A) Maintain the following financial covenants:
(i) At all times during the periods set forth
below Conquest shall maintain Adjusted Net Worth in
an amount not less than the amount set forth below
opposite such period:
Period Amount
------ ------
From the date hereof
through December 31, 1995 $1,800,000
From January 1, 1996
through March 31, 1996 $2,200,000
From April 1, 1996
through December 31, 1996 $2,800,000
From January 1, 1997
through March 31, 1997 $3,300,000
From April 1, 1997
through September 30, 1997 $3,700,000
From October 1, 1997
through December 31, 1997 $4,000,000
From January 1, 1998
through March 31, 1998 $4,300,000
From April 1, 1998
and thereafter $4,700,000
(ii) Parent shall maintain Interest Coverage
of not less than 1 to 1 for (a) the calendar
quarter ending December 31, 1995; (b) the six month
period ending March 31, 1996; (c) the nine month
period ending June 30, 1996; (d) the twelve month
period ending September 30, 1996 and (e) the twelve
month period ending on the last day of each
December, March, June and September thereafter
(commencing with December 31, 1996).
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(iii) For each period set forth below Parent
shall have EBITDA in an amount not less than the
amount set forth below opposite such period:
Period Amount
------ ------
October 1, 1995
through December 31, 1995 $1,410,000
October 1, 1995
through March 31, 1996 $2,270,000
October 1, 1995
through June 30, 1996 $2,700,000
October 1, 1995
through September 30, 1996 $3,567,100
October 1, 1996
through December 31, 1996 $1,460,000
October 1, 1996
through March 31, 1997 $2,360,000
October 1, 1996
through June 30, 1997 $2,810,000
October 1, 1996
through October 1, 1997 $3,717,000
Each October 1 thereafter
through the immediately
following December 31 $1,460,000
Each October 1 thereafter
through the immediately
following March 31 $2,360,000
Each October 1 thereafter
through the immediately
following June 30 $2,810,000
Each October 1 thereafter
through the immediately
following September 30 $3,717,000
(iv) Parent shall maintain Debt Service
Coverage of not less than 1.25 to 1.0 for (a) the
calendar quarter ending December 31, 1995; (b) the
six month period ending March 31, 1996; (c) the
nine month periOd ending June 30, 1996; (d) the
twelve month period ending September 30, 1996 and
(e) the twelve month period ending on the last day
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of each December, March, June and September
thereafter (commencing with December 31, 1996).
(B) Pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any Participant pays to
a bank or other similar institution arising out of or in
connection with (i) the forwarding to Borrower or any
other Person on behalf of Borrower, by Lender or any
Participant, of proceeds of Revolving Loans made by
Lender to Borrower pursuant to this Agreement, and (ii)
the depositing for collection, by Lender or any
Participant, of any check or item of payment received or
delivered to Lender or any Participant on account of the
Liabilities;
(C) At its sole cost and expense, keep and maintain
the Collateral insured for its full insurable value
against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks which
specified by Lender from time to time by obtaining
policies naming Lender as lender's loss payee (none of
which shall be cancelable or subject to modification
without at least thirty (30) days notice to Lender), with
coverage, form and amount and with companies satisfactory
to Lender, and at Lender's request will deliver each
policy or certificate of insurance together with the
applicable loss payee endorsement to Lender. Borrower
will collaterally assign to Lender all business
interruption insurance. All proceeds of insurance shall
be paid to Lender and applied to the Liabilities in such
manner as Lender deems appropriate. In addition,
Borrower will deliver renewals for all of such policies
at least thirty (30) days prior to the expiration date of
the subject policy. Without limiting the generality of
the foregoing, unless otherwise agreed in writing by
Lender, all of such policies shall (i) provide that no
act of any person other than Lender will affect Lender's
right to recover under such policies; (ii) be in an
amount at least equal to the greater of (a) original
cost, and (b) replacement value of the Collateral covered
thereby; and (iii) contain an agreed-value clause
sufficient to eliminate any risk of co-insurance;
(D) Notify Lender promptly upon learning thereof of
any event or occurrence causing a material loss or
decline in value of the Collateral and the estimated (or
actual, if available) amount of such loss or decline;
(E) Promptly upon Borrower's learning thereof,
notify Lender of (i) any material delay in Borrower,s or
Gaming Supply's performance of any of its obligations to
any Account Debtor and of any assertion of any material
claims, offsets, defenses or counterclaims by any Account
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Debtor and of any material allowances or credits granted
(including all credits issued for returned or repossessed
Inventory and Gaming Supply Inventory) or other monies
advanced by Borrower or Gaming Supply to any Account
Debtor, and (ii) all material adverse information
relating to the financial or other conditions of any
material Account Debtor;
(F) Keep books of account and prepare financial
statements and furnish to Lender the following (all of
the foregoing and following to be kept and prepared in
accordance with Generally Accepted Accounting Principles
applied on a basis consistent with the Financials):
(i) as soon as available, but not later than
one hundred twenty (120) days after the close of
each fiscal year of Borrower, consolidated and
consolidating financial statements of Parent
(including balance sheets and profit and loss
statements with supporting footnotes) as at the end
of such year and for the year then ended all in
reasonable detail as requested by Lender and
examined by a firm of independent certified public
accountants of recognized national standing sel-
ected by Borrower and containing the unqualified
opinion of such independent certified public
accountants with respect to the financial state-
ments, together with a certificate from such
accountants certifying that Lender may rely on such
financial statements;
(ii) as soon as available, but not later than
thirty (30) days after the end of each month
(forty-five (45) days after the end of each month
on which one of Borrower's fiscal quarters ends),
consolidated and consolidating financial statements
of Parent (including balance sheets and statements
of profit and loss and of surplus), all in
reasonable detail as requested by Lender and
certified by Borrower's principal financial officer
as prepared in accordance with Generally Accepted
Accounting Principles (subject to customary fiscal
year end adjustments) and fairly presenting the
financial position and results of operations of
Borrower for such month and the portion of
Borrower's fiscal year then elapsed;
(iii) as soon as available, but not later than
sixty (60) days before the beginning of each fiscal
year of Borrower, a cash flow projection for such
fiscal year on a monthly basis and for each of the
next two fiscal years on an annual basis, together
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with appropriate supporting documents acceptable to
Lender; and
(iv) such other data and information (xxxxx-
cial and other) as Lender, from time to time, may
reasonably request, bearing upon or related to the
Collateral, Borrower's or parent's financial
condition or results of its operations, or the
financial condition of any Person who is a
guarantor of any of the Liabilities;
(G) Except as may occur in the ordinary course of
Borrower's business, notify Lender through its scheduled
daily (Accounts) or monthly or weekly (Inventory) reports
of any Eligible Account, Gaming Supply Eligible Account,
Eligible Inventory or Gaming Supply Eligible Inventory
that Borrower knows has ceased to be an Eligible Account,
Gaming Supply Eligible Account, Eligible Inventory or
Gaming Supply Eligible Inventory, respectively, and the
reason(s) for such ineligibility;
(H) Notify Lender, promptly upon Borrower's
learning of (i) any litigation affecting Borrower or
Gaming Supply, whether or not the claim is considered by
Borrower to be covered by insurance; and (ii) the
institution of any suit or administrative proceeding
which in each case may materially and adversely affect
Borrower's or Gaming Supply's business, property, assets,
operations or condition, financial or otherwise;
(I) Provide Lender with copies of all agreements
between Borrower or Gaming Supply and any warehouse at
which Inventory or Gaming Supply Inventory may, from time
to time, be kept and all leases or similar agreements
between Borrower and Gaming Supply on the one hand and
any Person on the other, whether Borrower or Gaming
Supply is lessor or lessee thereunder;
(J) Maintain (i) product liability insurance in an
amount satisfactory to Lender but in no event less than
One Million Dollars ($1,000,000.00); and (ii) general
public liability insurance in an amount satisfactory to
Lender but in no event less than Five Million Dollars
($5,000,000.00) per occurrence, for bodily injury and
property damage, by obtaining policies (none of which
shall be cancelable or subject to modification without at
least thirty (30) days notice to Lender) in coverage and
form and with companies satisfactory to Lender and at
Lender's request will deliver each policy or certificate
of insurance to Lender. In addition, Borrower will
deliver renewals for all of such policies at least thirty
(30) days prior to the expiration date of the subject
policy;
46
(K) Furnish Lender within five (5) Business Days
after the occurrence of any of the following events, with
appropriate notice thereof: (i) the happening of a
Reportable Event with respect to any profit sharing or
pension plan governed by ERISA (such notice shall contain
the statement of the chief financial officer of Borrower
setting forth details as to such Reportable Event and the
action which Borrower proposes to take with respect
thereto and a copy of the notice of such Reportable Event
to the Pension Benefit Guaranty Corporation), (ii) the
termination of any such plan, (iii) the appointment of a
trustee by an appropriate United States District Court to
administer any such plan, or (iv) the institution of any
proceedings by the Pension Benefit Guaranty Corporation
to terminate any such plan or to appoint a trustee to
administer any such plan;
(L) Furnish to Lender a copy of each report which
is filed by Borrower or Gaming Supply with respect to any
profit sharing or pension plan governed by ERISA promptly
after the filing thereof with the Secretary of Labor or
the Pension Benefit Guaranty Corporation and notify
Lender promptly upon receipt by Borrower or Gaming Supply
of any notice of the institution of any proceeding or
other actions which may result in the termination of any
such plans;
(M) Comply, and cause Gaming Supply to comply, with
all applicable Environmental Laws, prevent any property
now or hereafter owned or operated by Borrower and Gaming
Supply from being in violation of applicable
Environmental Laws, and promptly respond to any on-site
or off-site Release of a Hazardous Material into the
environment to correct, mitigate, remove, prevent,
remediate or clean such Release. Borrower shall, and
shall cause Gaming Supply and its and Gaming Supply's
respective employees, agents, contractors and
subcontractors and any other Persons from time to time
present on or occupying property now or hereafter owned
or operated by either of Borrower and Gaming Supply to,
keep and maintain such property in compliance with
applicable Environmental Laws. Neither Borrower nor
Gaming Supply shall, nor shall either entity permit any
employees, agents, contractors or subcontractors of such
entities to, use, generate, manufacture, handle, treat,
store or dispose on, under or about any property now or
hereafter owned or operated by either of Borrower and
Gaming Supply, or transport to or from such property any
Hazardous Materials, except such Hazardous Materials as
may be required to be generated, used, stored,
manufactured, handled, treated or transported in
connection with the permitted uses of such property and
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then only to the extent permitted by law after obtaining
all necessary permits and licenses therefor;
(N) Promptly give notice to Lender upon Borrower's:
(i) receipt of any notice that Borrower or Gaming Supply
is not or might not be in full compliance with
requirements of applicable Environmental Laws; (ii)
receipt of notice that Borrower or Gaming Supply is
subject to investigation or inquiry evaluating whether
any corrective or remedial action is needed to respond to
the Release of any Hazardous Material; (iii) receipt of
notice of claim made or threatened by any Person against
Borrower, Gaming Supply or any property now or hereafter
owned or operated by Borrower or Gaming Supply, relating
to damage, contribution, cost recovery, compensation,
loss or injury resulting from Release or exposure to any
Hazardous Material; (iv) discovery of any occurrence or
condition on any real property adjoining or in the
vicinity of any property now or hereafter owned or
operated by Borrower or Gaming Supply, or any part
thereof, that could cause such property to be subject to
clean-up, corrective action, remediation or response
under any Environmental Laws; or (v) receipt of notice
that any property now or hereafter owned or operated by
Borrower or Gaming Supply is, or may be, subject to a
lien in favor of any Person for (a) any liability under
federal, state or local laws, or (b) damages arising
from, or costs incurred by, any Person in response to a
Release of a Hazardous Material or other substance into
the environment; and
(O) Continue Xxxxxxx Xxxxxxx'x employment as the
Chief Executive Officer of Borrower, except that such
employment may be terminated so long as a Chief Executive
Officer acceptable to Lender is employed by Borrower
within thirty (30) days following the date of Xxxxxxx
Xxxxxxx'x termination of employment.
10.2 NEGATIVE COVENANTS. Borrower covenants that after
the date hereof it shall not, and shall cause Gaming Supply not to,
take any of the actions described below, without the prior written
consent of Lender.:
(A) Merge or consolidate with or acquire the stock
of any Person or acquire assets from any Person (except
to the extent such acquisition of assets is permitted
under Section 10.2(K));
(B) Make any investment in the securities of any
Person or make loans or other advances of money to any
Person; PROVIDED, that Borrower may make loans and
advances to (i) Gaming Supply not to exceed Four Hundred
Thousand Dollars ($400,000) in the aggregate at any time
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48
outstanding until the earlier of (x) the Gaming
Disposition or (y) the date six (6) months from the date
of this agreement and (ii) Suncom Technologies, Ltd.
("Suncom") in respect of sales of goods by Borrower to
Suncom in the ordinary course of business;
(C) Declare or pay distributions upon any such
entity's equity capital or make any distribution of
property or assets; PROVIDED, that Borrower may declare
and pay dividends to Wico Holding Corp., a Delaware
corporation ("Parent") provided that (a) no Revolving
Loans are then predicated on the Collateral Overadvance
Facility, (b) no Defaults or Events of Default then exist
or would be caused by the payment thereof, (c) such
dividend payments do not exceed Five Hundred Eighty-One
Thousand Dollars ($581,000) per fiscal year of Borrower
minus the sum of (i) cash received by Conquest during
such fiscal year from Air L.A., Inc. or its Affiliates in
connection with the sale by Conquest to Air L.A., Inc. of
the outstanding capital stock of Conquest Airlines Corp.
and (ii) the amount of dividends paid by Gaming Supply to
Parent during such fiscal year, and (d) such
distributions are distributed by Parent to Conquest and
are used by Conquest solely to satisfy current
obligations owing in respect of (x) Series A, Series B,
Series C, Series D and Series E preferred stock of
Conquest and (y) certain promissory notes issued by
Conquest in connection with a July, 1994 private
placement in an aggregate amount of $2,737,500.00 (the
"Private Placement Notes");
(D) Pay any management, consulting or other fees to
any Person, except in the ordinary course of business to
a Person that is not an Affiliate;
(E) Redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of such entity's capital
stock or make any material change in such entity's
capital structure or in any of its business objectives,
purposes and operations;
(F) Enter into, or be a party to, any transaction
with any Affiliate, officer or shareholder of such
entity, except in the ordinary course of and pursuant to
the reasonable requirements of such entity's business and
upon fair and reasonable terms which are fully disclosed
to Lender and are no less favorable to such entity than
would obtain in a comparable arm's length transaction
with a Person not an Affiliate, officer or shareholder of
such entity;
(G) Enter into any transaction which materially and
adversely affects the Collateral or Borrower's ability to
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repay the Indebtedness or permit a modification of any
kind or nature with respect to any Account or Gaming
Supply Account in any material respect, including any of
the terms relating thereto, except, during the absence of
a Default, in accordance with practices and policies
previously disclosed in writing to Lender and for credits
given for inventory and Gaming Supply Inventory returned
pursuant to Section 7.3;
(H) Guarantee or otherwise, in any way, become
liable with respect to the obligations or liabilities of
any person, except (i) as set forth on EXHIBIT 9.1(I)
attached hereto, (ii) by endorsement of instruments or
items of payment for deposit to the general account of
Borrower or for delivery to Lender on account of the
Liabilities and (iii) Gaming Supply may guarantee
Borrower's repayment of the Liabilities;
(I) Except for Permitted Liens or as otherwise
expressly permitted in the Ancillary Agreements,
encumber, pledge, mortgage, grant a security interest in,
assign, sell, lease or otherwise dispose of or transfer,
whether by sale, merger, consolidation, liquidation,
dissolution, or otherwise, any of its property; provided,
that (i) Borrower and Gaming Supply may sell Inventory
and Gaming Supply Inventory in the ordinary course of
their business (which, except in connection with the
Gaming Disposition, does not include a transfer in
partial or total satisfaction of Indebtedness, sales in
bulk, sales on consignment or sales on an approval or
sale or return basis), (ii) Borrower may sell or
otherwise dispose of obsolete Equipment with an aggregate
net book value not to exceed Fifty Thousand Dollars
($50,000) in any fiscal year so long as the proceeds
thereof are delivered to Lender or used to acquire
Equipment of equal or greater value and (iii) Gaming
Supply may grant a security interest in all or
substantially all of its assets to Lender to secure the
guarantee described in Section 10.2(H);
(J) Except as provided on EXHIBIT 9.1(I), incur any
Indebtedness for borrowed money (other than the
Liabilities and purchase money financing of Equipment to
the extent permitted herein) other than Indebtedness
which is unsecured or secured by assets other than the
Collateral and in each such case is to Persons who
execute and deliver to Lender (in form and substance
acceptable to Lender and its counsel) subordination
agreements subordinating their Claims against Borrower to
the payment of the Liabilities;
(K) Make Capital Expenditures in any fiscal year of
Borrower (exclusive of expenditures pursuant to Section
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10.2(L)) in excess of Three Hundred Thousand Dollars
($300,000) in each such fiscal year,;
(L) Make expenditures in connection with the
relocation of Borrower's principal place of business in
excess of Three Hundred Thousand Dollars ($300,000);
(M) Amend or modify any of the NatWest Documents or
prepay all or any portion of the indebtedness evidenced
by any of the NatWest Documents other than (i) as set
forth on EXHIBIT 10.2(M); (ii) with the net proceeds of
an equity offering by Conquest; or (iii) with the
proceeds of loans made to Borrower by a bank or other
financial institution pursuant to documentation
substantially similar to the terms and conditions of the
NatWest Documents, in form and substance acceptable to
Lender and subordinated in favor of Lender pursuant to
documentation substantially similar to the terms and
conditions of the Intercreditor Agreement and in form and
substance satisfactory to Lender; and
(N) Change the end of Borrower's and Gaming
Supply's fiscal year from September 30 of each calendar
year.
10.3 CONTESTING CHARGES. Notwithstanding anything to the
contrary herein, Borrower and Gaming Supply may dispute any Charges
without prior payment thereof, even if such non-payment may cause
a lien to attach to Borrower's or Gaming Supply's assets, provided
that Borrower shall give Lender prompt notice of such dispute and
shall be diligently contesting or causing Gaming Supply to contest
the same in good faith and by an appropriate proceeding and there
is no danger of a loss or forfeiture of any of the Collateral and
provided further that, if the same are potentially or actually in
excess of Fifty Thousand Dollars ($50,000) in the aggregate at any
time hereafter, Borrower shall give Lender such additional
collateral and assurances as Lender, in its sole discretion, deems
necessary under the circumstances, immediately upon demand by
Lender.
10.4 PAYMENT OF CHARGES. Subject to the provisions of
Section 10.3, Borrower shall pay, and shall cause Gaming Supply to
pay, promptly when due all of the Charges. In the event either of
Borrower or Gaming Supply, at any time or times hereafter, shall
fail to pay the Charges or to promptly obtain the satisfaction of
such Charges, Borrower shall promptly so notify Lender thereof and
Lender may, without waiving or releasing any obligation or
liability of Borrower hereunder or any Default, in its sole
discretion, at any time or times thereafter, make such payment or
any part thereof (but shall not be obligated so to do), or obtain
such satisfaction and take any other action with respect thereto
which Lender deems advisable. All sums so paid by Lender and any
expenses, including reasonable attorneys' fees, court costs,
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expenses and other charges relating thereto, shall be payable by
Borrower to Lender upon demand and shall be additional Liabilities.
10.5 INSURANCE; PAYMENT OF PREMIUMS. All policies of
insurance on the Collateral or otherwise required hereunder shall
be in form and amount satisfactory to Lender and with insurers
reasonably recognized as adequate by Lender. Borrower shall
deliver to Lender evidence of the existence of each policy of
insurance and evidence of payment of all premiums therefor and
shall deliver evidence of renewals of all such policies to Lender
at least thirty (30) days prior to their expiration dates. Such
policies of insurance shall contain an endorsement, in form and
substance acceptable to Lender, showing all losses payable to
Lender. Such endorsement shall provide that the insurance
companies will give Lender at least thirty (30) days prior notice
before any such policy shall be altered or canceled and that no act
or default of Borrower or any other person shall affect the right
of Lender to recover under such policy in case of loss or damage.
Borrower hereby directs all insurers under such policies to pay all
proceeds payable thereunder directly to Lender. Borrower
irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as Borrower's
true and lawful attorney and agent-in-fact for the purpose of
making, settling and adjusting claims under such policies,
endorsing the name of Borrower in writing or by stamp on any check,
draft, instrument or other item of payment for the proceeds of such
policies and for making all determinations and decisions with
respect to such policies. If Borrower shall fail to obtain or to
maintain any of the policies required by this Agreement or to pay
any premium relating thereto, then Lender, without waiving or
releasing any obligation or default by Borrower hereunder, may (but
shall be under no obligation to do so) obtain and maintain such
policies of insurance and pay such premiums and take any other
action with respect thereto which Lender deems advisable. All sums
so disbursed by Lender, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be
payable by Borrower to Lender upon demand and shall be additional
Liabilities.
10.6 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
AGREEMENT. Except as otherwise expressly provided for in this
Agreement and in the Ancillary Agreements, no termination or
cancellation (regardless of cause or procedure of this Agreement or
the Ancillary Agreements) shall in any way affect or impair the
powers, obligations, duties, rights, and liabilities of Borrower or
Lender in any way or respect relating to any transaction or event
occurring prior to such termination or cancellation, the Colla-
teral, or any of the undertakings, agreements, covenants, warran-
ties and representations of Borrower or Lender contained in this
Agreement or the Ancillary Agreements. All such undertakings,
agreements, covenants, warranties and representations shall survive
such termination or cancellation.
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11. DEFAULT: RIGHTS AND REMEDIES ON DEFAULT.
11.1 DEFAULT. The occurrence of any one or more of the
following events shall constitute a Default:
(A) Borrower fails to pay any part of the Liabili-
ties or any other Indebtedness when due and payable or
declared due and payable;
(B) Borrower fails or neglects to perform, keep or
observe any term, provision, condition or covenant
contained in this Agreement or in any of the Ancillary
Agreements;
(C) A default shall occur and shall not be cured
within any applicable cure period, if any, or waived
under any material agreement, document or instrument
other than this Agreement or any of the Ancillary
Agreements now or hereafter existing, to which Borrower
or, prior to the Gaming Disposition, Gaming Supply is a
party, including without limitation (i) any of the
NatWest Documents, (ii) that certain Replacement
Promissory Note dated April 28, 1995 executed by Gaming
Supply in favor of Shuffle Master, Inc. and (iii) that
certain Security Agreement dated April 28, 1995 between
Gaming Supply and Shuffle Master, Inc.;
(D) Any statement, warranty, representation,
report, financial statement, or certificate made or
delivered by Borrower, any Guarantor or any of their
respective officers, employees or agents, to Lender is
not true and correct in any material respect;
(E) There shall occur any material uninsured damage
to or loss, theft, or destruction of any of the Colla-
teral;
(F) The Collateral or any of Borrower's or any
Guarantor's other assets are attached, seized, levied
upon or subjected to a writ or distress warrant, or come
within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors; an application
of a receiver, trustee, or custodian for possession of
any of the Collateral or any of Borrower's or any
Guarantor's other assets is filed and the same is not
dismissed within thirty (30) days after the filing
thereof;
(G) An application is made by Borrower or any
Guarantor for the appointment of a receiver, trustee or
custodian for any of the Collateral or any of Borrower's
or any Guarantor's other assets; a petition under any
section or chapter of the Bankruptcy Code or any similar
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law or regulation is filed against Borrower or any
Guarantor and is not dismissed with thirty (30) days
after filing; a petition under any section or chapter of
the Bankruptcy Code or any similar law or regulation is
filed by Borrower or any Guarantor; Borrower or any
Guarantor makes an assignment for the benefit of its
creditors or any case or proceeding is filed by or
against Borrower or any Guarantor for its dissolution,
liquidation, or termination; Borrower or any Guarantor
ceases to conduct its business as now conducted or is
enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its
business affairs;
(H) Except as permitted in Section 10.3, a notice
of lien, levy or assessment is filed of record with
respect to all or any substantial portion of Borrower's
or any Guarantor's assets by the United States, or any
department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency
including, without limitation, the Pension Benefit
Guaranty Corporation, or any taxes or debts owing to any
of the foregoing becomes a lien or encumbrance upon the
Collateral or any of Borrower's or any Guarantor's other
assets;
(I) Judgment(s) is or are rendered against Borrower
in excess of Fifty Thousand Dollars ($50,000) which is
not paid or are not stayed within thirty (30) days of the
entry thereof;
(J) Borrower or any Guarantor becomes insolvent or
fails generally to pay its debts as they become due;
(K) If any individual who is a Guarantor shall die
or become incompetent;
(L) If any Guarantor revokes or terminates any
guaranty relating to any of the Liabilities or defaults
under the terms of any such guaranty;
(M) If there shall be a change in the ownership
structure of Borrower or Gaming Supply as set forth on
EXHIBIT 11.1(M) hereto other than, with respect to Gaming
Supply, in connection with the Gaming Disposition;
(N) If either Parent or Conquest fails to comply
with any of its obligations set forth in the Gaming
Disposition Side Letter within the applicable time
periods established therein; or
(O) Conquest fails to apply any cash or cash
equivalents received by Conquest in connection with the
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disposition by Conquest of any note issued by, or equity
interest in, Air L.A., Inc. (including, without
limitation, in connection with any public or private
offering by Air L.A., Inc.) to reduce any outstanding
indebtedness evidenced by the Private Placement Notes.
11.2 ACCELERATION OF THE LIABILITIES. Upon and after the
occurrence of a Default, all of the Liabilities may at any time
prior to the cure thereof, at the option of Lender and without
demand, notice, or legal process of any kind, be declared, and
immediately shall thereupon become, due and payable.
11.3 REMEDIES. Upon and after the occurrence of a
Default, Lender shall have all of the following rights and
remedies:
(A) All of the rights and remedies of a secured
party under the Illinois Uniform Commercial Code or other
applicable law, all of which rights and remedies shall be
cumulative, and none exclusive, to the extent permitted
by law, and in addition to any other rights and remedies
contained in this Agreement and in any of the Ancillary
Agreements;
(B) The right to (i) peacefully enter upon the
premises of Borrower or any other place or places where
the Collateral is located and kept to the extent per-
mitted by law, without any obligation to pay rent to
Borrower or any other person, through self-help and
without judicial process or first obtaining a final
judgment or giving Borrower notice and opportunity for a
hearing on the validity of Lender's claim, and remove the
Collateral from such premises and places to the premises
of Lender or any agent of Lender, for such time as Lender
may require to collect or liquidate the Collateral,
and/or (ii) require Borrower to assemble and deliver the
Collateral to Lender at a place to be designated by
Lender;
(C) The right to (i) notify the post office
authorities to change the address for delivery of
Borrower's mail to an address designated by Lender and
receive and open Borrower's mail and collect any and all
amounts due from Account Debtors, provided that Lender
forwards such mail to Borrower, (ii) notify Account
Debtors that the Accounts have been assigned to Lender
and that Lender has a security interest therein, and
(iii) direct such Account Debtors to make all payments
due from them upon the Accounts, including the Special
Collateral, directly to Lender or to a lock box desig-
nated by Lender. Lender shall promptly furnish Borrower
with a copy of any such notice sent and Borrower hereby
agrees that any such notice in Lender's sole discretion,
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may be sent on Lender's stationery, in which event,
Borrower shall, upon demand, co-sign such notice with
Lender;
(D) The right to sell, lease, assign or to other-
wise dispose of all or any Collateral in its then
condition, or after any further manufacturing or proces-
sing thereof, at public or private sale or sales, with
such notice as provided in Section 11.4, in lots or in
bulk, for cash or on credit, all in accordance with
applicable law and as Lender, in its sole discretion, may
deem advisable. At any such sale or sales of the
Collateral, the Collateral need not be in view of those
present and attending the sale, nor at the same location
at which the sale is being conducted. Lender shall have
the right to conduct such sales on Borrower's premises or
elsewhere and shall have the right to use Borrower's
premises without charge for such sales for such time or
times as Lender may see fit. Lender is hereby granted a
license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks and advertising
matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to
Lender's benefit but Lender shall have no obligations
thereunder. Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase
price, may setoff the amount of such price against the
Liabilities. The proceeds realized from the sale of any
Collateral shall be applied first to the reasonable
costs, expenses and attorneys' and paralegals' fees and
expenses incurred by Lender for collection and for
acquisition, completion, protection, removal, storage,
sale and delivery of the Collateral; second to interest
due upon any of the Liabilities; and third to the
principal of the Liabilities. Lender shall account to
Borrower for any surplus. If any deficiency shall arise,
Borrower shall remain liable to Lender therefor.
11.4 NOTICE. Borrower agrees that any notice required to
be given by Lender of a sale, lease, other disposition of any of
the Collateral or any other intended action by Lender, which is
personally delivered to Borrower or which is deposited in the
United States mail, postage prepaid and duly addressed to Borrower
at the address set forth in Section 12.10, at least ten (10)
Business Days prior to any such public sale, lease or other
disposition or other action being taken, or the time after which
any private sale of the Collateral is to be held, shall constitute
commercially reasonable and fair notice thereof to Borrower.
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12. MISCELLANEOUS.
12.1 APPOINTMENT OF LENDER AS BORROWER'S LAWFUL ATTORNEY-
IN-FACT. Borrower, irrevocably designates, makes, constitutes and
appoints Lender (and all persons designated by Lender) as Bor-
rower's true and lawful attorney and agent-in-fact and Lender, or
Lender's agent, may, without notice to Borrower:
(A) At any time hereafter, endorse by writing or
stamp Borrower's name on any checks, notes, drafts or any
other payment relating to and/or proceeds of the Colla-
teral which come into the possession of Lender or under
Lender's control and deposit the same to the account of
Lender for application to the Liabilities; and
(B) At any time after the occurrence of a Default
Lender may, at any time priOr to the cure thereof, in
Borrower's or Lender's name: (i) demand payment of the
Collateral; (ii) enforce payment of the Collateral, by
legal proceedings or otherwise; (iii) exercise all of
Borrower's rights and remedies with respect to the
collection of the Collateral; (iv) settle, adjust,
compromise, extend or renew the Accounts and the Special
Collateral; (v) settle, adjust or compromise any legal
proceedings brought to collect the Collateral; (vi)
satisfy and release the Accounts and Special Collateral,;
(vii) take control, in any manner, of any item of payment
or proceeds referred to in Section 4.3; (viii) prepare,
file and sign Borrower's name on any proof of claim in
Bankruptcy or similar document against any Account
Debtor; (ix) prepare, file and sign Borrower,s name on
any notice of lien, assignment or satisfaction of lien or
similar document in connection with the Collateral; (x)
do all acts and things necessary, in Lender's sole
discretion, to fulfill Borrower's obligations under this
Agreement; (xi) endorse by writing or stamp the name of
Borrower upon any chattel paper, document, instrument,
invoice, freight xxxx, xxxx of lading or similar informa-
tion recorded on or contained in any data processing
equipment and computer hardware and software relating to
the Collateral to which Borrower has access.
12.2 MODIFICATION OF AGREEMENT: SALE OF INTEREST. This
Agreement and the Ancillary Agreements may not be modified, altered
or amended, except by an agreement in writing signed by Borrower
and Lender. Borrower may not sell, assign or transfer this
Agreement or the Ancillary Agreements or any portion hereof or
thereof, including, without limitation, Borrower's right, title,
interest, remedies, powers, or duties hereunder or thereunder.
Borrower hereby consents to Lender's participation, sale, assign-
ment, transfer or other disposition, at any time or times herea-
fter, of this Agreement or the Ancillary Agreements or of any
portion hereof or thereof, including, without limitation, Lender's
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right, title interest, remedies, powers, or duties hereunder or
thereunder.
12.3 ATTORNEYS' FEES AND EXPENSES; LENDER'S OUT-OF-POCKET
EXPENSES. If, regardless of the existence of a Default or an Event
of Default, Lender incurs legal or other costs and expenses or
employs counsel, accountants or other professionals for advice or
other representation or services in connection with this Agreement
or the Ancillary Agreements or any transactions or matters arising
thereunder, including without limitation in connection with:
(A) The preparation, negotiation and execution of
this Agreement, all Ancillary Agreements, or any amend-
ment, modification or waiver, of this Agreement or any of
the Ancillary Agreements;
(B) Any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender,
Borrower or any other Person) in any way relating to the
Collateral, this Agreement, the Ancillary Agreements or
Borrower's or any Guarantor's affairs;
(C) Any attempt to enforce any rights of Lender or
any Participant against Borrower or any other Person
which may be obligated to Lender or such Participant by
virtue of this Agreement or the Ancillary Agreements,
including, without limitation, the Account Debtors;
(D) Any attempt to inspect, verify, protect,
collect, sell, liquidate or otherwise dispose of any of
the Collateral; and
(E) Any inspection, verification, protection,
collection, sale, liquidation or other disposition of any
of the Collateral, including without limitation, Lender's
periodic or special audits of Borrower's books and
records;
then in any such event, the reasonable attorneys' and paralegals'
fees and expenses arising from such services and all other incurred
expenses, costs, charges and other fees of or paid by Lender in any
way or respect arising in connection with or relating to any of the
events or actions described in this Section 12.3 shall be payable
by Borrower to Lender upon demand and shall be additional
Liabilities. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include Uniform
Commercial Code and other public record searches; lien filing fees;
appraisal costs; surveys; title insurance costs; environmental
audit and review costs; counsel and accountants' fees, costs and
expenses; court costs, fees and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long
distance telephone charges; air express charges; telegram charges,;
secretarial overtime charges; and expenses for travel, lodging and
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food paid or incurred in connection with the performance of all
such services.
12.4 WAIVER BY LENDER. Lender's failure, at any time or
times hereafter, to require strict performance by Borrower of any
provision of this Agreement or of any Ancillary Agreement shall not
constitute a waiver, or affect or diminish any rights of Lender
thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by Lender of a Default under this
Agreement or any Ancillary Agreement shall not suspend, waive or
affect any other Default under this Agreement or the Ancillary
Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the under-
takings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or the Ancillary Agreements
and no Default under this Agreement or the Ancillary Agreements
shall be deemed to have been suspended or waived by Lender, unless
such suspension or waiver is by an instrument in writing signed by
an officer of Lender and directed to Borrower specifying
suspension or waiver.
12.5 SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.6 PARTIES: ENTIRE AGREEMENT. This Agreement and the
Ancillary Agreements shall be binding upon and inure to the benefit
of the respective successors and assigns of Borrower and Lender.
Borrower's successors and assigns shall include, without limita-
tion, a trustee, receiver or debtor-in-possession of or for
Borrower. Nothing contained in this Section 12.6 shall be deemed
to modify Section 12.2. This Agreement is the complete statement
of the agreement by and between Borrower and Lender and supersedes
all prior negotiations, understandings and representations between
them with respect to the subject matter of this Agreement.
12.7 CONFLICT OF TERMS. The provisions of the Ancillary
Agreements are incorporated in this Agreement by this reference.
Except as otherwise provided in this Agreement and except as
otherwise provided in the Ancillary Agreements by specific
reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any Ancillary Agreement, the
provision contained in this Agreement shall govern and control.
12.8 WAIVER BY BORROWER. EXCEPT AS OTHERWISE PROVIDED
FOR IN THIS AGREEMENT OR REQUIRED BY LAW, BORROWER WAIVES (i)
PRESENTMENT, DEMAND AND PROTEST, NOTICE OF PROTEST, NOTICE OF
PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE,
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SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER
AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER
MAY DO IN THIS REGARD; (ii) ALL RIGHTS TO NOTICE AND A HEARING
PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF, OR TO LENDER'S
REPLEVY, ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; AND (iii) THE BENEFIT
OF ALL VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.
BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY ITS OWN COUNSEL
WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS EVIDENCED BY
THIS AGREEMENT.
12.9 GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED
FOR ACCEPTANCE BY LENDER IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS.
BORROWER HEREBY (i) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED IN XXXX COUNTY, ILLINOIS, OVER ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM
OR RELATED TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT; (ii)
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND
CONSENTS THAT ALL SUCH PERSONAL SERVICE OF PROCESS BE MADE BY
MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER
AT THE ADDRESS SET FORTH IN SECTION 12.10 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR
THREE (3) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO
BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv)
AGREES THAT A FINAL JUDGMENT 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; AND
(v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
LENDER OR ANY OF LENDER'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT IN ANY COURT OTHER THAN ONE
LOCATED IN XXXX COUNTY, ILLINOIS. NOTHING IN THIS SECTION 12.9
SHALL AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL PROCESS IN ANY
MANNER PERMITTED BY LAW OR LENDER'S RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OR
ANY OTHER JURISDICTION. BORROWER AND LENDER EACH WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OF ANY KIND IN ANY COURT TO WHICH
BORROWER AND LENDER MAY BOTH BE PARTIES AND BORROWER CONSENTS TO
THE GRANTING OF SUCH LEGAL AND EQUITABLE RELIEF AS IS DEEMED BY THE
COURT.
12.10 NOTICE. Except as otherwise provided herein, any
notice required hereunder shall be in writing and addressed to the
party to be notified as follows:
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(A) If to Lender, at:.
Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxx, Vice President, Commercial
Finance Division
(B) If to Borrower, at:
Wico Corporation
0000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
or to such other address as each party may designate for itself in
the manner herein prescribed. Notices shall be deemed to have been
duly given (i) if delivered personally or otherwise actually
received, (ii) if sent by overnight delivery service, (iii) if
mailed by first class United States mail, postage prepaid,
registered or certified, with return receipt requested, (iv) if
sent by telex, with telex confirmation of receipt (with duplicate
notice sent by United States mail as provided above), or (v) if
sent by telecopy, with telecopy confirmation of receipt (with
duplicate notice sent by United States mail as provided above).
Notice mailed as provided in clause (iii) above shall be effective
upon the expiration of three (3) Business Days after its deposit in
the United States mail. Notice given in any other manner described
in this paragraph shall be effective upon receipt by the addressee
thereof; PROVIDED, HOWEVER, that if any notice is tendered to an
addressee and delivery thereof is refused by such addressee, such
notice shall be effective upon such tender.
12.11 INDEMNIFICATION. Borrower agrees to defend,
protect, indemnify and hold harmless Lender and each and all of its
officers, directors, employees, attorneys and agents ("Indemnified
Parties") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements
of counsel for the Indemnified Parties in connection with any
investigative, administrative or judicial proceeding, whether or
not the Indemnified Parties shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against any
Indemnified Party (whether direct, indirect or consequential and
whether based on any federal or state laws or other statutory
regulations, including without limitation securities, environmental
and commercial laws and regulations, under common law or at
equitable cause, or on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the
Ancillary Agreements, or any act, event or transaction related or
attendant thereto, the making and the management of the advances
and other financial accommodations hereunder (including any
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liability under Environmental Laws) or the use or intended use of
the proceeds of the advances and other financial accommodations
hereunder; PROVIDED, that Borrower shall not have any obligation to
any Indemnified Party hereunder with respect to matters caused by
or resulting from the willful misconduct or gross negligence of
such Indemnified Party. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall be liable for the maximum portion
which it is permitted to pay and satisfy under applicable law. Any
liability, obligation, loss, damage, penalty, cost or expense
incurred by the Indemnified Parties for which Borrower is respon-
sible or for which Borrower has indemnified the Indemnified Parties
shall be paid to the Indemnified Parties on demand. The provisions
of and undertakings and indemnifications set out in this section
shall survive the satisfaction and payment of the Liabilities and
termination of this Agreement.
12.12 COVENANT NOT TO XXX RE: ENVIRONMENTA MATTERS.
Without limiting any other waiver contained in this Agreement,
Borrower hereby forever waives, releases and covenants not to bring
any demand, claim, cost recovery action or lawsuit it may now or
hereafter have or accrue against any Indemnified Party arising from
any violation of Environmental Laws.
12.13 SUPERVENING ILLEGALITY. If, at any time or times
hereafter, there shall become effective any amendment to, deletion
from or revision, modification or other change in any provision of
any statute, or any rule, regulation or interpretation thereunder
or any similar law or regulation, affecting the financing arrange-
ments described in this Agreement and/or the selling of partici-
pations therein, Borrower shall, at Lender's option, either (i) pay
to Lender the then outstanding balance of the Liabilities, and hold
Lender harmless from and against any and all obligations, fees,
liabilities, losses, penalties, costs, expenses and damages, of
every kind and nature, imposed upon or incurred by Borrower by
reason of Lender's failure or inability to comply with the terms of
this Agreement or the Ancillary Agreements or (ii) indemnify and
hold Lender harmless from and against any and all obligations,
fees, liabilities, losses, penalties, costs, expenses and damages,
of every kind and nature, imposed upon or incurred by Lender by
reason of such amendment, deletion, revision, modification, or
other change.
12.14 INCREASED CAPITAL. If either (a) the introduction
of or any change in or in the interpretation of any law or
regulation or (b) compliance by Lender with any guideline or
request from any central bank or other governmental authority
(whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) affects or would
affect the amount of capital required or expected to be maintained
by Lender or any corporation controlling Lender, and Lender
determines that the amount of such capital is increased by or based
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upon the existence of Lender's commitment hereunder to make
advances and other financial accommodations, then, upon demand by
Lender, Borrower shall immediately pay to Lender, from time to time
additional amounts sufficient to compensate Lender in the light of
such circumstances, to the extent that Lender determines such
increase in capital to be allocable to the existence of or Lender's
commitment hereunder to make the advances and other financial
accommodations hereunder. A certificate as to such amounts
submitted to Borrower by Lender shall, in the absence of manifest
error, be conclusive and binding for all purposes.
12.15 SECTION TITLES, ETC. The section titles and table
of contents, if any, contained in this Agreement are and shall be
without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto. All
references herein to Sections, paragraphs, clauses and other
subdivisions refer to the corresponding Sections, paragraphs,
clauses and other subdivisions of this Agreement; and the words
"herein", "hereof", "hereby", "hereto", "hereunder", and words of
similar import refer to this Agreement as a whole and not to any
particular Section, paragraph, clause or subdivision hereof. All
Exhibits which are referred to herein or attached hereto are hereby
incorporated by reference.
IN WITNESS WHEREOF, this Agreement has been duly executed
as of the day and year specified at the beginning hereof.
WICO CORPORATION
/s/ Xxxxxxx X. Xxxxxxx
By:_______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: CEO
SANWA BUSINESS CREDIT
CORPORATION
/s/ Xxxxxxx X. Xxx
By:_______________________________
Name: Xxxxxxx X. Xxx
Title: V.P.
Attachments: Exhibit 1.1, 1.2, 1.3, 1.4, 3.2(B), 9.1(B), 9.1(I),
9.1(J), 9.1(R), 10.2(M) and 11.1(M)
-62-
63
EXHIBITS
1.1 Special Deposit Agreement
1.2 List of Equipment
1.3 Financial Statements
1.4 Liens, Claims, Security Interests or Encumbrances
2.3(C) Notice of Conversion/Continuation
3.2(B) Inventory Locations, Chief Executive Office
9.1(B) Fictitious Names
9.1(I) Pending Litigation; Indebtedness; Guaranties
9.1(J) Adverse Contracts or Agreements; Labor Issues
9.1(R) Environmental Conditions
10.2(M) Permitted Prepayments
11.1(M) Ownership Structure
