Exhibit 10.1
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MASTER LOAN AGREEMENT
BY AND AMONG
PDS FINANCIAL CORPORATION
PDS FINANCIAL CORPORATION - NEVADA
AND
XXXXXX & XXXXXXXXX INVESTMENTS CORPORATION
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Drafted by:
Xxxxxxxxxx & Xxxxx, P.A.
1100 International Centre
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
MASTER LOAN AGREEMENT
THIS AGREEMENT is made as of May 26, 1998, by and among PDS FINANCIAL
CORPORATION, a Minnesota corporation ("PDS"), PDS FINANCIAL CORPORATION-
NEVADA, a Nevada corporation ("PDS-Nevada") (PDS and PDS-Nevada are jointly
and severally, the "Borrower") and XXXXXX & XXXXXXXXX INVESTMENTS
CORPORATION, a Minnesota corporation ("M&S"), and certain other participating
institutions identified in the Participation Agreements among M&S and the
participants (M&S and the participants being collectively, the "Lender").
RECITALS
A. The Borrower has requested that the Lender make available to the
Borrower a multiple advance credit facility in an aggregate principal amount
of Five Million Dollars ($5,000,000) (the "Credit Facility") evidenced by a
Promissory Note dated the date hereof from the Borrower in favor of the
Lender (the "Note") and secured by a Master Security Agreement dated the date
hereof between the Borrower and the Lender (as such Master Security Agreement
may be amended from time to time, the "Security Agreement").
B. The Lender is willing to make advances under the Credit Facility
(each a "Loan") to the Borrower upon the terms and subject to the conditions
set forth herein.
C. The Lender has entered or will enter into one or more participation
agreements (the "Participation Agreements") pursuant to which the
participants named therein agree to participate in the Credit Facility.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
"Addendum and Assignment" is defined in Section 1 of the Security
Agreement.
"Capitalized Cost to Lessee" means the fair market value of the
Equipment as of the date of the Contract as reasonably determined by Borrower
in accordance with FASB 13, excluding any charges for insurance, maintenance,
delivery and sales or use taxes.
"Closing Date" means the date hereof.
"Collateral" is defined in Section 2 of the Security Agreement.
"Contract" means any Contract which is identified in an Addendum and
Assignment, and which meets the eligibility criteria set forth in EXHIBIT A
attached hereto.
"Delinquent Contract" means any Contract where payment in full of all
installments then due have not been made within 30 days of the due date or
where any other material default has occurred and such default has continued
for a period of at least 30 days.
"Equipment" is defined in Section 1 of the Security Agreement.
"Equipment Value" means, (i) with respect to any Contract which is an
installment sales contract, the sales price of the Equipment subject to such
Contract, EXCLUDING sales or use tax, delivery charges, installation charges and
any security deposit in whatever form collected; (ii) with respect to any
Contract which is a finance lease, the Capitalized Cost to Lessee, EXCLUDING
sales or use tax, delivery charges, installation charges and any security
deposits; and (iii) with respect to any Contract which is an operating lease,
the Capitalized Cost to Lessee, EXCLUDING sales or use tax, delivery charges,
installation charges and any security deposits.
"GAAP" means generally accepted accounting principles as in effect from
time to time, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.
"Loan Documents" means this Agreement, the Note, the Security Agreement,
the Addendum and Agreement, the Repossession Agreement, the UCC-1 and UCC-3
Financing Statements, and all other documents, instruments or agreements
(excluding the Contracts) necessary to give effect to this Agreement and the
transaction contemplated hereby.
"Maturity Date" means May 1, 2001.
"Obligor" means, with respect to any Contract, the person identified on a
Contract as the lessee or purchaser.
"Repossession Agreement" means that certain Repossession Agreement among
the Borrower and the Lender, dated the date hereof, as it may be amended from
time to time.
"Required Payment Amount" means as of any Installment Payment Date (as
defined in the Note), that amount equal to the monthly amount necessary to fully
amortize the then outstanding principal balance and accrued interest under the
Note in equal monthly installments by the Maturity Date, together with payment
of the Servicing Fee described in the Note.
2. THE CREDIT FACILITY. Subject to and upon the terms and conditions
hereof, and in reliance upon the representations and warranties of the Borrower
herein, the Lender will make Loans to the Borrower under the Credit Facility
from time to time from the date hereof until May 1, 2001, at such time and in
such amount as to each Loan as the Borrower may request up to but not exceeding
an aggregate principal amount of $5,000,000 for the purpose of funding
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Contracts to certain casino operators, and to pay all related transaction
costs. The Credit Facility will be advanced based on multiple Advance
Requests (as hereafter defined) but will not be a revolving credit facility
and the Borrower may not borrow, repay and reborrow amounts advanced. The
Advance amount of any Loan shall not exceed ninety percent (90%) of the
Equipment Value of any Contract(s) being financed therewith and no more than
$1,000,000 will be advanced on an individual Contract, and in no event shall
the aggregate principal amount of Loans, the proceeds of which are used to
finance Contracts where the Equipment subject to such Contracts is located on
ships or is subject to maritime laws, exceed twenty-five percent (25%) of the
aggregate principal amount of all Loans. The Loans under the Credit Facility
shall be evidenced by a single Note which will be made payable to the order
of the Lender. The Credit Facility shall bear interest at the rate of Ten
and 00/100th percent (10.00%) per annum. The Credit Facility shall be
payable over a thirty-six (36)-month term. Interest accruing on the Note
shall be paid on June 1, 1998 and on July 1, 1998. Commencing August 1,
1998, and continuing on each Installment Payment Date (as defined in the
Note) thereafter, the Borrower shall pay installments of principal and
interest equal to the Required Payment Amount; provided that the unpaid
principal balance of the Note, interest accrued thereon and all charges
payable pursuant to the terms of the Note shall become due and payable in
full on the earlier to occur of the following: (i) the Maturity Date, (ii)
the occurrence of an Event of Default and (iii) the Installment Payment Date
(as defined in the Note) next following the Installment Payment Date on which
the unpaid principal balance of the Note declines below $100,000. Any
prepayments made on any Contract shall be used to prepay the Credit Facility
to the extent required by paragraph 3.t. of the Security Agreement. The Note
may be prepaid in whole or in part at any time, provided that any prepayment
shall be made on fifteen (15) days' advance written notice to the Lender and
shall be made only on a regularly scheduled Installment Payment Date and
shall be made in denominations of no less than $100,000 or provide for
payment in full of the outstanding balance of the Note. After a prepayment,
the then outstanding principal balance and accrued interest will be
reamortized over the period remaining between the date of prepayment and the
Maturity Date. All amounts paid in respect of the Note shall be applied in
accordance with Section 5(b) of the Security Agreement. All payments and
prepayments of the principal of and interest on the Loan shall be made by the
Borrower to the Lender pursuant to the terms of the Note and other Loan
Documents, and shall be made by wire transfer in accordance with Lender's
instructions.
3. BORROWING PROCEDURE AND DISBURSEMENT OF LOAN PROCEEDS. On the date
hereof, the Lender has disbursed to the Borrower $174,850 for payment of closing
costs for the Credit Facility. The balance of the Credit Facility in the amount
of $4,825,150 has been advanced under the Note and deposited in an interest
bearing escrow account with the Lender (the "Escrow"). Each time the Borrower
desires to obtain a disbursement from the Escrow, the Borrower shall submit to
the Lender a written advance request, duly signed by the Borrower, substantially
in the form of EXHIBIT B attached hereto (each an "Advance Request"). Each
Advance Request shall be submitted by the Borrower to the Lender at least five
(5) business days prior to the date of the requested advance.
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Each Advance Request shall specify (i) the advance date (which shall be a
business day), (ii) the Equipment being acquired or financed therewith and
the Equipment Value thereof, (iii) the terms of the Contract(s) to which such
Equipment will be sold or leased, and (iv) the amount of the requested Loan,
and shall set forth the information requested therein. Unless the Lender
reasonably determines any applicable condition specified in this Agreement
has not been satisfied, the Lender will make the amount of the requested Loan
available to the Borrower at the Lender's principal office in Minneapolis,
Minnesota not later than 5:00 p.m., Minneapolis time, on the date requested.
The Borrower shall be obligated to repay all Loans notwithstanding the fact
that the person requesting the same was not in fact authorized to do so. The
proceeds of each Loan will be disbursed to the Borrower upon delivery to the
Lender of the following documents or other items:
a. ITEMS NECESSARY AT TIME THIS AGREEMENT IS EXECUTED:
(1) this Agreement, the Note, the Security Agreement, and the
Repossession Agreement, each executed by the Borrower in favor of the Lender;
(2) resolutions of the executive committee of the board of
directors of the Borrower, certified by an officer of the Borrower,
authorizing the execution, delivery and performance of the Loan Documents and
related documents and the transactions contemplated thereby;
(3) evidence in form and substance acceptable to the Lender
that the Borrower has all licenses necessary to carry on its business and to
enable it to perform its obligations under the Repossession Agreement,
including without limitation all licenses required under Nevada gaming law
for the operation of the Borrower's business;
(4) Articles of Incorporation of PDS, certified by the
Minnesota Secretary of State, a copy of the Bylaws of PDS, certified by an
officer of PDS, and an unqualified certificate of good standing for PDS
issued by the Minnesota Secretary of State;
(5) Articles of Incorporation of PDS - Nevada, certified by the
Nevada Secretary of State, a copy of the Bylaws of PDS - Nevada, certified by an
officer of PDS - Nevada, and an unqualified certificate of good standing for PDS
- Nevada issued by the Nevada Secretary of State;
(6) UCC searches with respect to each Borrower;
(7) an opinion of counsel to PDS as to the due organization and
good standing of PDS, the due authorization, execution and delivery by PDS of
the Loan Documents, the validity and enforceability of the Loan Documents, and
as to such other matters regarding PDS and the transactions and documents
contemplated hereby as the parties may agree;
(8) an opinion of counsel to PDS - Nevada as to the due
organization and good standing of PDS - Nevada, the due authorization, execution
and delivery by PDS - Nevada of the Loan Documents, the validity and
enforceability of the Loan Documents, the availability of and basic elements of
the procedure to perfect a purchase money security interest
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under Nevada state law, and as to such other matters regarding PDS - Nevada
and the transactions and documents contemplated hereby as the parties may
agree;
(9) a special opinion of Nevada counsel regarding the Loan and
Nevada gaming law;
(10) a certificate of an officer of each Borrower to the effect
that the representations, warranties and covenants of such Borrower contained
herein and in the other Loan Documents are true and correct as of the date of
such documents and as of the date of delivery of the certificate;
(11) certificates of insurance and insurance endorsements
required hereby;
(12) a certificate by each Borrower regarding Year 2000 computer
compliance.
b. BORROWER ITEMS NECESSARY BEFORE ANY LOAN:
(1) an Addendum and Assignment and UCC-1 and UCC-3 Financing
Statements, each executed by the Borrower in favor of the Lender with respect to
the Contract(s) being financed with the Loan, and an assignment of the
Borrower's interest as secured party in the UCC-1 Financing Statement as to the
related Equipment;
(2) with respect to each of the Contracts in which Borrower is
granting a security interest to the Lender pursuant to the Addendum and
Assignment, the executed original of each such Contract, with all collateral
schedules, and copies of such additional instruments, opinions, documents,
certificates, searches and reports as the Borrower has obtained in connection
with such Contract;
(3) a Notice, Consent and Acknowledgment of Assignment with
respect to the Contract(s) being financed with the Loan, duly executed by the
Borrower;
(4) updated UCC searches with respect to each Borrower who is
requesting a loan on a Contract owned by that Borrower;
(5) Except as to financing statements in favor of the Lender,
UCC-3 financing statements terminating security interests filed with respect to
the Contracts and the Equipment, including without limitation a release executed
by U.S. Bank (or any other creditor holding a blanket lien) with respect to the
Contracts and the Equipment;
(6) the first time a Loan is requested regarding a Contract
where the Equipment is located in a jurisdiction (other than Nevada), an opinion
of counsel to PDS as to
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the availability of and basic elements of the procedure to perfect a purchase
money security interest under the law of that jurisdiction;
(7) certificates of insurance and insurance endorsements
required hereby;
(8) all other items as may be required pursuant to the
eligibility criteria set forth in EXHIBIT A attached hereto.
c. OBLIGOR ITEMS NECESSARY BEFORE ANY LOAN:
(1) a Notice, Consent and Acknowledgment of Assignment duly
executed by the Obligor under each Contract being financed with the Loan;
(2) UCC-1 Financing Statements, executed by the Obligor in favor
of the Borrower and assigned to the Lender with respect to the Contract(s) being
financed with the Loan, and the related Equipment and releases, terminations or
other appropriate filings, if any;
(3) certificates of insurance and insurance endorsements
required hereby;
(4) all other items as may be required pursuant to the
eligibility criteria set forth in EXHIBIT A attached hereto.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to induce
the Lender to advance the proceeds of each Loan, the Borrower hereby represents
and warrants to the Lender as follows:
a. PDS is a corporation duly organized and validly existing under
the laws of the State of Minnesota, and PDS-Nevada is a corporation duly
organized and validly existing under the laws of the State of Nevada. The
Borrower is duly qualified to do business and is in good standing in every other
jurisdiction wherein the nature of its business or the character of its
properties makes such qualification necessary and where failure to be so
qualified and in good standing, in the aggregate, would not have a material
adverse effect on the business, properties, operations, assets, liabilities or
condition (financial or otherwise) of the Borrower. The Borrower has all
requisite power and authority to carry on its business as now conducted and as
presently proposed to be conducted.
b. The Borrower has full power and authority to execute and deliver
the Loan Documents and to incur and perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Borrower of the Loan
Documents and any and all other documents and transactions contemplated hereby
or thereby, have been duly authorized by all necessary corporate action, will
not violate any provision of law or of the Articles of Incorporation or the
Bylaws of the Borrower or result in the breach of, constitute a default under,
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or create or give rise to any lien under, any indenture or other agreement or
instrument to which the Borrower is a party or by which the Borrower or its
property may be bound or affected. The Loan Documents have been executed and
delivered to the Lender by an appropriate officer of the Borrower who is
authorized by and specified in the Borrower's Bylaws to execute and so deliver
such agreements. The Borrower is not in violation of or subject to any
contingent liability on account of any statute, law, rule, ordinance, order,
writ, injunction or decree to the extent that such violation or contingent
liability would result in a material adverse effect on the condition (financial
or otherwise), business, properties, or assets of Borrower. As used herein,
material adverse effect means a violation or contingent liability that would
result in a cost or loss to Borrower of $500,000 or more.
c. The Loan Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms.
d. Except as set forth in EXHIBIT C hereto, there is no action, suit
or proceeding pending or, to the knowledge of the Borrower, threatened against
or affecting the Borrower, or any basis therefor, which, if adversely
determined, would have a material adverse effect on the condition (financial or
otherwise), business, properties or assets of the Borrower or which would
question the validity of the Loan Documents or any instrument, document or other
agreement related hereto or required hereby, or impair the ability of the
Borrower to perform its obligations under the foregoing agreements.
e. The Borrower possesses adequate licenses, permits, franchises,
patents, copyrights, trademarks and trade names, or rights thereto (collectively
"Licenses"), to conduct its business substantially as now conducted and as
presently proposed to be conducted. Without limiting the foregoing, PDS -
Nevada possesses all licenses required under Nevada gaming law for the operation
of PDS - Nevada's business. Each License is validly issued and in full force
and effect. Borrower has fulfilled and performed all of its obligations with
respect thereto. No event has occurred which: (1) results in, or after notice
or lapse of time or both would result in, suspension, surrender, failure to
renew, revocation or termination of any material License; or (2) materially and
adversely affects or in the future may (so far as Borrower can now reasonably
foresee) materially adversely affect any of the rights of Borrower thereunder.
Borrower is not a party to and the Borrower does not have any knowledge of any
notice of violation, order or complaint issued by or before any court or
regulatory body or of any other proceedings which could in any manner result in
suspension, surrender, failure to renew, revocation or termination of any
material License or otherwise threaten or adversely affect the validity or
continued effectiveness of the Licenses of Borrower. Borrower has no reason to
believe that any Licenses will not be renewed in the ordinary course. Borrower
has fully cooperated with every regulatory body having jurisdiction over any of
the Licenses or the activities of Borrower with respect thereto, and Borrower
has filed all material reports, applications, documents, instruments, and
information required to be filed by it pursuant to applicable laws, rules and
regulations. Borrower has posted all required bonds required under its
Licenses.
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f. The Borrower owns the Contracts constituting part of the
Collateral, subject to no prior security interests, assignments, liens or
encumbrances. The Lender has a valid first perfected security interest in
the Collateral subject to no prior security interests or encumbrances. The
security interest of the Lender has been recorded with the appropriate
recording offices, and the Lender's security interest in the Equipment is a
first perfected security interest, subject only to the rights of the Obligors
and the Borrowers under the Collateral.
g. No director, shareholder, officer, employee of or consultant
to the Borrower is prohibited by law, regulation, contract or the terms of
any license, franchise, permit, certificate, approval or consent from
participating in the business of the Borrower as director, shareholder,
officer, employee of or as consultant to the Borrower.
h. Except with respect to reporting and compliance requirements
of the regulatory gaming authorities in the jurisdictions in which either of
the Borrowers or the Obligors conducts business, no consent, approval, order
or authorization of, or registration, declaration or filing with, or notice
to, any governmental authority or any third party is required in connection
with the execution and delivery of the Loan Documents or any of the
agreements or instruments contemplated thereby to which the Borrower is a
party, or in connection with the carrying out or performance of any of the
transactions required or contemplated hereby or thereby or, if required, such
consent, approval, order or authorization has been obtained or such
registration, declaration or filing has been accomplished or such notice has
been given prior to the date hereof.
i. The Borrower has filed all local, state, federal and other tax
returns required to be filed by it and either paid all taxes shown thereon to
be due, including interest and penalties, which are not being contested in
good faith and by appropriate proceedings, or provided adequate reserves for
payment thereof. The Borrower has no information or knowledge of any
objections to or claims for additional taxes in respect of local, state and
federal or other income or excess profits tax returns of the Borrower for
prior years.
j. The Borrower does not intend to, or believe that it will,
incur debts beyond its ability to pay such debts as they mature.
k. All financial and other information provided to the Lender by
or on behalf of the Borrower in connection with the Borrower's request for
the Loan fairly presented the financial condition of the Borrower as of the
dates thereof and disclosed fully all liabilities of the Borrower. Since the
date of such financial and other information, there has been no material
adverse change in the financial condition of the Borrower.
l. Each qualified retirement plan of the Borrower, if any,
presently conforms to and is administered in a manner consistent with the
Employee Retirement Income Security Act of 1974.
m. As of the date hereof, no Contract is a Delinquent Contract.
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n. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of the Loan will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
o. No proceeds of the Loan will be used to acquire any security in
any transaction which is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934.
p. The transaction evidenced by this Agreement does not violate any
law pertaining to usury or the payment of interest on loans.
q. The Borrower will use the proceeds of the Loan solely for lawful
and proper corporate purposes of the Borrower.
5. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees as follows:
a. The Borrower will use the proceeds of each Loan solely for the
financing of Contracts to certain casino operators.
b. The Borrower will pay all of its taxes (including payroll and
withholding taxes), levies, assessments and governmental charges prior to the
time when any penalties or interest accrue, unless contested in good faith with
an adequate reserve for payment.
c. The Borrower will continue the conduct of its business, maintain
its corporate existence, maintain all rights, licenses and franchises necessary
or desirable in the normal conduct of its business, comply with all rules,
regulations and orders of any governmental or other authority or agency and all
applicable federal and state laws and regulations. Without in any way limiting
the generality of the foregoing, the Borrower will maintain all licenses
required under Nevada gaming law for the operation of Borrower's business, and
will timely file all reports as the Nevada Gaming Commission may from time to
time require or request.
d. The Borrower shall use best efforts to cause the Obligors to
maintain and service the Equipment so as to keep such Equipment in good
operating condition, ordinary wear and tear from normal use excepted.
e. The Borrower will deliver to the Lender:
(1) Within one hundred twenty (120) days after the end of each
fiscal year, the consolidated audited financial statements of the Borrower for
such fiscal year, certified (without qualification as to the opinion or scope of
examination) by a firm of independent certified public accountants selected by
the Borrower and acceptable to the Lender.
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(2) Within forty-five (45) days after the end of each fiscal
quarter, consolidated quarterly financial statements of the Borrower.
(3) Upon the reasonable request of the Lender, all backup data
regarding the Contracts and the Equipment.
(4) Within thirty (30) days after the end of each calendar
quarter, a Contract Status report setting forth the information set forth on
EXHIBIT D hereto.
(5) As soon as practicable, but in any event within thirty
(30) days after the end of each calendar month, a certificate of the
Controller of the Borrower substantially in the form of EXHIBIT E hereto
stating (i) whether or not such officer has knowledge of the occurrence of
any Event of Default under any of the Loan Documents or any event which with
the giving of notice or the passage of time would constitute an Event of
Default under any of the Loan Documents, other than Events of Default
previously reported and remedied and, if so, stating in reasonable detail the
facts with respect to such Event of Default, and (ii) that the Borrower is in
compliance with each of the covenants set forth in SECTIONS 5 AND 6 of this
Agreement. Without limiting the foregoing, the certificate shall
specifically state (A) the aggregate number and aggregate unpaid payments of
Delinquent Contracts, and (B) the aggregate amount of prepayments on the
Contracts in such month.
(6) Copies of any and all reports, filings, financial statements
or other information as and when filed with the United States Securities and
Exchange Commission and with the Nevada Gaming Commission (only if in connection
with the Loan, the Contracts, the Equipment, the Lender or its participants),
and copies of all information and notices as and when delivered to the
Borrower's shareholders.
(7) Promptly upon becoming aware thereof, notice of any default
with respect to any other indebtedness, whether owed to the Lender or any other
creditor.
f. Upon reasonable notice of not less than 48 hours, the Borrower
will permit any officer, employee, attorney or accountant for the Lender to
review, make extracts from, or
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copy any and all corporate and financial books and records of the Borrower
relating to the Contracts at all times during ordinary business hours, to
send and discuss with Obligors requests for verification of amounts owed to
the Borrower if Lender has a reasonable basis for believing such a
verification is necessary, and to discuss the affairs of the Borrower with
any of its officers. After the occurrence of an Event of Default, the rights
to review and copy books and records shall not be limited to those relating
to the Contracts but will be all of the Borrower's books and records.
g. The Borrower will provide the Lender with an insurance
certificate, issued by Obligor's insurer, in form and content and from an
insurer acceptable to the Lender, providing for ten (10) days' written notice
to the Lender of cancellation or non-renewal (without qualification), and
evidencing the following categories and amounts of coverage:
(1) In the case of finance lease or operating lease
transactions, comprehensive public liability coverage for the Obligor.
(2) Comprehensive physical damage insurance for the full
insurable value of the Equipment, naming the Lender as loss payee, as their
interests may appear.
(3) If circumstances warrant, warehouse and transportation
insurance on the Equipment which is being stored or transported, as the case may
be, for the full insurable value of the Equipment naming the Lender as loss
payee, as their interests may appear.
(4) With respect to any Equipment which is located on any ship
or which is otherwise subject to any maritime laws, shipwreck, piracy,
abandonment and hull insurance in such amounts as the Lender may request, with a
lender's loss payable endorsement provided to the Lender.
h. The Borrower will notify the Lender promptly of (i) any
material disputes or claims by any Obligor; (ii) any Equipment returned to or
recovered by the Borrower or damaged, destroyed or stolen from the Borrower
or an Obligor; (iii) any change in the persons constituting the directors or
officers of the Borrower; (iv) the occurrence of any breach, default or event
of default by or attributable to the Borrower under this Agreement or any of
the Loan Documents; (v) the occurrence of any breach, default or event of
default by or attributable to any Obligor under the Obligor's Contract; and
(vi) any event which may have any effect on the enforceability of any lien in
favor of the Lender, or on the ability of the Borrower or the Obligor to
perform its obligations under the Loan Documents or any Contract, as the case
may be.
i. The Borrower will notify the Lender in writing promptly after
the commencement of any lawsuit, legal proceeding or proceedings before any
governmental or regulatory agency against the Borrower which would have a
material adverse effect on the Loan, the Contracts, the Equipment, the Lender
or its participants or the business of Borrower. As used herein, material
adverse effect means a lawsuit or proceeding involving a potential cost or
loss to Borrower of $500,000 or more.
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j. The Borrower will maintain, on a consolidated basis, the
following financial covenant:
At all times, a Tangible Net Worth at an amount not less than
$6,000,000 plus 15% of positive Net Income earned after January 1, 1998. As
used herein, "Tangible Net Worth" means, at a particular date, (a) the
aggregate amount of all assets of the Borrower on a consolidated basis as may
be properly classified as such in accordance with GAAP excluding such other
assets as are properly classified as intangible assets under GAAP, less (b)
the aggregate amount of all liabilities of the Borrower on a consolidated
basis. As used herein, "Net Income" means, with respect to any period, the
aggregate of the net income of the Borrower on a consolidated basis for such
period determined in accordance with GAAP.
k. With respect to any Delinquent Contract, the Borrower shall,
within fifteen (15) days, either (i) pay to the Lender an amount equal to the
unamortized amount of the loan proceeds advanced with respect to such
Contract, and such payment shall be applied to the unpaid principal balance
of the Note, or (ii) execute and deliver to the Lender an Addendum and
Assignment (and appropriate UCC financing statements) respecting one or more
other Contracts with an aggregate Equipment Value multiplied by 90% equal to
or greater than the unamortized amount of the loan proceeds advanced with
respect to such Delinquent Contract, and Obligor Acknowledgment(s) relating
to such Contract(s) duly executed by each Obligor under such Contract, and
all such other documents, instruments and agreements as required under
SECTION 3(b) AND 3(c) or as the Lender may request.
l. The Borrower will keep full and complete books of record and
accounts for itself and other records reflecting the results of the
Borrower's operations, all in accordance with GAAP.
m. At any time upon request from the Lender after the occurrence
of an Event of Default, the Borrower will cause the Obligors under the
Contracts which constitute a part of the Collateral to be notified to make
payment directly to the Lender, and the Lender shall be entitled to take
control of any proceeds thereof.
n. After the occurrence of an Event of Default, all proceeds of
Collateral not released from the lien of the Security Agreement pursuant to
Section 3 of the Security Agreement, including without limitation, proceeds
from the sale or re-leasing of the Equipment, proceeds of insurance and all
other unscheduled recoveries, shall be paid by the Borrower into a collateral
account administered by the Lender in the manner described in Section 5 of
the Security Agreement.
o. In the event any Equipment has been repossessed, the Borrower
shall pay promptly to the Lender the proceeds of the sale or other disposition
of the Equipment, together with a cash payment equal to the amount necessary to
fully pay the unamortized amount of the loan proceeds advanced with respect to
Contract(s) relating to such Equipment.
12
p. In the event any Equipment is damaged, destroyed, lost or
stolen, the Borrower shall pay promptly to the Lender the proceeds of any
insurance on the Equipment, together with a cash payment equal to the amount
necessary to fully pay the unamortized amount of the loan proceeds advanced
with respect to Contract(s) relating to such Equipment.
q. The Borrower shall service the Contracts which form a part of
the Collateral in accordance with the industry standards applicable to
servicers of such contracts, and the Borrower shall have ultimate
responsibility for such servicing. If the Borrower shall fail in any
material respect in the performance of its duties hereunder, and such failure
shall continue for thirty (30) days, the Lender shall appoint a servicer,
chosen at the discretion of the Lender, to perform such duties, and the
Borrower shall promptly make available to such servicer all books and records
in any and all formats with respect to the Collateral, and shall also make
available to the servicer without fee any and all computer software necessary
to service the Collateral. Fees of the servicer shall be paid in the manner
described in the Security Agreement.
r. The Borrower will provide notice to all applicable gaming
authorities, to the extent required by the applicable gaming law, of the
Lender's security interest in the Contracts and the Equipment.
s. After the occurrence of an Event of Default and not later than
two (2) days prior to a date on which a payment is due under the Note, the
Borrower shall provide the Lender with a detailed report with respect to all
monies, if any, deposited in the collateral account pursuant to Section 5 of
the Security Agreement, including amounts paid in respect of Payments on all
Contracts (as due and as a prepayment) and amounts paid in respect of
interest. The report shall be prepared in such manner as may be required by
the Lender for purposes of properly applying funds in accordance with Section
5(b) of the Security Agreement, if applicable.
t. With respect to each of the Contracts, the Borrower shall:
(i) perform all acts necessary to preserve the validity and enforceability of
each such Contract; (ii) take all actions reasonably necessary to assist
Lender in collecting when due all amounts owing to Borrower with respect to
each such Contract; (iii) at all times keep accurate and complete records of
performance by Borrower and the Obligor under each such Contract; and (iv)
upon request of Lender verify with the Obligor under each Contract the
payments due to Borrower under such Contract, except that (A) prior to the
occurrence of an Event of Default or an event which with the passage of time
or the giving of notice, or both, would be an Event of Default, such requests
shall not occur any more frequently than once each year and (B) after the
occurrence and during the continuance of an Event of Default or an event
which with the passage of time or the giving of notice, or both, would be an
Event of Default such requests may occur as often as Lender shall require.
u. The Borrower will store the Equipment (which is not in the
possession of an Obligor) only in the Borrower's warehouses or in bonded
warehouses.
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6. NEGATIVE COVENANTS. The Borrower covenants and agrees that, except
with the prior written approval of the Lender:
a. The Borrower will not create, incur or cause to exist any
mortgage, security interest, encumbrance, lien or other charge of any kind upon
any of the Collateral, whether now owned or hereafter acquired, except for the
security interests created by the Loan Documents. Except as permitted by the
Security Agreement, the Borrower will not sell, dispose of, lease, mortgage,
assign, sublet or transfer all or any part of the Borrower's right, title or
interest in or to all or any portion of the Collateral.
b. The Borrower will not substantially alter the nature of the
business in which it is engaged, or engage in any line of business substantially
different from its current business.
c. Following the occurrence of and during the continuance of an
Event of Default, the Borrower will not declare or pay any distributions or
purchase or redeem any of its capital stock, or otherwise distribute any
property on account of its capital stock, or enter into any agreement therefor.
d. The Borrower will not permit any material breach, default or
event of default to occur under any note, loan agreement, indenture, lease,
mortgage, contract for deed, security agreement or other contractual obligation
binding upon the Borrower which is not cured within the applicable cure
provisions thereof.
e. The Borrower will not materially amend, supplement, modify,
compromise or waive any of the terms of any Contract, without the prior written
consent of the Lender, provided that Borrower will have the right to substitute
Equipment subject to any Contract with other Equipment that is like-kind in
value as long as Borrower files an amended or updated UCC financing statement
signed by Lender as to the substituted Equipment within the time period required
by the law of the applicable jurisdiction to perfect a purchase money security
interest and delivers such filed financing statements to the Lender with its
quarterly Contract Status Report.
f. If any of the following transactions would result in the
surviving entity not complying with the Tangible Net Worth test set forth in
Section 5.j. hereof or otherwise cause an Event of Default hereunder, the
Borrower will not consolidate with or merge into any person or entity, or permit
any other person or entity to merge into it, or acquire (in a transaction
analogous in purpose or effect to a consolidation or merger) all or
substantially all of the assets of any other person or entity, or enter into any
partnership or joint venture.
g. The Borrower will not make any payments on any of the Borrower's
indebtedness to any of the Borrower's affiliated entities, or to any of the
Borrower's shareholders, officers, directors or employees, following the
occurrence of and during the
14
continuance of an Event of Default or a failure to comply with a covenant
contained in SECTION 5 or this SECTION 6.
h. After delivery of the Equipment to Obligor, the Borrower will not
cause or allow any movement of the Equipment, except as permitted under Section
6.e. hereof or in connection with any repossession by the Borrower of such
Equipment.
7. EVENT OF DEFAULT. Each of the following occurrences shall constitute
an Event of Default under this Agreement and under the Loan Documents (herein
called an "Event of Default"):
a. The Borrower shall fail to pay any or all of the indebtedness
arising out of this Agreement or Loan Documents (the "Obligations") when due or,
if payable on demand, on demand and such failure shall continue for a period of
five (5) days after such payment becomes due; or
b. The Borrower shall fail to observe or perform any covenant or
agreement binding on the Borrower under this Agreement or under any other
assignment, conveyance, instrument or agreement now in effect or hereafter made
between the Borrower and the Lender, or under the Loan Documents for a period of
thirty (30) days for any default which can be reasonably cured within thirty
(30) days and a reasonable period of time for a default not reasonably capable
of cure within thirty (30) days, provided the Borrower diligently commences and
continues a course of action acceptable to the Lender to so cure; or
c. The Borrower shall make any representations or warranties in this
Agreement or in any such other assignment, conveyance, instrument, agreement,
financial statements, reports or certificates heretofore or at any time
hereafter submitted by or on behalf of the Borrower to the Lender, and such
representations or warranties, shall prove to have been false or materially
misleading when made; or
d. As a result of a default or failure by Borrower, payment of any
substantial indebtedness of the Borrower (other than the Obligations) shall be
demanded, or the maturity of any substantial indebtedness shall be accelerated,
or any precondition or circumstance permitting any creditor of the Borrower
(acting individually or with the consent of other creditors) to accelerate the
maturity of any substantial indebtedness shall have occurred; for this purpose
indebtedness shall be deemed substantial if it exceeds $500,000; or
e. The Borrower shall become insolvent or shall commit an act of
bankruptcy under the United States Bankruptcy Act, or shall file or have filed
against it, voluntarily or involuntarily, a petition in bankruptcy or for
reorganization or for the adoption of an arrangement or plan under the United
States Bankruptcy Act or shall procure or suffer the appointment of a receiver
for any substantial portion of its properties, or shall initiate or have
initiated against it, voluntarily or involuntarily, any act, process or
proceeding under any insolvency law or other statute or law providing for the
modification or adjustment of the rights of creditors and such
15
petition, receiver, act, process or proceeding shall not be dismissed or
discharged within ninety (90) days; or
f. A garnishment summons or writ of attachment for an amount in
excess of $500,000 shall have been issued against or served upon the Lender
for the attachment of any property of the Borrower in the Lender's possession
or any indebtedness owing the Borrower; or
g. The Borrower shall have been dissolved, whether voluntarily or
by operation of law; or
h. Any of Borrower's licenses required under the gaming laws of
Nevada, New Jersey or any other jurisdiction in which any of the Collateral
is located is revoked or rescinded, lapses, or is otherwise no longer
maintained by or available to the Borrower.
8. RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, the Lender may exercise one or more of the
following rights and remedies:
a. The Lender may declare all unmatured Obligations to be
immediately due and payable, and the same shall thereupon be immediately due and
payable, without presentment or other notice or demand;
b. Subject to the rights of the Obligors, the Lender may exercise
and enforce any and all rights and remedies available upon default to a secured
party under the Uniform Commercial Code including, without limitation, the right
to take possession of the Collateral, or any evidence thereof, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and the
Borrower agrees to make the Collateral available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both parties. If
notice to the Borrower of any intended disposition of the Collateral or any
other intended action is required by law in a particular instance, such notice
shall be deemed commercially reasonable if given at least ten (10) calendar days
prior to the date of intended disposition or other action;
c. The Lender may request the Borrower to, and upon such request the
Borrower will, assist the Lender in repossessing and selling the Equipment in
compliance with all applicable laws and in accordance with the Repossession
Agreement (this provision in no way limits the Lender's ability to use any other
person or entity to repossess and sell the Equipment);
d. Without notice or demand, the Lender may offset any
indebtedness the Lender or any of its participants, successors or assigns
then owes to the Borrower whether or not then due, against any Obligation
then owed to the Lender or any of its participants, successors or assigns by
Borrower, whether or not then due;
16
e. The Lender may exercise the recourse rights of the Borrower
against the Obligor on any Contracts; and
f. The Lender may exercise or enforce any and all other rights or
remedies available by law or agreement against the Collateral, against the
Borrower or against any other person or property.
9. MISCELLANEOUS. The Borrower agrees that:
a. The performance or observance of any promise or condition set
forth in this Agreement may be waived in writing by the Lender, but not
otherwise. No delay in the exercise of any power, right or remedy of the
Lender, shall operate as a waiver thereof, nor shall any single or partial
exercise thereof or the exercise of any other power, right or remedy operate
as a waiver thereof.
b. This Agreement shall be binding upon the Borrower and its
successors and assigns and shall inure to the benefit of the Lender and its
participants and the successors and assigns of any of them, provided that the
Borrower may not transfer or assign its rights hereunder without the prior
written consent of the Lender. This Agreement shall be effective the date
written above. All rights and powers specifically conferred upon the Lender
may be transferred or delegated by the Lender to any of its successors or
assigns. Except to the extent otherwise required by law, this Agreement and
the transactions evidenced hereby shall be governed by the substantive laws
of the State of Minnesota without regard to principles of conflicts of laws.
If any provision or application of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect, and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement or in any other
agreement between the Borrower and the Lender shall survive the execution,
delivery and performance of this Agreement and the creation and payment of
any indebtedness to the Lender. This Agreement may be executed in any number
of counterparts, each of which is to be deemed to be an original and all of
which constitute one agreement.
10. NOTICES. All notices, consents, requests, demands and other
communications hereunder shall be given to or made upon the respective
parties hereto at their respective addresses specified below or, as to any
party, at such other address as may be designated by it in a written notice
to the other party. All notices, requests, consents and demands hereunder
shall be effective when personally delivered or five (5) days after
depositing in the United States mail, certified or registered, postage
prepaid, or when sent by confirmed facsimile, or when delivered by overnight
courier.
17
If to Borrower: PDS Financial Corporation
0000 XxXxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
With a copy to: Xxxxx Xxxxxx, Esq.
Xxxxxxxx & Xxxx, Ltd.
Xxxxx 000
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
If to M&S: Xxxxxx & Xxxxxxxxx Investments Corporation
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Gaming Department
Telephone: 612/000-0000
Fax: 612/000-0000
11. JURISDICTION. THE BORROWER HEREBY SUBMITS ITSELF TO THE
JURISDICTION OF THE STATE OF MINNESOTA AND THE FEDERAL COURTS OF THE UNITED
STATES LOCATED IN SUCH STATE IN RESPECT OF ALL ACTIONS ARISING OUT OF OR IN
CONNECTION WITH THE INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT AND THE
DOCUMENTS RELATED THERETO.
12. DUTIES OF LENDER WITH RESPECT TO COLLATERAL. Except with respect
to the exercise of remedies under this Agreement or the Security Agreement,
the Lender shall have no duty, responsibility or obligation of any nature
whatsoever to service, collect, administer, enforce or account for the
Contracts. The Borrower shall service, account for, administer, collect all
payments and enforce all rights with respect to such Contracts. Upon the
occurrence of an Event of Default, the Borrower shall deposit such payments
promptly upon receipt and in the form received in the collateral account
established by the Lender pursuant to Section 5 of the Security Agreement.
18
13. INDEMNIFICATION. Except for losses, claims, damages or liability
arising out of the gross negligence or wilful misconduct of the Lender, the
Borrower agrees to indemnify and hold harmless the Lender, its officers,
agents (including outside legal counsel) and employees, against any and all
losses, claims, damages or liability to which the Lender, its officers,
agents and employees, may become subject under any law in connection with the
carrying out of the transactions contemplated by this Agreement or any other
Loan Document, or the conduct of any activity related to the Equipment and to
reimburse the Lender, its officers, agents and employees, for any
out-of-pocket legal and other expenses (including reasonable attorneys' fees,
whether incurred at trial, on appeal, in bankruptcy proceedings, or
otherwise) incurred by the Lender, its officers, agents and employees, in
connection with investigating any such losses, claims, damages or liabilities
or in connection with defending any actions relating thereto. The Lender
agrees, at the request and reasonable expense of the Borrower, to cooperate
in the making of any investigation in defense of any such claim and promptly
to assert any or all of the rights and privileges and defenses which may be
available to the Lender. The Borrower further releases and agrees to hold
harmless the Lender, its officers, agents and employees, from and against all
losses, damages, penalties, liabilities, or expenses (including reasonable
legal fees, whether incurred at trial, on appeal, in bankruptcy proceedings,
or otherwise) due to or arising out of any misrepresentation of information
furnished to Lender by Borrower or out of a breach of any covenant,
representation or undertaking of the Borrower contained in this Agreement or
any other Loan Document. The Borrower's liability hereunder shall not be
limited to the extent of such insurance or subject to any exclusions from
coverage in any insurance policy. The provisions of this Section shall
survive the payment of the Note and the Loan.
14. PLACEMENT FEE/PARTICIPATION SERVICING FEE. The Borrower shall pay
to the Lender the following amounts: (i) a placement fee that will be
deducted from the proceeds of the Note on the Closing Date, and (ii) a
participation servicing fee on the unpaid principal balance of the Note from
time to time outstanding (computed on the basis of a year consisting of
twelve (12) thirty (30) day months) accruing at a rate equal to one-fourth of
one percent (0.25%), payable monthly on each payment date under the Note.
15. ATTORNEYS FEES AND TAXES. The Borrower shall reimburse the Lender,
upon demand, for all reasonable costs and expenses actually incurred,
including without limitation reasonable attorney's fees paid or incurred by
the Lender in connection with:
a. The preparation or review of the Loan Documents (provided,
however, that the Borrower's obligation to pay legal fees to the Lender for
legal services rendered by counsel for the Lender in connection with the
preparation and review of the Loan Documents shall be limited to $15,000),
the perfection, protection, enforcement or foreclosure of the security
interests created by the Loan Documents, the protection or enforcement of the
interests and collateral security of the Lender in any litigation or
bankruptcy or insolvency proceeding or the prosecution or defense of any
action or proceeding relating in any way to the transactions contemplated by
this Agreement, travel to and from the offices and place of business of the
Borrower, the negotiation and preparation of the Loan Documents and all other
documents
19
necessary or desirable in connection with the original execution and delivery
of Loan Documents;
b. Subsequent to the initial Closing, the negotiation of any
amendments or modifications to any of the Loan Documents requested by or
consented to by Borrower or, if an Event of Default has occurred and is
continuing, requested by Lender, and any related documents, instruments or
agreements and the preparation of any and all documents necessary or
desirable to effect such amendments or modifications; and
c. The enforcement by the Lender during the term hereof or
thereafter of the rights or remedies of the Lender hereunder or under any of
the foregoing documents, instruments or agreements, including without
limitation reasonable costs and expenses of collection in the Event of
Default, whether or not suit is filed with respect thereto and whether such
costs are paid or incurred, or to be paid or incurred, prior to or after
entry of judgment.
The Borrower agrees to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter reasonably determined
by the Lender to be payable in connection with the Loan Documents, or any
other documents, instruments or transactions pursuant to or in connection
herewith or therewith, and the Borrower agrees to save the Lender harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions, unless such omission or delay is due to
gross negligence or willful misconduct on the part of Lender. All such
expenses, taxes or attorney's fees shall be payable to the Lender on demand.
The obligations of Borrower under this SECTION 15 shall survive the repayment
of the Note and Loan.
16. RELATIONSHIP AMONG BORROWERS.
a. JOINT AND SEVERAL LIABILITY. BY SIGNING THIS AGREEMENT, EACH
OF THE BORROWERS AGREES THAT IT IS LIABLE, JOINTLY AND SEVERALLY WITH THE
OTHER BORROWER, FOR THE PAYMENT OF THE NOTE AND ALL OTHER OBLIGATIONS OF THE
BORROWERS UNDER THIS AGREEMENT, AND THAT LENDER CAN ENFORCE SUCH OBLIGATIONS
AGAINST EITHER BORROWER, IN LENDER'S SOLE AND UNLIMITED DISCRETION.
b. LENDER RIGHTS TO ADMINISTER THE LOAN. Lender may at any time
and from time to time, without the consent of, or notice to, either Borrower,
without incurring responsibility to either Borrower, and without affecting,
impairing or releasing any of the obligations of either Borrower hereunder:
(1) alter, change, modify, extend, release, renew, cancel,
supplement or amend in any manner the Loan Documents provided at least one
Borrower has consented thereto, and the Borrowers' joint and several
liability shall continue to apply after giving effect to
20
any such alteration, change, modification, extension, release, renewal,
cancellation, supplement or amendment;
(2) sell, exchange, surrender, realize upon, release (with or
without consideration) or otherwise deal with in any manner and in any order
any property of any person or entity mortgaged to Lender or otherwise
securing the Borrowers' joint and several liability, or otherwise providing
recourse to Lender with respect thereto;
(3) exercise or refrain from exercising any rights against
either Borrower or others with respect to the Borrowers' joint and several
liability, or otherwise act or refrain from acting;
(4) settle or compromise any of the Borrowers' joint and
several liability, any security therefor or other recourse with respect
thereto, or subordinate the payment or performance of all or any part thereof
to the payment of any liability (whether due or not) of either Borrower to
any creditor of either Borrower, including without limitation, Lender and
either Borrower;
(5) apply any sum received by Lender from any source in
respect of any liabilities of either Borrower to Lender to any of such
liabilities, regardless of whether the Note remains unpaid;
(6) fail to set off and/or release, in whole or in part, any
balance of any account or any credit on its books in favor of either
Borrower, or of any other person, and extend credit in any manner whatsoever
to either Borrower, and generally deal with either Borrower and any security
for the Borrowers' joint and several liability or any recourse with respect
thereto as Lender may see fit; and/or
(7) consent to or waive any breach of, or any act, omission
or default under, this Agreement or any other Loan Document, including,
without limitation, any agreement providing collateral security for the
payment of the Borrowers' joint and several liability or any other
indebtedness of either Borrower or Lender.
c. PRIMARY OBLIGATION. No invalidity, irregularity or
unenforceability of all or any part of either Borrower's joint and several
liability or of any security therefor or other recourse with respect thereto
shall affect, impair or be a defense to the other Borrower's joint and
several liability, and all obligations under the Note and this Agreement are
primary obligations of each Borrower.
d. PAYMENTS RECOVERED FROM LENDER. If any payment received by the
Lender and applied to any obligations is subsequently set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of a Borrower or any
other obligor), the obligations to which such payment was applied shall be
deemed to have continued in existence, notwithstanding such application, and
21
each Borrower shall be jointly and severally liable for such obligations as
fully as if such application had never been made. References in this
Agreement to amounts "irrevocably paid" or to "irrevocable payment" refer to
payments that cannot be set aside, recovered, rescinded or required to be
returned for any reason.
e. NO RELEASE. Until the Note and all other obligations under
this Agreement have been paid in full and each and every one of the covenants
and agreements of this Agreement are fully performed, the obligations of
either Borrower hereunder shall not be released, in whole or in part, by any
action or thing (other than irrevocable payment in full) which might, but for
this provision of this Agreement, be deemed a legal or equitable discharge of
a surety or guarantor, or by reason of any waiver, extension, modification,
forbearance or delay or other act or omission of Lender or its failure to
proceed promptly or otherwise, or by reason of any action taken or omitted by
Lender whether or not such action or failure to act varies or increases the
risk of, or affects the rights or remedies of, either Borrower, nor shall any
modification of any of the Note or this Agreement or release of any security
therefor by operation of law or by the action of any third party affect in
any way the obligations of either Borrower hereunder, and each Borrower
hereby expressly waives and surrenders any defense to its liability hereunder
based upon any of the foregoing acts, omissions, things, agreements, or
waivers of any of them. Neither Borrower shall be exonerated with respect to
its liabilities under this Agreement by any act or thing except irrevocable
payment and performance of the obligations, it being the purpose and intent
of this Agreement that the obligations constitute the direct and primary
obligations of each Borrower and that the covenants, agreements and all
obligations of each Borrower hereunder be absolute, unconditional and
irrevocable.
f. ACTIONS NOT REQUIRED. Each Borrower hereby waives any and all
right to cause a marshalling of the other Borrower's assets or any other
action by any court or other governmental body with respect thereto insofar
as the rights of Lender hereunder are concerned or to cause Lender to proceed
against any security for the Borrowers' joint and several liability or any
other recourse which Lender may have with respect thereto, and further waives
any and all requirements that Lender institute any action or proceeding at
law or in equity against the other Borrower or anyone else, or with respect
to this Agreement, the Loan Documents, or any collateral security for the
Borrowers' joint and several liability, as a condition precedent to making
demand on, or bringing an action or obtaining and/or enforcing a judgment
against, either Borrower. Each Borrower further waives any requirement that
Lender seek performance by the other Borrower or any other person, of any
obligation under this Agreement, the Loan Documents or any collateral
security for the Borrowers' joint and several liability as a condition
precedent to making a demand on, or bringing an action or obtaining and/or
enforcing a judgment against, either Borrower. No Borrower shall have any
right of setoff against Lender with respect to any of its obligations
hereunder. Any remedy or right hereby granted which shall be found to be
unenforceable as to any person or under any circumstance, for any reason,
shall in no way limit or prevent the enforcement of such remedy or right as
to any other person or circumstance, nor shall such unenforceability limit or
prevent enforcement of any other remedy or right hereby granted.
22
g. DEFICIENCIES. Each Borrower specifically agrees that in the
event of a foreclosure under the Security Agreement, any other security
agreement or other similar agreement held by Lender which secures any part or
all of the Borrowers' joint and several liability and in the event of a
deficiency resulting therefrom, each Borrower shall be, and hereby is
expressly made, liable to Lender for the full amount of such deficiency
notwithstanding any other provision of this Agreement or provision of such
agreement, any document or documents evidencing the indebtedness secured by
such agreement or any other document or any provision of applicable laws
which might otherwise prevent Lender from enforcing and/or collecting such
deficiency. Each Borrower hereby waives any right to notice of a foreclosure
under any security agreement or other similar agreement given to Lender by
any other Borrower which secures any part or all of the Borrowers' joint and
several liability.
h. BORROWERS BANKRUPTCY. Each Borrower expressly agrees that its
liability and obligations under the Note and this Agreement shall not in any
way be affected by the institution by or against the other Borrower or any
other person or entity of any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or any other similar proceedings for
relief under any bankruptcy law or similar law for the relief of debtors, or
any action taken or not taken by Lender in connection therewith, and that any
discharge of either Borrower's joint and several liability pursuant to any
such bankruptcy or similar law or other laws shall not discharge or otherwise
affect in any way the obligations of the other Borrower under the Note and
this Agreement, and that upon or at any time after the institution of any of
the above actions, at Lender's sole discretion, the Borrowers' joint and
several obligations shall be enforceable against either Borrower that is not
itself the subject of such proceedings. Each Borrower expressly waives any
right to argue that Lender's enforcement of any remedies against that
Borrower is stayed by reason of the pendency of any such proceedings against
the other Borrower.
i. NO SUBROGATION. Notwithstanding any payment or payments made
by either Borrower hereunder or any setoff or application of funds of either
Borrower by the Lender, such Borrower shall not be entitled to be subrogated
to any of the rights of the Lender against the other Borrower or any other
guarantor or any collateral security or guaranty or right of offset held by
the Lender for the payment of the obligations, nor shall such Borrower seek
or be entitled to seek any contribution or reimbursement from the other
Borrower or any other guarantor in respect of payments made by such Borrower
hereunder, until all amounts owing to the Lender by the Borrowers on account
of the obligations are irrevocably paid in full. If any amount shall be paid
to a Borrower on account of such subrogation rights at any time when all of
the obligations shall not have been irrevocably paid in full, such amount
shall be held by that Borrower, and shall, forthwith upon receipt by the
Borrower, be turned over to the Lender in the exact form received by the
Borrower (duly endorsed by the Borrower to the Lender, if required), to be
applied against the obligations, whether matured or unmatured, in such order
as the Lender may determine.
j. BORROWERS' FINANCIAL CONDITION. Each Borrower is familiar
with the financial condition of the other Borrower, and each Borrower has
executed and delivered this
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Agreement and the Note based on that Borrower's own judgment and not in
reliance upon any statement or representation of the Lender. The Lender
shall have no obligation to provide either Borrower with any advice
whatsoever or to inform either Borrower at any time of the Lender's actions,
evaluations or conclusions on the financial condition or any other matter
concerning the Borrowers.
k. RELATIONSHIP OF BORROWERS. Each Borrower represents that it
expects to derive benefits from the extension of credit accommodations to the
Borrowers by the Lender and finds it advantageous, desirable and in its best
interests to execute and deliver this Agreement and the Note to the Lender.
17. PARTICIPATION DISCLOSURE. The Borrower hereby acknowledges that
and consents to the Lender selling participation interests in the Loan, and
hereby authorizes the Lender to disclose to any potential participant the
Loan Documents and any and all financial and other information relating to
the Borrower and delivered to the Lender in connection with this transaction,
provided that Lender shall comply with all laws, including but not limited to
federal and state securities laws, in connection with the offer or sale of
such participation interests. The Lender and anyone claiming by or through
the Lender shall not hold Borrower responsible for any false representations
Lender may have made to its participants.
18. AMENDMENTS. No amendment, modification or waiver of any provision
of the Loan Documents and no consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
19. MARSHALLING; PAYMENTS SET ASIDE. The Lender shall be under no
obligation to xxxxxxxx any assets in favor of the Borrower or any other
Person or against or in payment of the Loan and other Indebtedness of the
Borrower to the Lender. To the extent that the Borrower makes a payment or
payments to the Lender or the Lender exercises its rights of setoff, and such
payment or payments or the proceeds of such setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.
20. INVALID PROVISIONS. If fulfillment of any provision hereof, or any
transaction related thereto at the time performance of any such provision shall
be due, shall involve transcending the limit of validity prescribed by law,
then, ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity; and such clause or provision shall be deemed
24
invalid as though not herein contained, and the remainder of this Agreement
shall remain operative in full force and effect.
21. NOT JOINT VENTURES. The Lender is not, and shall not by reason of any
provision of any of the Loan Documents be deemed to be, a joint venturer with or
partner or agent of the Borrower.
22. ESTOPPEL CERTFICATE. At any time and from time to time, within
fifteen (15) Business Days after receipt from the other party hereto of a
written request therefor, Borrower or Lender, as the case may be, shall prepare,
execute and deliver to the such party, and/or any other party which Borrower or
Lender, as the case may be, may designate, an estoppel certificate stating: (a)
the amount of the unpaid principal balance and accrued interest on the date
thereof; (b) the date upon which the last payment was made and the date the next
payment is due; and (c) that Borrower has no defenses, claims or offsets against
full enforcement hereof according to the terms hereof, or listing and describing
any such amendments, changes, defaults, events of default, defenses, claims or
offsets which do exist.
23. NOTICE OF CHANGE OF LOCATION. Borrower shall promptly notify Lender
of any change in location of Borrower's principal places of business or the
offices where it keeps its records concerning accounts and contract rights.
24. TAX IDENTIFICATION NUMBER. The federal tax identification number
for PDS Financial Corporation is 00-0000000. The federal tax identification
number for PDS Financial Corporation - Nevada is 00-0000000.
25. SETOFFS. If the unpaid principal amount of the Loan, interest
accrued thereon or any other amount owing by the Borrower under the Loan
Documents shall have become due and payable (by demand, acceleration or
otherwise), the Lender shall have the right, in addition to all other rights
and remedies available to it, without notice to the Borrower, to set off
against, and to appropriate and apply to such due and payable amounts any
debt owing to, and any other funds held in any manner by the Lender for the
account of, the Borrower. Such right shall exist whether or not the Lender
shall have made any demand hereunder or under any other Loan Document,
whether or not such debt owing to or funds held for the account of the
Borrower is or are matured or unmatured, and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to the Lender.
26. REMEDIES CUMULATIVE. The rights and remedies herein specified of the
parties hereto are cumulative and not exclusive of any rights or remedies which
the parties hereto would otherwise have at law or in equity or by statute.
27. INTEGRATION; CONFLICTING TERMS. This Agreement together with the
other Loan Documents comprises the entire agreement of the parties on the
subject matter hereof and supersedes and replaces all prior agreements, oral and
written, on such subject matter. If any term of any of the other Loan Documents
expressly conflicts with the provisions of this
25
Agreement, the provisions of this Agreement shall control; provided, however,
that the inclusion of supplemental rights and remedies of Lender in any of
the other Loan Documents shall not be deemed a conflict with this Agreement.
28. GOVERNING LAW; CONSTRUCTION. The Loan Documents shall be governed
by, and construed in accordance with, Minnesota law. Whenever possible,
each, provision of the Loan Documents and any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of the Loan Documents or any other
statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under
such applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of the Loan Documents or any other
statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto. The parties shall endeavor in good-faith
negotiations to replace any invalid, illegal or unenforceable provisions with
a valid provision the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provision. The provisions of
this Section are irrevocable and may not be rescinded, revoked or amended
without the prior written consent of Lender. Borrower acknowledges Lender
has relied upon them in entering into the Loan Documents.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the proper officers thereunto duly authorized on the day and year first
above written.
XXXXXX & XXXXXXXXX PDS FINANCIAL CORPORATION
INVESTMENTS CORPORATION
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------- ----------------------------
Its: Senior Vice President Its: Chief Financial Officer
------------------------- ---------------------------
PDS FINANCIAL CORPORATION -
NEVADA
By: /s/ Xxxxx Xxxxxx
---------------------------
Its: Secretary
--------------------------
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LIST OF EXHIBITS
----------------
A. Contract Eligibility Criteria
B. Form of Advance Request
C. Pending Litigation
D. Contract Status Report Format
E. Compliance Certificate
27
