EXHIBIT 4.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") dated as of October 29, 1999 is
between GAMBLERS SUPPLY MANAGEMENT COMPANY, a South Dakota corporation (the
"COMPANY"), and ISLE OF CAPRI CASINOS, INC. (the "LENDER").
W I T N E S S E T H:
WHEREAS, the Lender may from time to time make loans, advances or other
financial accommodations to the Company;
WHEREAS, the obligations of the Company to the Lender are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company by the
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. When used herein, (a) the terms CERTIFICATED SECURITY,
CHATTEL PAPER, DEPOSIT ACCOUNT, DOCUMENT, EQUIPMENT, FINANCIAL ASSET, FIXTURE,
GOODS, INVENTORY, INSTRUMENT, INVESTMENT PROPERTY, SECURITY, SECURITY
ENTITLEMENT and UNCERTIFICATED SECURITY shall have the respective meanings
assigned to such terms in the Uniform Commercial Code (as defined below) and (b)
the following terms have the following meanings (such definitions to be
applicable to both the singular and plural forms of such terms):
ACCOUNT DEBTOR means the party who is obligated on or under any Account
Receivable, Contract Right or General Intangible.
ACCOUNT RECEIVABLE means any right of the Company to payment for goods sold
or leased or for services rendered.
COLLATERAL means all property and rights of the Company in which a security
interest is granted hereunder.
COMPUTER HARDWARE AND SOFTWARE means all of the Company's rights (including
rights as licensee and lessee) with respect to (i) computer and other electronic
data processing hardware, including all integrated computer systems, central
processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories, peripheral devices and
other related computer hardware; (ii) all software programs designed for use on
the computers and electronic data processing hardware described in CLAUSE
(i) above, including all operating system software, utilities and application
programs in whatsoever form (source code and object code in magnetic tape, disk
or hard copy format or any other listings whatsoever);
(iii) any firmware associated with any of the foregoing; and (iv) any
documentation for hardware, software and firmware described in CLAUSES (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.
CONTRACT RIGHT means any right of the Company to payment under a contract
for the sale or lease of goods or the rendering of services, which right is at
the time not yet earned by performance.
DEFAULT means the occurrence of any Event of Default by the Company under
the Credit Agreement dated as of October 29, 1999 by and between the Company and
the Lender.
GENERAL INTANGIBLES means all of the Company's "general intangibles" as
defined in Uniform Commercial Code and, in any event, includes (without
limitation) all of the Company's trademarks, trade names, patents, copyrights,
trade secrets, customer lists, inventions, designs, software programs, mask
works, goodwill, registrations, licenses (except gaming licenses issued by the
State of Iowa), franchises, tax refund claims, guarantee claims, security
interests and rights to indemnification.
INTELLECTUAL PROPERTY means all past, present and future: trade secrets
and other proprietary information; trademarks, service marks, business names,
designs, logos, indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights; unpatented inventions (whether or not
patentable); patent applications and patents; industrial designs, industrial
design applications and registered industrial designs; license agreements
related to any of the foregoing and income therefrom; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets, source codes,
object codes and other physical manifestations, embodiments or incorporations of
any of the foregoing; the right to xxx for all past, present and future
infringements of any of the foregoing; and all common law and other rights
throughout the world in and to all of the foregoing.
LIABILITIES means all obligations (monetary or otherwise) of the Company to
the Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due.
NON-TANGIBLE COLLATERAL means, collectively, the Company's Accounts
Receivable, Contract Rights and General Intangibles.
TRADEMARK - see SECTION 3.
UNIFORM COMMERCIAL CODE means the Uniform Commercial Code as in effect in
the State of New York on the date of this Agreement; provided that, as used in
SECTION 8 hereof, "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the applicable jurisdiction.
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2. GRANT OF SECURITY INTEREST. As security for the payment of all
Liabilities, the Company hereby assigns to the Lender, and grants to the Lender
a continuing security interest in, the following, whether now or hereafter
existing or acquired:
All of the Company's:
(i) Accounts Receivable;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with respect
thereto, including, any and all licenses, options, warranties,
service contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements,
additions or model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Financial Assets;
(ix) General Intangibles;
(x) Goods (including all of its Equipment, Fixtures and Inventory),
and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(xi) Instruments;
(xii) Intellectual Property;
(xiii) Investment Property;
(xiv) money (of every jurisdiction whatsoever);
(xv) Security Entitlements;
(xvi) Uncertificated Securities; and
(xvii) to the extent not included in the foregoing, other personal
property of any kind or description;
together with all books, records, writings, data bases, information and
other property relating to, used or useful in connection with, or
evidencing, embodying,
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incorporating or referring to any of the foregoing, and all proceeds,
products, offspring, rents, issues, profits and returns of and from
any of the foregoing; PROVIDED that to the extent that the provisions
of any lease or license of Computer Hardware and Software or
Intellectual Property expressly prohibit (which prohibition is
enforceable under applicable law) the assignment thereof, and the
grant of a security interest therein, the Company's rights in such
lease or license shall be excluded from the foregoing assignment and
grant for so long as such prohibition continues, IT BEING UNDERSTOOD
that upon the reasonable request of the Lender, the Company will in
good faith use reasonable efforts to obtain consent for the creation
of a security interest in favor of the Lender in the Company's rights
under such lease or license.
3. WARRANTIES. The Company warrants that: (i) no financing statement
(other than any which may have been filed on behalf of the Lender or in
connection with liens expressly agreed to in writing by the Lender ("PERMITTED
LIENS")) covering any of the Collateral is on file in any public office; (ii)
the Company is and will be the lawful owner of all Collateral, free of all liens
and claims whatsoever, other than the security interest hereunder and Permitted
Liens, with full power and authority to execute this Agreement and perform its
obligations hereunder, and to subject the Collateral to the security interest
hereunder; (iii) all information with respect to Collateral and Account Debtors
set forth in any schedule, certificate or other writing at any time heretofore
or hereafter furnished by the Company to the Lender is and will be true and
correct in all material respects as of the date furnished; (iv) the Company's
chief executive office and principal place of business are as set forth on
SCHEDULE I hereto (and the Company has not maintained its chief executive office
and principal place of business at any other location at any time after December
31, 1998); (v) each other location where the Company maintains a place of
business is set forth on SCHEDULE II hereto; (vi) except as set forth on
SCHEDULE III hereto, the Company is not now known and during the five years
preceding the date hereof has not previously been known by any trade name;
(vii) except as set forth on SCHEDULE III hereto, during the five years
preceding the date hereof the Company has not been known by any legal name
different from the one set forth on the signature pages of this Agreement nor
has the Company been the subject of any merger or other corporate
reorganization; (viii) SCHEDULE IV hereto contains a complete listing of all of
the Company's Intellectual Property which is subject to registration statutes;
(ix) the Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation; (x) the execution and
delivery of this Agreement and the performance by the Company of its obligations
hereunder are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, have received all necessary governmental
approval (if any shall be required), and do not and will not contravene or
conflict with any provision of law or of the charter or by-laws of the Company
or of any material agreement, indenture, instrument or other document, or any
material judgment, order or decree, which is binding upon the Company; (xi) this
Agreement is a legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except that the enforceability of this Agreement
may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law); and (xii) the Company is in compliance in all material respects with
the requirements of all applicable laws (including the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which would reasonably be expected to result
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in a material adverse effect on the Company's business, condition (financial or
otherwise), properties or prospects.
4. COLLECTIONS, ETC. Until such time during the existence of a
Default as the Lender shall notify the Company of the revocation of such
power and authority, the Company (a) may, in the ordinary course of its
business, at its own expense, sell, lease or furnish under contracts of
service any of the Inventory normally held by the Company for such purpose,
use and consume, in the ordinary course of its business, any raw materials,
work in process or materials normally held by the Company for such purpose,
and use, in the ordinary course of its business (but subject to the terms of
any agreement with the Lender), the cash proceeds of Collateral and other
money which constitutes Collateral, (b) will, at its own expense, endeavor to
collect, as and when due, all amounts due under any of the Non-Tangible
Collateral, including the taking of such action with respect to such
collection as the Lender may reasonably request or, in the absence of such
request, as the Company may deem advisable, and (c) may grant, in the
ordinary course of business, to any party obligated on any of the
Non-Tangible Collateral, any rebate, refund or allowance to which such party
may be lawfully entitled, and may accept, in connection therewith, the return
of Goods, the sale or lease of which shall have given rise to such
Non-Tangible Collateral. The Lender, however, may, at any time that a
Default exists, whether before or after any revocation of such power and
authority or the maturity of any of the Liabilities, notify any parties
obligated on any of the Non-Tangible Collateral to make payment to the Lender
of any amounts due or to become due thereunder and enforce collection of any
of the Non-Tangible Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon the request of the Lender during the
existence of a Default, or prior thereto, the Company will, at its own
expense, notify any or all parties obligated on any of the Non-Tangible
Collateral to make payment to the Lender of any amounts due or to become due
thereunder.
Upon request by the Lender during the existence of a Default, the Company
will forthwith, upon receipt, transmit and deliver to the Lender, in the form
received, all cash, checks, drafts and other instruments or writings for the
payment of money (properly endorsed, where required, so that such items may be
collected by the Lender) which may be received by the Company at any time in
full or partial payment or otherwise as proceeds of any of the Collateral.
Except as the Lender may otherwise consent in writing, any such items which may
be so received by the Company will not be commingled with any other of its funds
or property, but will be held separate and apart from its own funds or property
and upon express trust for the Lender until delivery is made to the Lender. The
Company will comply with the terms and conditions of any consent given by the
Lender pursuant to the foregoing sentence.
The Lender (or any designee thereof) is authorized to endorse, in the name
of the Company, any item, howsoever received by the Lender, representing any
payment on or other proceeds of any of the Collateral.
5. CERTIFICATES, SCHEDULES AND REPORTS. The Company will from time to
time, as the Lender may request, deliver to the Lender such schedules,
certificates and reports respecting all or any of the Collateral at the time
subject to the security interest hereunder, and the items or amounts received by
the Company in full or partial payment of any of the Collateral, as the Lender
may reasonably request. Any such schedule, certificate or report shall be
executed by a duly authorized officer of the Company and shall be in such form
and detail as the Lender may
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specify. The Company shall immediately notify the Lender of the occurrence
of any event causing any loss or depreciation in the value of its Inventory
or other Goods which is material to the Company and its subsidiaries taken as
a whole, and such notice shall specify the amount of such loss or
depreciation.
6. AGREEMENTS OF THE COMPANY. The Company (a) will, upon request of the
Lender, execute such financing statements and other documents (and pay the cost
of filing or recording the same in all public offices reasonably deemed
appropriate by the Lender) and do such other acts and things (including,
delivery to the Lender of any Instruments or Certificated Securities which
constitute Collateral), all as the Lender may from time to time reasonably
request, to establish and maintain a valid security interest in the Collateral
(free of all other liens, claims and rights of third parties whatsoever, other
than Permitted Liens) to secure the payment of the Liabilities; (b) will keep
all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on SCHEDULES I and II hereto or at
such other addresses of which the Company shall have given the Lender not less
than 10 business days' prior written notice, (c) will keep its records
concerning the Non-Tangible Collateral in such a manner as will enable the
Lender or its designees to determine at any time the status of the Non-Tangible
Collateral; (d) will furnish the Lender such information concerning the Company,
the Collateral and the Account Debtors as the Lender may from time to time
reasonably request; (e) will permit the Lender and its designees, from time to
time, on reasonable notice and at reasonable times and intervals during normal
business hours and without interfering with the Company's normal operation of
business (or at any time without notice during the existence of a Default) to
inspect the Company's Inventory and other Goods, and to inspect, audit and make
copies of and extracts from all records and other papers in the Company's
possession pertaining to the Collateral and the Account Debtors, and will, upon
request of the Lender during the existence of a Default, deliver to the Lender
all of such records and papers; (f) will, upon the reasonable request of the
Lender, stamp on its records concerning the Collateral, and add on all Chattel
Paper constituting a portion of the Collateral, a notation, in form satisfactory
to the Lender, of the security interest of the Lender hereunder; (g) except for
the sale or lease of Inventory in the ordinary course of its business and sales
of Equipment which is no longer useful in its business or which is being
replaced by similar Equipment, will not sell, lease, assign or create or permit
to exist any Lien on any Collateral other than Permitted Liens; (h) will at all
times keep all of its Inventory and other Goods insured under policies
maintained with reputable, financially sound insurance companies against loss,
damage, theft and other risks to such extent as is customarily maintained by
companies similarly situated, and cause all such policies to provide that loss
thereunder shall be payable to the Lender as its interest may appear (it being
understood that (A) so long as no Default exists, the Lender shall deliver any
proceeds of such insurance which may be received by it to the Company and (B)
whenever a Default exists, the Lender may apply any proceeds of such insurance
which may be received by it toward payment of the Liabilities, whether or not
due, in such order of application as the Lender may determine), and such
duplicate originals of policies or certificates thereof shall, if the Lender so
requests, be deposited with or furnished to the Lender; (i) will take such
actions as are reasonably necessary to keep its Inventory in good repair and
condition; (j) will take such actions as are reasonably necessary to keep its
Equipment in good repair and condition and in good working order, ordinary wear
and tear excepted; (k) will promptly pay when due all license fees, registration
fees, taxes, assessments and other charges which may be levied upon or assessed
against the ownership, operation, possession, maintenance or use of its
Equipment and other Goods; (l) will, upon request of the Lender, (i) cause to be
noted on the applicable certificate, in the event any of its Equipment is
covered by a certificate of title, the security interest of the Lender in the
Equipment covered thereby, and (ii) deliver all
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such certificates to the Lender or its designees; (m) will take all steps
reasonably necessary to protect, preserve and maintain all of its rights in
the Collateral; (n) except as listed on SCHEDULE V, will keep all of the
tangible Collateral in the United States; and (o) will reimburse the Lender
for all reasonable expenses, including reasonable attorney's fees and charges
(including time charges of attorneys who are employees of the Lender),
incurred by the Lender in seeking to collect or enforce any rights in respect
of the Collateral.
Any expenses incurred in protecting, preserving or maintaining any
Collateral shall be borne by the Company. Whenever a Default shall be existing,
the Lender shall have the right to bring suit to enforce any or all of the
Intellectual Property or licenses thereunder, in which event the Company shall
at the request of the Lender do any and all lawful acts and execute any and all
proper documents required by the Lender in aid of such enforcement and the
Company shall promptly, upon demand, reimburse and indemnify the Lender for all
costs and expenses incurred by the Lender in the exercise of its rights under
this SECTION 6. Notwithstanding the foregoing, the Lender shall have no
obligation or liability regarding the Collateral or any thereof by reason of, or
arising out of, this Agreement, unless arising out of the Lender's gross
negligence or willful misconduct.
7. DEFAULT. Whenever a Default shall be existing, the Lender may
exercise from time to time any right or remedy available to it under applicable
law. The Company agrees, in case of Default, (i) to assemble, at its expense,
all its Inventory and other Goods (other than Fixtures) at a convenient place or
places acceptable to the Lender, and (ii) at the Lender's request, to execute
all such documents and do all such other things which may be necessary or
desirable in order to enable the Lender or its nominee to be registered as owner
of the Intellectual Property with any competent registration authority. Any
notification of intended disposition of any of the Collateral required by law
shall be deemed reasonably and properly given if given at least ten days before
such disposition. Any proceeds of any disposition by the Lender of any of the
Collateral may be applied by the Lender to payment of reasonable expenses in
connection with the Collateral, including reasonable attorney's fees and charges
(including time charges of attorneys who are employees of the Lender), and any
balance of such proceeds may be applied by the Lender toward the payment of
such of the Liabilities, and in such order of application, as the Lender may
from time to time elect.
8. GENERAL. The Lender shall be deemed to have exercised reasonable
care in the custody and preservation of any of the Collateral in its possession
if it takes such action for that purpose as the Company requests in writing or
such action as it ordinarily takes with respect to similar property provided by
the Lender, but failure of the Lender to comply with any such request shall not
of itself be deemed a failure to exercise reasonable care, and no failure of the
Lender to preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Company, shall be deemed of itself a failure
to exercise reasonable care in the custody or preservation of such Collateral.
Any notice from the Lender to the Company, if mailed, shall be deemed given
five days after the date mailed, postage prepaid, addressed to the Company
either at the Company's address shown on SCHEDULE I hereto or at such other
address as the Company shall have specified in writing to the Lender as its
address for notices hereunder.
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The Company agrees to pay all reasonable expenses, including reasonable
attorneys' fees and charges (including time charges of attorneys who are
employees of the Lender) paid or incurred by the Lender in endeavoring to
collect the Liabilities, or any part thereof, and in enforcing this Agreement,
and such obligations will themselves be Liabilities.
No delay on the part of the Lender in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Lender of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Liabilities have been paid in full and all commitments by the Lender to make
loans, advances or other financial accommodations to the Company have
terminated. If at any time all or any part of any payment theretofore applied
by the Lender to any of the Liabilities is or must be rescinded or returned by
the Lender for any reason whatsoever (including the insolvency, bankruptcy or
reorganization of the Company), such Liabilities shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
the Lender, and this Agreement shall continue to be effective or be reinstated,
as the case may be, as to such Liabilities, all as though such application by
the Lender had not been made.
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York applicable to contracts made and to be fully
performed in such State, subject, however, to the applicability of the Uniform
Commercial Code of any jurisdiction in which any Goods may be located at any
given time. Whenever 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.
The rights and privileges of the Lender hereunder shall inure to the
benefit of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement.
No interest of the Lender created or arising under this Agreement shall
attach to any gaming license issued by the State of Iowa.
This Agreement may only be amended in a writing signed by both parties.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT RELATED HERETO, SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH
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COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, TO THE ADDRESS SET FORTH ON SCHEDULE I HERETO (OR SUCH OTHER
ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE LENDER AS ITS ADDRESS
FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
NEW YORK. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
EACH OF THE COMPANY AND THE LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
GAMBLERS SUPPLY MANAGEMENT COMPANY
By: /s/ XXXX X. XXXX
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Title: Vice President
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ISLE OF CAPRI CASINOS, INC., as Lender
By: /s/ XXXXXXX X. XXXXXXX
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Title: Senior Vice President and
Chief Financial Officer
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