SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-19322
POWERHOUSE TECHNOLOGIES, INC.
(Formerly known as Video Lottery Technologies, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 81-0470853
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
115 Perimeter Place, Suite 911
Atlanta, Georgia 30346
(Address of principal executive officers) (Zip code)
(770) 481-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
Applicable only to corporate issuers:
The number of shares outstanding the issuer's $ .01 per value Common Stock, as
of the latest practicable date of September 30, 1998, was 10,818,821 shares.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Statements of Earnings
Nine Months Ended September 30, 1998 and 1997
Three Months Ended September 30, 1998 and 1997 4
Balance Sheets
September 30, 1998 and December 31, 1997 5
Statement of Stockholders' Equity
Nine Months Ended September 30, 1998 6
Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 21
ITEM 2. Changes in Securities 21
ITEM 3. Defaults Upon Senior Securities 21
ITEM 4. Submission of Matters to a Vote of Security Holders 21
ITEM 5. Other Information 22
ITEM 6. Exhibits and Reports on Form 8-K 22
Signatures 23
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<PAGE>
Powerhouse Technologies, Inc. (the "Company") was incorporated in Delaware
in May 1991. The Company acts as a holding company for ten active corporations.
Unless the context otherwise requires, references to the "Company" or "PTI"
refer to Powerhouse Technologies, Inc. and its subsidiaries. References to "AWI"
refer to Automated Wagering International, Inc., one of the Company's three
principal operating subsidiaries, which provides on-line lottery systems and
services primarily to governmental lottery authorities. References to "VLC"
refer to Video Lottery Consultants, Inc., another of the Company's three
principal operating subsidiaries, which designs, manufactures and markets casino
and video lottery gaming machines and central control systems. References to
"UWS" or "United Tote" refer to United Wagering Systems, Inc., the Company's
third principal operating subsidiary whose operating units provide computerized
pari-mutuel wagering systems for horse and greyhound racetracks, off-track
betting facilities and jai alai frontons. The Company also owns and operates a
racetrack facility in Sunland Park, New Mexico, which is accounted for as part
of the UWS operating segment. References to the "Subsidiaries" refer to AWI,
VLC, UWS and the other subsidiaries of the Company.
Certain statements in this Report on Form 10-Q constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions; competitive factors in the industry, including
additional competition from existing competitors or future entrants to the
industry; social and economic conditions; local, state and federal regulations;
changes in business strategy or development plans; the Company's indebtedness;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel; and
other factors.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
(in thousands except for per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
On-line lottery $ 79,337 71,671 25,628 22,764
Gaming machine and route operations 46,353 51,627 15,187 20,126
Wagering systems and racetrack operations 20,847 21,322 6,958 6,585
-------- ------- ------ ------
Total revenues 146,537 144,620 47,773 49,475
-------- ------- ------ ------
COSTS AND EXPENSES:
On-line lottery 47,892 48,244 14,569 15,932
Gaming machine and route operations 27,573 28,790 9,197 12,235
Wagering systems and racetrack operations 15,602 15,300 4,726 4,396
-------- ------- ------ ------
91,067 92,334 28,492 32,563
-------- ------- ------ ------
Gross profit 55,470 52,286 19,281 16,912
OTHER OPERATING EXPENSES
Selling, general and administrative 26,784 22,983 9,478 7,743
Research and development 7,509 7,122 2,485 2,279
Depreciation and amortization 14,576 16,943 4,909 5,102
-------- ------- ------ ------
48,869 47,048 16,872 15,124
-------- ------ ------ ------
Earnings from operations 6,601 5,238 2,409 1,788
-------- ------- ------ ------
OTHER INCOME (EXPENSE):
Interest and other income 1,013 709 406 319
Interest expense (2,318) (2,978) (765) (968)
-------- ------- ------ ------
(1,305) (2,269) (359) (649)
-------- ------- ------ ------
Earnings before income taxes and
extraordinary items 5,296 2,969 2,050 1,139
Income tax expense (2,216) (1,595) (883) (549)
-------- ------- ------ ------
Net earnings before extraordinary items 3,080 1,374 1,167 590
Extraordinary gain, net --- 13,269 --- ---
-------- ------- ------ ------
Net earnings $ 3,080 14,643 1,167 590
======== ======= ====== ======
Earnings per share:
Basic $0.29 1.42 0.11 0.06
Diluted $0.28 1.41 0.11 0.06
===== ==== ==== ====
Weighted average shares:
Basic 10,602 10,310 10,673 10,255
Potential Common Stock 306 88 240 237
------ ------ ------ ------
Diluted 10,908 10,398 10,913 10,492
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,786 13,772
Restricted short-term deposits 3,482 1,423
Accounts receivable, net 16,402 25,839
Current installments of notes receivable, net 4,718 3,192
Inventories 23,790 15,942
Prepaid expenses 2,050 1,037
Deferred income taxes 9,926 11,444
-------- -------
Total current assets 69,154 72,649
-------- -------
Property, plant and equipment 161,572 152,074
Less accumulated depreciation (97,620) (88,914)
-------- -------
Net property, plant and equipment 63,952 63,160
-------- -------
Restricted cash deposits 413 2,408
Notes receivable, excluding current installments 3,299 2,547
Goodwill, net 8,701 9,314
Intangible and other assets, net 12,854 11,319
-------- -------
$158,373 161,397
======== =======
LIABILITIES
Current liabilities:
Current installments of long-term debt $ 5,669 4,381
Accounts payable 6,544 9,513
Accrued expenses 18,468 21,705
-------- -------
Total current liabilities 30,681 35,599
-------- -------
Long-term debt, excluding current installments 27,647 31,446
Deferred income taxes 12,263 12,206
-------- -------
Total liabilities 70,591 79,251
-------- -------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 10,000,000
shares; no shares issued --- ---
Series A Junior Preferred stock, $.01 par value, convertible
non-cumulative. Authorized 1,912,728 shares 19 19
Common stock, $.01 par value. Authorized 25,000,000
shares 114 110
Paid-in capital 92,993 89,427
Deferred restricted stock compensation (1,231) (217)
Accumulated deficit (4,113) (7,193)
-------- -------
Total stockholders' equity 87,782 82,146
-------- -------
$158,373 161,397
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Series A Restricted Total
Preferred Common Stock Accumu- Stock
Stock Stock Paid-in Compen- lated holders'
par value par value Capital sation Deficit Equity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31,
1997 $19 110 89,427 (217) (7,193) 82,146
Net earnings --- --- --- --- 3,080 3,080
Restricted stock
issued --- 1 1,399 (1,400) --- ---
Amortization of
deferred
restricted stock
compensation --- --- --- 386 --- 386
Proceeds from
sale of common
stock --- 2 2,078 --- --- 2,080
Stock options
exercised and
shares issued
under stock
purchase plan --- 1 89 --- --- 90
--- --- ------ ----- ----- ------
September 30, 1998
$19 114 92,993 (1,231) (4,113) 87,782
=== === ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 Share Data (1)
Series A Common
Balance Preferred Stock Issued Stock Issued
- ------- ---------------------- ------------
<S> <C> <C>
Beginning of period 1,912,728 11,023,406
Restricted Common Stock issued --- 108,000
Common Stock issued --- 232,869
--------- ----------
September 30, 1998 1,912,728 11,364,275
========= ==========
</TABLE>
(1) 1,912,728 shares of Series A Preferred Stock and 545,454 shares of Common
Stock are held in treasury as collateral for a note payable (see Notes 2
and 4 to consolidated Financial Statements).
See accompanying notes to consolidated financial statements.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,080 14,642
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 14,576 16,943
Extraordinary gain, net --- (13,269)
Other, net 323 211
Changes in operating assets and liabilities:
Receivables, net 7,318 (2,678)
Inventories (7,367) 7,296
Prepaid expenses (1,014) (391)
Accounts payable (3,008) (1,371)
Accrued expenses (6,181) 9,397
Income taxes 5,323 5,397
------- ------
Net cash provided by operating activities 13,050 36,177
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,439) (5,824)
Expenditures on intangible and other non-current asse (3,278) (1,511)
Proceeds from sales of equipment 374 87
Change in restricted cash deposits (65) 560
------- ------
Net cash used in investing activities (16,408) (6,688)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable --- (7,650)
Proceeds from issuance of long-term debt --- 643
Repayments of long-term debt (3,798) (8,812)
Proceeds from sale of common stock 2,170 56
------- -------
Net cash used in financing activities (1,628) (15,763)
------- -------
Net (decrease) increase in cash and cash equivalents (4,986) 13,726
Cash and cash equivalents, beginning of period 13,772 4,322
------- ------
Cash and cash equivalents, end of period $ 8,786 18,048
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Presentation
The consolidated financial statements include the accounts of
Powerhouse Technologies, Inc. and its subsidiaries (collectively the
"Company"). All significant inter-company balances and transactions have
been eliminated in consolidation.
The consolidated balance sheet as of September 30, 1998 and the
consolidated statements of earnings and cash flows for the nine-month
periods ended September 30, 1998 and 1997 and the consolidated statement of
stockholders' equity for the nine-month period ended September 30, 1998
have been prepared by the Company in accordance with generally accepted
accounting principles ("GAAP"), for interim financial reporting, and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by GAAP for complete annual financial statements. The financial
statements have been prepared without audit and, in the opinion of
management, include all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position, results of
operations and cash flows as of and for the periods indicated. The December
31, 1997 consolidated balance sheet was derived from consolidated financial
statements audited by KPMG Peat Marwick LLP in connection with the
Company's annual audit. For further information see the Company's 1997
Annual Report on Form 10-K.
b. Earnings Per Share
Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of the Company. Potential common stock is excluded from the
weighted average share calculations when the inclusion would be
anti-dilutive.
c. Accounting Pronouncements Not Yet Adopted
The American Institute of Certified Public Accountants (AICPA)
Accounting Standards Executive Committee (AcSEC) issued Statement of
Position 98-5 (SOP), Reporting on the Costs of Start-Up Activities, which
requires companies to expense start-up costs (including organization costs)
as incurred. The SOP is effective for fiscal years beginning after December
15, 1998 with early adoption permitted. Accordingly, the Company will adopt
the SOP in the fourth quarter 1998 or the first quarter 1999. As of
September 30, 1998, the Company has capitalized approximately $0.2 million
of start-up costs related to the development of a casino in Sunland Park,
New Mexico (see Note 6). Current plans for the casino development reflect
approximately $1.0 million of anticipated start-up costs.
The Company has capitalized start-up costs in conjunction with the
implementation of its long-term contracts in the on-line lottery and
wagering systems segments. The Company's accounting policy for start-up
costs incurred to implement its long-term service contracts is not affected
by the SOP.
Statement of Financial Accounting Standards No. 133 ("Statement 133"),
issued June 1998, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This statement is effective for
fiscal years beginning after June 15, 1999. The Company currently holds no
derivative instruments or derivative instruments embedded in other
contracts.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d. Management Estimates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
2. EXTRAORDINARY ITEM - EDS SETTLEMENT
In January 1994, Electronic Data Systems Corporation ("EDS") purchased
545,454 shares of the Company's Common Stock and 1,912,728 shares of the
Company's Series A Junior Preferred Stock ("Series A Preferred Stock"). In
conjunction with the stock sale to EDS in 1994, the Company entered into a
ten-year agreement with EDS which, among other things, called for EDS to
provide to the Company enhanced computing, communications, system and
engineering and field maintenance services under terms of the Company's
on-line lottery contracts. In 1996, the Company withheld certain payments
to EDS due to EDS performance issues and related on-line lottery customer
disputes. In mid-1996 the contract with EDS was terminated and EDS filed a
complaint against the Company seeking payment of outstanding fees. On
January 30, 1997, the Company and EDS settled all claims against each other
and agreed to transition the EDS services to the Company. The settlement
resulted in a net of taxes extraordinary gain on debt extinguishment of
approximately $13.3 million ($1.28 per basic and diluted share) for the
Company. The terms of the settlement included the redemption by the Company
of all of the Common and Series A Preferred Stock owned by EDS, the
transfer to the Company of certain inventories and property, plant and
equipment used in the provision of EDS services to on-line lottery
customers and the extinguishment of approximately $38.0 million of
outstanding fees in exchange for a note payable with an initial present
value of $26.1 million. The note payable was fully paid in October 1998.
(See note 4.) The transition of the EDS services and related employees to
the Company was completed in 1997.
3. INVENTORIES
A summary of inventory follows:
September 30, December 31,
1998 1997
---- ----
(000) (000)
Manufacturing:
Raw materials $10,715 6,703
Work-in-process 1,805 662
Finished goods 9,817 7,427
Customer service and other 1,453 1,150
------- ------
$23,790 15,942
======= ======
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LONG-TERM DEBT
A summary of long-term debt, including capitalized lease obligations,
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(000s) (000s)
<S> <C> <C>
Note payable paid in October 1998 (See Note 2.) $25,779 25,850
8.25% note payable in monthly installments including interest,
through September 2001 4,415 4,940
4.95% to 10.4% various notes and capital lease obligations,
due in monthly installments of $4,573 to $26,567 including
interest maturing through September 2001 996 584
9.0% to 12.25% notes payable paid in October 1998 2,126 3,183
LIBOR (5.58%) at December 31, 1997) plus 3.25% notes payable
paid in February 1998 --- 1,270
------- ------
33,316 35,827
Less current installments 5,669 4,381
------- ------
Long-term debt, excluding current installments $27,647 31,446
======= ======
</TABLE>
In October 1998, the Company completed negotiations for a $100.0 million
credit facility with Lehman Brothers, Inc. The credit facility replaces the
credit facility with U. S. Bank and, among other things, provides for two $25.0
million term loans maturing in five and six years, respectively, and a revolving
line of credit for $50.0 million expiring September 30, 2003. At the Company's
option, the credit facility bears interest at a Base Rate approximating prime or
LIBOR (approximately 5.4% at the closing date in October 1998) plus an
applicable margin percentage. The margin percentage above the LIBOR rate may
fluctuate between 1.75% and 2.75% depending on the Company's Consolidated
Leverage Ratio as defined in the credit facility agreements collectively
referred to as the ("Credit Agreement"). The Company may utilize up to $15.0
million of the $50.0 million revolving line of credit to collateralize its
bonding program. Contractual obligations at September 30, 1998 required
approximately $8.0 million in outstanding letters of credit. The credit facility
carries customary restrictive covenants including but not limited to minimum
leverage and cash flow ratios, limitations on domestic and foreign capital
investments, restrictions on change in control, restrictions on payments of
dividends, maintenance of minimum consolidated net worth, limitations on
additional debt, liens and asset dispositions. Upon closing, in October, the
Company advanced on the two $25.0 million term loans. The proceeds were used to
pay off existing debt of approximately $27.9 million and provide capital for
existing commitments to manufacture and implement the on-line lottery system in
Pennsylvania and continue the development of the Company's gaming machine casino
at the racetrack in Sunland Park, New Mexico.
The combined maturity of the term loans is as follows: (000's)
Year 1 $2,750
Year 2 2,750
Year 3 4,000
Year 4 4,000
Year 5 12,750
Year 6 23,750
------
$50,000
=======
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POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. STOCKHOLDERS' EQUITY
In February 1998, the Company effected a secondary offering of currently
outstanding shares held by an investor group representing approximately 15% of
the Company's outstanding common stock (approximately 1.5 million shares).
Approximately 220,000 additional shares were issued pursuant to the exercise of
an option granted by Company to the underwriters. In August 1998, the Company's
Board of Directors authorized the repurchase of up to $10.0 million of the
Company's outstanding Common Stock. In August 1998, the Company entered into an
agreement to repurchase 285,000 shares of the Company's Common Stock that closed
in October 1998 for approximately $2.3 million.
6. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with certain of its executive
officers that provide for lump sum severance payments and accelerated vesting of
options and restricted stock upon termination of employment under certain
circumstances or a change in control, as defined.
The Company is obligated to provide services and/or equipment under certain
of its contracts with customers. In addition, the various state on-line lottery
and video gaming contracts contain provisions under which the Company may be
subject to monetary penalties for central computer downtime, terminal failures,
delays in servicing inoperable terminals within specified time periods and
ticket stock shortages among other things. The Company accrues estimated
liabilities to fulfill the terms of these contracts when a loss is probable and
can be reasonably estimated.
The Year 2000 issue is pervasive and complex. Virtually every information
technology ("IT") system, including the Company's internal systems, systems
delivered to customers, and suppliers' systems, as well as non-IT systems will
be affected in some way by the rollover of the two-digit year value to "00".
Non-IT systems include manufacturing systems and physical facilities including,
but not limited to, security systems and utilities. The result could create
errors in information or system failures. Recognizing this uncertainty,
management has and is continuing to actively analyze, assess and plan for
various Year 2000 issues. Management has appointed a task force that reports
periodically to the Company's CEO and Board of Directors, and has also engaged
outside consultants to assist and advise management in this assessment process.
The Company's Year 2000 team has completed an inventory of all of its
computer systems and technology that may be impacted by Year 2000 issues. The
programming and testing of mission critical systems is anticipated to be
complete by the end of 1998 and contingency plans are planned for completion by
April 1999. The Company plans to replace or upgrade those systems that are
identified as non-Year 2000 ready during the remainder of 1998 and calendar 1999
at an incremental cost of approximately $0.5 million. Non-IT system issues are
more difficult to identify and resolve. The Company is actively identifying
non-IT Year 2000 issues concerning its products and services, as well as its
physical facility locations. As non-IT areas are identified, management
formulates the necessary actions to ensure minimal disruption to its business
processes. Although management believes that its efforts will be successful and
the costs will be immaterial to its consolidated financial position and results
of operations, it also recognizes that any failure or delay could cause a
disruption in its business and may have a significant financial impact.
The Company has evaluated its strategy and legal obligations for any
communication to its customers. The Year 2000 readiness of its customers varies,
and the Company is encouraging its customers to evaluate and prepare their own
systems. In many cases the Company is assisting customers by providing new or
modified systems to resolve Year 2000 issues.
The Company is also assessing the Year 2000 readiness of its key suppliers.
The Company's direction in this effort is to ensure the adequacy of resources
and supplies to minimize any potential business interruptions. Management plans
to complete this part of its Year 2000 readiness plan in the first
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
or second quarter of calendar 1999. As part of the Company's contingency plans,
management will, as considered necessary, begin to identify and communicate with
alternative suppliers to ensure the continuation of its critical business
operations.
The Company believes that because of modifications already made and current
plans for additional modifications of existing computer systems, updates by
vendors and conversion to new software, the Year 2000 issue will not pose
significant operations problems for the Company. However, if such modifications
and conversions are not completed properly or in a timely manner, or third party
software and systems relied on by the Company fail, the Year 2000 issue could
have a material impact on the business and operations of the Company. The costs
of modifications and conversions are not anticipated to be material, and will
principally represent a re-deployment of existing or otherwise planned
resources. No assurance can be given that the Company will successfully avoid
any problems associated with the Year 2000 issue.
The Company typically posts bid, litigation, and performance bonds for
on-line lottery contracts. At September 30, 1998, the Company had collateral in
support of the various bonds outstanding consisting of $2.8 million of
restricted deposits and approximately $7.5 million of irrevocable standby
letters of credit. Should the Company fail to meet contractually specified
obligations during the contract term, the lottery authority may assess damages
and exercise its right to collect on the applicable bond. The Company has had
disputes with customers over implementation schedules, deliverables and other
issues. The Company works with these customers to resolve these differences;
however, should the Company be unable to resolve any disputes in a mutually
satisfactory manner, the Company may suffer negative consequences in its
relationships with these and other customers and its pursuit of future business.
The ultimate cost to the Company of such damages (if any) would be net of its
claims under risk management policies in effect as appropriate.
In October 1998, the Company announced that AWI and the Department of
Lottery of the State of Florida have signed a nine-year agreement under which
AWI will provide a new on-line lottery system and related services to the
Florida Lottery. The Florida Lottery had originally awarded the contract to AWI
in October 1996. Subsequent to the announcement, the losing vendor filed
unsuccessful protests, and an attempt to enjoin the contract was rejected by the
Florida district court, allowing the parties to negotiate and finalize the terms
of the nine-year agreement. The protest is still being pursued by the losing
vendor.
The Company has entered into a contract with the Pennsylvania Lottery to
replace the contract the Company currently has with the Pennsylvania Lottery.
The current contract expires in December 1998.
In October 1998, the Company announced that AWI had been selected by the
State of Indiana to provide a new on-line lottery system and related services
for the Hoosier Lottery.
Total capital requirements for the Company including Sunland Park is
estimated at approximately $90.0 to $100.0 million through the year 2000.
The recovery of a significant amount of the Company's investment in the
racetrack operations in Sunland Park, New Mexico is largely contingent upon the
implementation of gaming at the racetrack. In March, 1997, the New Mexico
legislature voted to allow casino gaming at pari-mutuel racetracks in New
Mexico, including the Company's racetrack in Sunland Park. The bill allows,
among other things, the operation of up to 300 gaming machines per pari-mutuel
racetrack facility for up to twelve hours per day. The implementation of gaming
is subject to the timing and satisfaction of conditions of the legislation,
including the actions of the state's appointed board to oversee the gaming and
other regulatory matters. While the Company is filing for the necessary licenses
and approvals and believes it meets the appropriate criteria and standards, no
assurances can be given that the licenses and approvals will be granted. The
Company is not aware of any reason it would not receive the necessary licenses
or approvals. The Company does not anticipate that any revenues will be
generated from the approved gaming until the first quarter of 1999. The Company
has expended approximately $2.4 million for development of the racetrack
facility for casino gaming. The Company's investment in the racetrack operations
and casino development
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POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is approximately $20.0 million and current plans call for approximately $6.0
million of additional capital expenditures for the casino development, gaming
machines and related equipment.
A significant percentage of the Company's consolidated revenues are derived
from sales to customers in jurisdictions that have enacted legislation
permitting various types of gaming. Such enacted legislation may change due to
political and economic conditions within the jurisdiction and could have a
material adverse effect upon the Company's financial position and results of
future operations.
International sales denominated in foreign currencies accounted for
approximately 10% of the Company's consolidated revenues in 1997. Management can
give no assurances that changes in currency and exchange rates will not
materially affect the Company's revenues, costs, cash flows and business
practices and plans. The Company historically has not attempted to hedge the
risks of fluctuating exchange rates given the currencies involved and the terms
of payment granted to its customers.
Risks inherent in the Company's international business activities generally
include unexpected changes in regulatory requirements, tariffs and other trade
barriers, delays in receiving payments on accounts receivable balances,
reimbursement approvals (both governmental and private), difficulties in
managing international operations, potentially adverse tax consequences,
restrictions on repatriation of earnings and the burdens of complying with a
wide variety of foreign laws and regulations. In addition, the Company's foreign
operations would be affected by general economic conditions in the international
markets in which the Company does business. There can be no assurances that such
factors will not have a material adverse effect on the Company's future
international revenues and, consequently, on the Company's business, financial
condition, results of operations or cash flows.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these other matters will not
have a material adverse effect on its consolidated financial position or results
of operations or liquidity.
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POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company derives its revenues principally from four business segments in
the gaming and wagering industry. Two of the business segments operate in the
pari-mutuel wagering market and are combined for financial reporting purposes as
the wagering systems and racetrack operations segment. The Company develops,
manufactures, sells, services and operates gaming and wagering systems in the
on-line lottery, video lottery, casino gaming and pari-mutuel wagering markets.
Revenues from the on-line lottery segment are generated from the rendering
of services and the sale or supply of computerized on-line lottery systems and
components to government-authorized lotteries. Service revenues are derived
primarily from service contracts. These contracts are typically of at least five
years' duration with various extension options available to the lottery
authority, and are generally based upon a percentage of a lottery's gross
on-line lottery sales. These percentages vary depending on the size of the
lottery and the scope of services provided to the lottery. Product sale revenues
have been derived primarily from the installation and licensing of new on-line
lottery systems and sales of lottery terminals and equipment in connection with
the expansion of existing lottery programs. The size and timing of these
transactions result in variability in product sales revenues from period to
period. The segment revenue will also experience fluctuations depending on
contract start and end dates and relative sizes of jackpots and the number of
terminals on-line and selling tickets in the states which the Company operates.
The Company expects on-line lottery services revenue to continue to be a
significant component of total revenues. On-line lottery revenue is generated by
the Company's AWI subsidiary.
The Company expects the on-line lottery segment to remain a significant
segment of the Company. The segment's growth is dependent upon management's
ability to selectively bid and win domestic lottery contracts and aggressively
pursue and win international on-line lottery opportunities as well as expand
services to existing customers. On-line lottery contracts for a number of state
lotteries are anticipated to be up for re-bid over the next several years. Due
to the high cost of procuring new lottery contracts, the Company is targeting
states that it believes will establish a bidding process based exclusively on
technical capability, price and service. This strategy allows the Company to
efficiently allocate its resources so that it may also pursue international
growth opportunities. The Company is currently pursuing potential opportunities
in a number of international jurisdictions that are expected to implement,
replace or expand existing on-line lottery programs.
Revenue from the gaming machine and route operations segment consists of
sales and lease of gaming machines, sales of parts, central control system
hardware and software, service of terminals, license fees, and from the
operation of gaming machine routes in video lottery and casino gaming markets.
Route operations revenue consists primarily of gaming machine wagers net of
pay-outs to patrons and state gaming taxes. Revenue from gaming machine sales is
subject to potentially significant fluctuations. If jurisdictions approve
legislation for new or expanded gaming operations and if the Company is awarded
a contract in any such jurisdictions, the segment may experience a surge in
sales revenue that may or may not subsequently decline dramatically depending on
the jurisdiction and gaming venue. The Company expects gaming machine and route
operations revenue to continue to be a major component of total revenues. Gaming
machine revenue is primarily generated by the Company's VLC subsidiary.
Wagering systems revenue is generated primarily from rendering services
pursuant to contracts with over 120 horse and dog racing facilities in North
America as well as sales and lease of pari-mutuel wagering systems both
domestically and internationally. Service revenues are generally based on a
percentage of wagers placed on races. Racetrack operations revenue is derived
from the ownership and operation of a horse racing facility in Sunland Park, New
Mexico. While on-track attendance and handle from pari-mutuel wagering in the
United States has markedly decreased over the last decade as jurisdictions have
legalized other forms of gaming, there has also been a substantial increase in
simulcast and off-track betting handle. Due to the volatility within gaming
venues during the last several years, the
- 14 -
<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
Company cannot predict the magnitude of any resulting effects on this segment of
its business. The Company expects wagering systems and racetrack operations
revenue to be a significant component of total revenues.
Gross profit for each segment is herein defined as revenues for that
segment less the corresponding costs and expenses (excluding depreciation and
amortization expense and any special or other unusual charges). Costs and
expenses related to on-line lottery revenue include all direct costs and
allocated indirect costs involved in operating the on-line lottery equipment in
each jurisdiction in which the Company has a contract as well as costs of
equipment sales, inclusive of materials, labor and allocated manufacturing
overhead. Costs and expenses related to gaming machine revenue include direct
costs of production, including labor and allocated manufacturing overhead. Costs
and expenses related to route operations include the location's owners' share of
the net machine revenues. Costs and expenses related to wagering systems
operations include direct and allocated indirect costs associated with the
operation of pari-mutuel wagering equipment at the racetracks at which the
Company has a contract as well as direct costs of equipment sales.
Selling, general and administrative expenses ("SG&A") consist of labor
costs, professional fees, repairs and maintenance expense, promotion and
advertising costs, occupancy and other costs, other than those included in costs
and expenses applicable to the determination of gross profit as defined above or
research and development as discussed below.
Research and development ("R&D") costs represent costs incurred to gain and
develop new knowledge applicable to the Company's various gaming systems
inclusive of software and hardware technology. Included in R&D costs are labor,
material, consulting, occupancy and other expenses associated with the R&D
efforts. Certain development costs are capitalized in accordance with Statement
of Financial Accounting Standards Board Statement No. 86 for certain software
developed for sale or lease.
Third Quarter 1998 Compared with Third Quarter 1997
- ---------------------------------------------------
Consolidated revenues decreased by $1.7 million, or 3.4%, to $47.8 million
from $49.5 million in the third quarter 1997. The consolidated gross profit
increased by $2.4 million, or 14.2%, to $19.3 million from $16.9 million in the
third quarter 1997. Earnings from operations were $2.4 million in 1998 as
compared to $1.8 million in 1997. Earnings before depreciation, amortization,
interest and taxes were $7.3 million in the third quarter 1998 and $6.9 million
in 1997.
On-line Lottery
Total revenues from the on-line lottery segment increased by $2.8 million,
or 12.3% to $25.6 million from $22.8 million in the third quarter 1997. Revenues
from the Company's domestic lottery customers increased as a result of higher
lottery jackpots, including the multi-state game Powerball(R), in the third
quarter 1998, while recorded revenues from product sales and installations of
on-line lottery systems to customers in Norway and Chile declined in the third
quarter 1998 compared to 1997.
In the third quarter 1998, revenues from lottery system enhancements and
product sales, primarily to international customers in Chile and Norway, were
$0.2 million as compared to $2.0 million in 1997.
In October 1998, the Company announced that AWI and the Department of
Lottery of the State of Florida have signed a nine-year agreement under which
AWI will provide a new on-line lottery system and related services to the
Florida Lottery. The Florida Lottery had originally awarded the contract to AWI
in October 1996. Subsequent to the announcement, the losing vendor filed
unsuccessful protests, and an attempt to enjoin the contract was rejected by the
Florida district court, allowing the parties to negotiate and finalize the terms
of the nine-year agreement. The protest is still being pursued by the losing
vendor.
The Company has entered into a contract with the Pennsylvania Lottery to
replace the contract the Company currently has with the lottery. The current
contract expires in December 1998.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
In October 1998, the Company announced that AWI had been selected by the
State of Indiana to provide a new on-line lottery system and related services
for the Hoosier Lottery.
The Company's on-line lottery system MasterLink(R) affords the Company the
ability to develop add-on products and services as well as modify the system for
game changes such as the recent change in the Powerball(R) lottery game. These
game changes and system enhancements which impact total amounts wagered may
result in periodic fluctuations in revenues and gross margins to the Company.
The gross profit margin for on-line lottery revenues was 43% in the third
quarter 1998 as compared to 30% in 1997. The gross profit margin from on-line
lottery service revenues was 45% in the third quarter 1998 and 27% in 1997. The
increase is partially attributable to the large Powerball(R) jackpot experienced
in the third quarter 1998, which contributed to higher levels of wagering and
the achievement of operating cost efficiencies. In late 1997 the Multi State
Lottery Association ("MUSL") modified the Powerball(R) lottery game to increase
the statistical expectation of higher jackpots. Four of the Company's U. S.
on-line lottery contract customers are members of the MUSL. The Company believes
that the Powerball(R) game modification should result in periodically higher
jackpots, which can result in higher revenues and gross profit margins to the
Company although there can be no assurance that this will happen.
Gaming Machine and Route Operations
Revenue from the gaming machine and route operations segment decreased by
$4.9 million, or 24%, to $15.2 million from $20.1 million in the third quarter
of 1997. The decrease reflects the anticipated effect of the cancellation of the
anticipated Ontario video lottery program in April of this year and a $5.6
million sale in Quebec in 1997. Sales in the casino markets, however, continued
to increase with over $5.5 million of gaming machine sales in the quarter ended
September 30, 1998 compared to $3.9 million in 1997.
Revenue was recognized on delivery of approximately 994 units in the third
quarter 1998 as compared to 1,989 units in 1997.
Revenue from the Company's route operations was $4.3 million in the third
quarter of 1998 and $4.5 million in 1997. Revenue from leases of gaming machines
was $2.0 million in the third quarter 1998 as compared to $3.0 million in 1997.
The decrease in revenue from leasing arrangements primarily reflects the
reduction in gaming machines under lease in 1998 compared to 1997. In March
1997, the lease agreements for approximately 2,200 gaming machines with the
Oregon Lottery expired and the Lottery exercised an option to purchase 1,375 of
the expired lease machines.
The Company expects the gaming machine and route operation segment to
remain a significant segment of the Company's operations. The growth and success
of the segment is dependent upon the Company's ability to expand its position in
the worldwide video lottery gaming machine market, to continue to penetrate
casino markets such as Nevada and New Jersey, and to develop casino
opportunities at pari-mutuel racetracks such as the Company's racetrack in
Sunland Park, New Mexico. The Company believes that new markets such as South
Africa, and the replacement of older gaming machines and systems in Australia
and North America will provide for significant future growth opportunities for
the Company. Penetration and growth of sales to casino markets is primarily
dependent on the Company's ability to gain visibility and acceptance of its
gaming machines in the markets while offering a competitive price. The Company
believes that its gaming machines are capable of producing greater than average
play and net win amounts reflecting their superior game playability, reliability
and enhanced graphics. Developing casino opportunities at pari-mutuel racetracks
is dependent initially upon the enactment of legislation to allow gaming at
racetrack facilities. A small number of states, including New Mexico, West
Virginia, Delaware, Iowa, Rhode Island and Louisiana have enacted legislation to
allow gaming at racetracks and the Company anticipates the trend to continue
although there can be no assurance of it.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
In October 1998, the Company announced that VLC had signed a new contract
to provide gaming machine monitoring software to the Independent Gaming
Corporation Ltd. (IGC) of South Australia. VLC will upgrade the IGC's current
monitoring system technology with VLC's Advanced Gaming System (AGS) which will
monitor, control and provide accounting for IGC's 11,000 gaming-machine network.
The software order and seven-year maintenance contract is expected to generate
in excess of $4 million in revenues for VLC.
The gross profit margin on gaming machine and route operations revenue was
39% in the third quarters of 1998 and 1997. The gross profit margin from route
operations revenue was 28% in the third quarter 1998 and 27% in 1997. Revenue
from leasing of gaming machines has minimal direct costs. Depreciation expense
of gaming machines under lease and revenue share agreements is recorded as a
component of depreciation and amortization expense in the Company's consolidated
financial statements. Although there can be no assurance given, the Company
expects gross profit margin levels to remain near 40% for the segment.
Wagering Systems and Racetrack Operations
Revenue from the wagering systems and racetrack operation segments
increased by $0.4 million to $7.0 million from $6.6 million in the third quarter
1997. Revenue from wagering systems service contracts was $5.8 million in the
third quarter of 1998 and $5.2 million in 1997. Racetrack operation revenue was
$1.3 million in the third quarter of 1998 and $1.4 million in 1997. Sales of
pari-mutuel wagering systems equipment were $0.8 million in the third quarter
1998 as compared to $0.4 million in 1997.
The gross profit margin from wagering systems revenue was 39% in the third
quarters 1998 and 1997. The racetrack operations in Sunland Park, New Mexico
resulted in no gross profit in the third quarter 1998 and $0.2 million in 1997.
The Company expects the wagering systems segment to remain a significant
segment. However, declines in attendance at pari-mutuel facilities has created
increased pricing pressures for the Company and its competitors. The Company
does not anticipate those pricing pressures to decrease in the near future.
Accordingly, the Company plans to maintain profitability by improving customer
service while attempting to maintain or reduce operating costs. The Company
believes that expansion of video gaming at racetracks could increase attendance
and on-track wagering at racetracks. A number of jurisdictions have considered
or are considering gaming at racetracks. The Company provides wagering systems
and service to over 120 of the approximate 350 pari-mutuel facilities in North
America.
The recovery of a significant amount of the Company's investment in the
racetrack operations in Sunland Park, New Mexico is contingent upon the
implementation of casino gaming machines at the racetrack. In March 1997, the
legislature of New Mexico voted to allow casino gaming at pari-mutuel
racetracks, including the Company's racetrack in Sunland Park. The bill allows,
among other things, the operation of up to 300 gaming machines per pari-mutuel
racetrack facility for up to twelve hours per day. The implementation of gaming
is subject to the timing and satisfaction of conditions of the legislation,
including the actions of the state's appointed board to oversee the gaming and
other regulatory matters. While the Company intends to file the necessary
licenses and approvals and believes it meets the appropriate criteria and
standards, no assurances can be given that the licenses and approvals will be
granted. The Company is not aware of any reason it would not be granted the
necessary licenses or approvals.
The Company does not anticipate that any revenues will be generated from
gaming at Sunland Park until the first quarter of 1999. The Company developed
architectural plans for casino gaming at the racetrack facility and has expended
approximately $2.4 million on construction. The Company's investment in the
racetrack operations is approximately $20.0 million and current plans call for
approximately $6.0 million of additional capital expenditures for facility
enhancements, gaming machines and related equipment. Included in the capital
expenditures for the facility is approximately $1.0 million of start-up
expenditures that are subject to the requirements of the AICPA's Statement of
Position 98-5
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
(SOP 98-5). SOP 98-5 requires that start-up expenditures be expensed as incurred
effective for fiscal years beginning after December 15, 1998 with early
application permitted. Accordingly, the start-up expenditures incurred, prior to
adoption of SOP 98-5, for the casino will be charged to expense as a cumulative
effect of a change in accounting principle net of tax effects in either the
fourth quarter 1998 or first quarter 1999.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative ("SG&A") expenses increased by $1.8
million, or 23%, to $9.5 million in the third quarter 1998 from $7.7 million in
1997. The increase reflects the Company's continued increased marketing and
business development efforts. The increase was primarily in the casino market of
the gaming machine segment and on-line lottery sales initiatives. The Company
anticipates SG&A expenses to remain at or above current levels given a
continuation of strategic business development plans.
Research and Development
- ------------------------
In the third quarter 1998, the Company expended $2.5 million on research
and development activities as compared to $2.3 million in 1997. In the third
quarter 1997 the Company capitalized approximately $0.2 million of software
development costs. The Company continues to develop and enhance its central
system and gaming and wagering terminal software and games as well as terminal
hardware for all three operating segments. A number of software development
projects are currently being monitored for technological feasibility and the
Company may capitalize additional software development costs as the projects
continue. Research and development expenditures were 5% of consolidated revenues
in the third quarters of 1998 and 1997.
Nine Months Ended September 30, 1998 and 1997
- ---------------------------------------------
Consolidated revenues increased by $1.9 million, or 1%, to $146.5 million
from $144.6 million in the first nine months of 1997. The overall gross profit
increased by $3.2 million, or 6%, to $55.5 million from $52.3 million in the
nine months ended September 30, 1997. Earnings before interest, depreciation,
and amortization and income taxes was $21.2 million in 1998 as compared to $22.1
million in 1997.
On-line Lottery
Total revenues from the on-line lottery segment increased by $7.6 million,
or 11%, to $79.3 million from $71.7 million in 1997. The increase primarily
reflects increased lottery ticket sales for the multi state lottery game
Powerball(R) which experienced relatively higher jackpots in the 1998 period.
The gross profit margin in the on-line lottery segment was 40% in the first
nine months of 1998 as compared to 33% in the first nine months of 1997. The
increase primarily reflects increased lottery ticket sales for Powerball(R) and
higher relative gross profit margins on sales of lottery systems equipment and
software enhancements. The gross profit margin from on-line lottery equipment
and system sales was 34% on $8.5 million of revenue in the first nine months of
1998, as compared to gross profit margin of 43% on $7.5 million of revenue in
1997.
Gaming Machine and Route Operations
Revenue from the gaming machine and route operations segment decreased by
$5.2 million, or 10%, to $46.4 million from $51.6 million in the first nine
months of 1997. The decrease reflects lower sales in the Quebec video lottery
market and the anticipated effect of the cancellation of the anticipated Ontario
video lottery program. The Company, however, experienced a notable increase in
casino game and system sales with $16.1 million in 1998 compared to $9.5 million
in 1997. Additionally, the Company sold approximately 200 gaming machines to a
pari-mutuel racetrack facility in West Virginia in the second quarter 1998
reflecting progress in the development of casino opportunities at racetracks.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
Revenue was recognized on shipments of 3,152 units in the first nine months
of 1998 as compared to 5,556 units in 1997. In the first nine months of 1997,
the Company sold approximately 1,400 gaming machines to the Oregon Lottery
pursuant to the exercise of an option to purchase the machines contained in the
lease agreement with the Oregon Lottery.
Revenue from leasing and revenue sharing arrangements was $6.7 million in
the first nine months of 1998 as compared to $8.5 million in 1997. The lease
term on approximately 2,200 gaming machines leased to the Oregon Lottery expired
in March 1997. As discussed above, a significant number of the machines were
purchased by the Oregon Lottery. The remaining terminals have been sold in the
ordinary course of business in other video lottery markets after refurbishment.
The gross profit margin from the gaming machine segment was 41% in the
first nine months of 1998 as compared to 44% in 1997. The reduction primarily
reflects lower lease revenue in the 1998 period as well unmatched 1997 sales of
chipsets and parts at relatively higher gross profit margins. To date, the
Company has experienced lower gross profit margins on sales in casino gaming
markets. Management expects gross profit margins from gaming machine and route
operations revenues to remain near the 40% level. The gross profit margin from
route operations was 27% in the first nine months of 1998 and 28% in 1997.
Wagering Systems and Racetrack Operations
Revenue from the wagering systems and racetrack operation segments combined
was $20.8 million in the first nine months of 1998 as compared to $21.3 million
in 1997. Revenue from wagering systems service contracts was $14.0 million in
the first nine months of 1998 and $13.8 in 1997. Revenue from sales of wagering
systems equipment was $1.3 million in the first nine months of 1998 as compared
to $2.1 million in 1997. Revenue from the racetrack operations in Sunland Park,
New Mexico was $5.5 million in the first nine months of 1998 as compared to $5.4
million in 1997.
The gross profit margin from wagering systems revenue was 36% in the first
nine months of 1998 and 37% in 1997. The gross profit margin on wagering systems
service revenue fluctuates from quarter to quarter primarily based on the
pari-mutuel racing seasons of customer racetracks. Management does not
anticipate any significant increase selling, general and administrative gross
profit margin levels on service revenue in the near future. The gross profit
margin from equipment sales of $1.3 million was 31% in the first nine months of
1998, as compared to 49% on $2.1 million of sales in 1997. The Company
experienced a negative gross profit from the racetrack operations of
approximately $0.5 million in the first nine months of 1998 and $0.1 million in
1997.
Selling, General and Administrative
- -----------------------------------
Total SG&A expenses were $26.8 million in the nine months ended September
30, 1998 and $23.0 million in 1997. The $3.8 million increase reflects the
Company's continued increased marketing and business development efforts and is
in line with management's expectations. The increase was primarily in the casino
market of the gaming machine segment and on-line lottery sales initiatives. The
Company also suffered losses on foreign currency exchange rate changes over 1997
levels. The Company anticipates SG&A expenses to remain at or above current
levels given a continuation of strategic business development plans.
Research and Development
- ------------------------
Research and development expense, net of amounts capitalized was $7.5
million in the first nine months of 1998 as compared to $7.1 million in 1997.
The Company capitalized $0.8 million in the first nine months of 1997. Total
research and development expenditures approximated 5.1% of consolidated revenues
in the first nine months of 1998 and 5.5% in 1997.
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POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
Depreciation and Amortization
- -----------------------------
Depreciation and amortization decreased by $2.3 million to $14.6 million in
the nine months ended September 30, 1998 from $16.9 million in 1997. The
decrease is primarily attributable to a reduction in the number of gaming
machine terminals under lease with the Oregon Lottery as discussed earlier and
extensions of a number of on-line lottery contracts that occurred in 1997. The
lottery authorities in Delaware, Florida and South Dakota exercised extension
options in 1997 or in the case of Minnesota, executed a new contract using a
substantial amount of the equipment from the previous contract. The Company
records depreciation expense on equipment placed in service pursuant to on-line
lottery contracts over the estimated useful life of the equipment equal to the
contract term including exercised extension options.
Liquidity and Capital Resources
- -------------------------------
In the nine months ended September 30, 1998 the Company generated
approximately $13.1 million of cash from operations as compared to $36.2 million
in 1997. The reduction reflects a number of fluctuations in operating assets and
liabilities representing a reduction in cash provided by operations. The
fluctuations include an increase in inventory levels and decreases in accounts
payable and accrued liabilities as well as a decrease in income tax refund
receivables offset by decreases in accounts receivable. Working capital
increased by approximately $1.4 million from December 31, 1997 to $38.5 million
at September 30, 1998. Inventories increased by $7.8 million in the nine months
ended September 30, 1998, reflecting an expansion of the Company's gaming
machine product line and casino market penetration efforts. The Company
considers the investment in the expanded product line to be recoverable;
however, no assurance can be given that customers and gaming patrons will prefer
the new products.
Approximately $16.7 million was invested in property, plant and equipment
and intangible and other assets in the first nine months 1998 as compared to
$7.3 million in 1997. Approximately $6.5 million has been expended for the
initial implementation cost of the on-line lottery system in Pennsylvania in
1998. Additionally, the wagering systems segment has expended approximately $3.6
million to manufacture and install new tote equipment in 1998. The Company has
expended approximately $2.4 million on the development of the casino at Sunland
Park in the first nine months of 1998. The Company anticipates expending an
additional $6.0 million on the casino development before start-up anticipated in
the fourth quarter 1998 or first quarter 1999.
In October 1998, the Company announced that AWI and the Department of
Lottery of the State of Florida have signed a nine-year agreement under which
AWI will provide a new on-line lottery system and related services to the
Florida Lottery. The Florida Lottery had originally awarded the contract to AWI
in October 1996. Subsequent to the announcement, the losing vendor filed
unsuccessful protests, and an attempt to enjoin the contract was rejected by the
Florida district court, allowing the parties to negotiate and finalize the terms
of the nine-year agreement. The protest is still being pursued by the losing
vendor.
The Company has entered into a contract with the Pennsylvania Lottery to
replace the contract the Company currently has with the lottery. The current
contract expires in December 1998.
In October 1998, the Company announced that AWI had been selected by the
State of Indiana to provide a new on-line lottery system and related services
for the Hoosier Lottery.
Total capital requirements for the Company including Sunland Park is
estimated at approximately $90.0 to $100.0 million through the year 2000. The
Company expects to fund these capital requirements as well as the Sunland Park
casino development through a combination of the new credit facility and cash
flow from operations; however, the Company cannot provide assurance that
anticipated cash flows will be adequate.
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<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
In October 1998, the Company completed negotiations for a $100.0 million
credit facility with Lehman Brothers, Inc. The credit facility replaces the
credit facility with U. S. Bank and, among other things, provides for two $25.0
million term loans maturing in five and six years, respectively, and a revolving
line of credit for $50.0 million expiring September 30, 2003. At the Company's
option, the credit facility bears interest at a Base Rate approximating prime or
LIBOR (approximately 5.4% at the closing date in October 1998) plus an
applicable margin percentage. The margin percentage above the LIBOR rate may
fluctuate between 1.75% and 2.75% depending on the Company's Consolidated
Leverage Ratio as defined in the credit facility agreements collectively
referred to as the ("Credit Agreement"). The Company may utilize up to $15.0
million of the $50.0 million revolving line of credit to collateralize its
bonding program. Contractual obligations at September 30, 1998 required
approximately $8.0 million in outstanding letters of credit. The credit facility
carries customary restrictive covenants including but not limited to minimum
leverage and cash flow ratios, limitations on domestic and foreign capital
investments, restrictions on change in control, restrictions on payments of
dividends, maintenance of minimum consolidated net worth, limitations on
additional debt, liens and asset dispositions. Upon closing, in October, the
Company advanced on the two $25.0 million term loans. The proceeds were used to
pay off existing debt of approximately $27.9 million and provide capital for
existing commitments to manufacture and implement the on-line lottery system in
Pennsylvania and continue the development of the Company's gaming machine casino
at the racetrack in Sunland Park, New Mexico.
The Company repaid long-term debt of $3.8 million in the nine months ended
September 30, 1998 including the outstanding term loans with U. S. Bank .
In February 1998, the Company effected a secondary offering of currently
outstanding shares held by an investor group representing approximately 15% of
the Company's outstanding common stock (approximately 1.5 million shares).
Approximately, 220,000 additional shares were issued pursuant to the exercise of
an option granted by Company to the underwriters. In August 1998, the Company's
Board of Directors authorized the repurchase of up to $10.0 million of the
Company's outstanding Common Stock. In October, the Company repurchased 285,000
shares for approximately $2.3 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No significant changes have occurred with regard to legal proceedings as
disclosed in Part 1, Item 3, of the Company's December 31, 1997 Form 10-K,
except for the following:
In August 1998, the U. S. District Court, South District of New York
dismissed, without prejudice, the action filed against the Company and AWI by MR
International, Inc. and American Lottery Systems.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
- 21 -
<PAGE>
POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 5. OTHER INFORMATION
In September 1998, the Company announced the appointment of Christer Roman,
Senior Vice President of Product and Business Development, and Alan Rassaby,
Senior Vice President of Legal and Administration.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Listing of Exhibits
10.1 Credit Agreement and related documents among Powerhouse
Technologies, Inc., Lehman Brothers Inc., Lehman Commercial Paper
Inc., and Canadian Imperial Bank of Commerce dated as of October
9, 1998
EX-27 Financial Data Schedule (For SEC Use Only)
b. Reports on Form 8-K
On July 1, 1998, the Company filed a current report on Form 8-K to report
its announcement that it expects to exceed consensus analysts' estimates for the
second quarter ending June 30, 1998 and reporting on the status of its Sunland
Park Casino opening and other business developments.
On August 19, 1998, the Company filed a current report on Form 8-K to
report announcement of agreement for a $100 million credit facility arranged and
syndicated by Lehman Brothers, Inc.
On August 31, 1998, the Company filed a current report on Form 8-K to
report that pursuant to a letter agreement with U. S. Bank National Association,
formerly known as First Bank National Association, the Company's existing credit
facility had been extended through October 31, 1998.
- 22 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
POWERHOUSE TECHNOLOGIES, INC.
Date: November 13, 1998 /S/ Susan J. Carstensen
------------------------------------------------------
Susan J. Carstensen, Chief Financial Officer and
Treasurer (authorized to sign on behalf of Registrant)
- 23 -
$100,000,000
CREDIT AGREEMENT
among
POWERHOUSE TECHNOLOGIES, INC.,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
LEHMAN BROTHERS INC.,
as Arranger
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent
Dated as of October 9, 1998
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................................1
1.1 Defined Terms....................................................1
1.2 Other Definitional Provisions...................................23
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................23
2.1 Term Loan Commitments...........................................23
2.2 Procedure for Term Loan Borrowing...............................23
2.3 Repayment of Term Loans.........................................24
2.4 Revolving Credit Commitments....................................25
2.5 Procedure for Revolving Credit Borrowing........................26
2.6 Repayment of Loans; Evidence of Debt............................26
2.7 Commitment Fees, etc. ..........................................27
2.8 Termination or Reduction of Revolving Credit Commitments;
Increase of Revolving Credit Commitments.......................27
2.9 Optional Prepayments............................................28
2.10 Mandatory Prepayments and Commitment Reductions................29
2.11 Conversion and Continuation Options............................30
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches......30
2.13 Interest Rates and Payment Dates...............................30
2.14 Computation of Interest and Fees...............................31
2.15 Inability to Determine Interest Rate...........................31
2.16 Pro Rata Treatment and Payments................................32
2.17 Requirements of Law............................................34
2.18 Taxes..........................................................35
2.19 Indemnity......................................................37
2.20 Illegality.....................................................37
2.21 Change of Lending Office.......................................37
SECTION 3. LETTERS OF CREDIT.................................................38
3.1 L/C Commitment..................................................38
3.2 Procedure for Issuance of Letter of Credit......................38
3.3 Fees and Other Charges..........................................39
3.4 L/C Participations..............................................39
3.5 Reimbursement Obligation of the Borrower........................40
3.6 Obligations Absolute............................................40
3.7 Letter of Credit Payments.......................................41
3.8 Applications....................................................41
3.9 Participating Interest in Existing Letters of Credit............41
SECTION 4. REPRESENTATIONS AND WARRANTIES....................................42
4.1 Financial Condition.............................................42
4.2 No Change.......................................................43
4.3 Corporate Existence; Compliance with Law........................43
4.4 Corporate Power; Authorization; Enforceable Obligations.........43
i
<PAGE>
4.5 No Legal Bar....................................................44
4.6 No Material Litigation..........................................44
4.7 No Default......................................................44
4.8 Ownership of Property; Liens....................................44
4.9 Intellectual Property...........................................44
4.10 Taxes..........................................................45
4.11 Federal Regulations............................................45
4.12 Labor Matters..................................................45
4.13 ERISA..........................................................45
4.14 Investment Company Act; Other Regulations......................46
4.15 Subsidiaries...................................................46
4.16 Use of Proceeds................................................46
4.17 Environmental Matters..........................................46
4.18 Accuracy of Information, etc...................................47
4.19 Security Documents.............................................48
4.20 Solvency.......................................................49
4.21 Regulation H...................................................49
SECTION 5. CONDITIONS PRECEDENT..............................................49
5.1 Conditions to Initial Extension of Credit.......................49
5.2 Conditions to Each Extension of Credit..........................53
SECTION 6. AFFIRMATIVE COVENANTS.............................................53
6.1 Financial Statements............................................53
6.2 Certificates; Other Information.................................54
6.3 Payment of Obligations..........................................55
6.4 Conduct of Business and Maintenance of Existence, etc. .........55
6.5 Maintenance of Property; Insurance..............................55
6.6 Inspection of Property; Books and Records; Discussions..........56
6.7 Notices.........................................................56
6.8 Environmental Laws..............................................57
6.9 Interest Rate Protection........................................57
6.10 Additional Collateral, etc.....................................57
6.11 Further Assurances.............................................59
6.12 Removal of Prohibition on Negative Pledge......................59
6.13 Completion of Phase II Evaluation..............................59
6.14 Surveys........................................................59
SECTION 7. NEGATIVE COVENANTS................................................60
7.1 Financial Condition Covenants...................................60
7.2 Limitation on Indebtedness......................................61
7.3 Limitation on Liens.............................................62
7.4 Limitation on Fundamental Changes...............................63
7.5 Limitation on Disposition of Property...........................63
7.6 Limitation on Restricted Payments...............................64
7.7 Limitation on Capital Expenditures..............................64
7.8 Limitation on Investments.......................................64
7.9 Limitation on Transactions with Affiliates......................65
7.10 Limitation on Sales and Leasebacks.............................65
ii
<PAGE>
7.11 Limitation on Changes in Fiscal Periods........................65
7.12 Limitation on Negative Pledge Clauses..........................65
7.13 Limitation on Restrictions on Subsidiary Distributions.........66
7.14 Limitation on Lines of Business................................66
7.15 Foreign Exposure Limitation....................................66
7.16 Limitation on Optional Payments and Modifications of Debt
Instruments, etc..........................................66
SECTION 8. EVENTS OF DEFAULT.................................................67
SECTION 9. THE AGENTS........................................................70
9.1 Appointment.....................................................70
9.2 Delegation of Duties............................................70
9.3 Exculpatory Provisions..........................................70
9.4 Reliance by Agents..............................................71
9.5 Notice of Default...............................................71
9.6 Non-Reliance on Agents and Other Lenders........................71
9.7 Indemnification.................................................72
9.8 Agent in Its Individual Capacity................................72
9.9 Successor Agents................................................72
9.10 Authorization to Release Liens.................................73
9.11 The Arranger and the Documentation Agent.......................73
SECTION 10. MISCELLANEOUS....................................................73
10.1 Amendments and Waivers.........................................73
10.2 Notices........................................................75
10.3 No Waiver; Cumulative Remedies.................................75
10.4 Survival of Representations and Warranties.....................76
10.5 Payment of Expenses............................................76
10.6 Successors and Assigns; Participations and Assignments.........77
10.7 Adjustments; Set-off...........................................79
10.8 Counterparts...................................................80
10.9 Severability...................................................80
10.10 Integration...................................................80
10.11 GOVERNING LAW.................................................80
10.12 Submission To Jurisdiction; Waivers...........................80
10.13 Acknowledgements..............................................81
10.14 Confidentiality...............................................81
10.15 Release of Collateral Security and Guarantee Obligations......82
10.16 Accounting Changes............................................82
10.17 Delivery of Lender Addenda. .................................82
10.18 WAIVERS OF JURY TRIAL. ......................................82
iii
<PAGE>
ANNEXES:
A Pricing Grid
SCHEDULES:
1.1 Mortgaged Property
3.9 Existing Letters of Credit
4.4 Consents, Authorizations, Filings and Notices
4.15 Subsidiaries
4.19(a) UCC Filing Jurisdictions
4.19(b) Mortgage Filing Jurisdictions
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D-1 Form of Mortgage (Real Property)
D-2 Form of Aircraft Mortgage
E Form of Assignment and Acceptance
F Matters to be Covered in Legal Opinions
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
H Form of Prepayment Option Notice
I Form of Exemption Certificate
J Form of Lender Addendum
K Form of Revolving Credit Commitment Increase Supplement
L Form of New Lender Supplement
M Form of Participation Agreement
iv
<PAGE>
1
CREDIT AGREEMENT, dated as of October 9, 1998, among POWERHOUSE
TECHNOLOGIES, INC, a Delaware corporation (the "Borrower"), the several banks
and other financial institutions from time to time parties to this Agreement
(the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in such
capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as administrative agent
(in such capacity, the "Administrative Agent"), LEHMAN COMMERCIAL PAPER INC., as
syndication agent (in such capacity, the "Syndication Agent"), and CANADIAN
IMPERIAL BANK OF COMMERCE., as Documentation Agent (in such capacity, the
"Documentation Agent").
W I T N E S S E T H:
WHEREAS, the Borrower wishes to establish credit facilities to provide
financing for the repayment of certain existing indebtedness, to fund capital
expenditures and for other general corporate purposes; and
WHEREAS, the Lenders are willing to make such credit facilities
available upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": as defined in the preamble hereto.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
(or persons performing similar functions) of such Person or (b) direct or
cause the direction of the management and policies of such Person, whether
by contract or otherwise.
"Agents": the collective reference to the Administrative Agent, the
Syndication Agent and the Documentation Agent.
<PAGE>
2
"Aggregate Exposure": with respect to any Lender at any time, an
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the sum of (i) the
aggregate then unpaid principal amount of such Lender's Term Loans and (ii)
the amount of such Lender's Revolving Credit Commitment then in effect or,
if the Revolving Credit Commitments have been terminated, the amount of
such Lender's Revolving Extensions of Credit then outstanding.
"Aggregate Exposure Percentage" with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such
time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Aircraft": a 1974 Sabreliner Model 40, carrying FAA Identification
Number N999VT.
"Aircraft Mortgage": the Aircraft Mortgage, substantially in the form
of Exhibit D-2, to be executed by Powerhouse Technologies, Inc., in respect
of the Aircraft, as the same may from time to time be amended, supplemented
or otherwise modified.
"Applicable Margin": for each Type of Loan, the rate per annum set
forth under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
----- -----
Revolving Credit Loans 1.25% 2.25%
Tranche A Term Loans 1.25% 2.25%
Tranche B Term Loans 1.75% 2.75%
provided, that on and after the first Adjustment Date, the Applicable
Margin for Loans under each Facility will be determined pursuant to the
Pricing Grid.
"Application": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"Arranger": as defined in the preamble hereto.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (a), (b), (c) or (d) of Section 7.5) which yields gross proceeds to
the Borrower or any of its Subsidiaries
<PAGE>
3
(valued at the initial principal amount thereof in the case of non-cash
proceeds consisting of notes or other debt securities and valued at fair
market value in the case of other non-cash proceeds) in excess of $50,000.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment then in effect over (b) such Lender's
Revolving Extensions of Credit then outstanding.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by the Reference Lender as
its prime or base rate in effect at its principal office in New York City
(the Prime Rate not being intended to be the lowest rate of interest
charged by the Reference Lender in connection with extensions of credit to
debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the C/D Reserve Percentage
and (b) the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month certificates
of deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Reference Lender from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it. Any change in the Base Rate due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
<PAGE>
4
"Benefitted Lender": as defined in Section 10.7.
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date
on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"Business Day": (i) for all purposes other than as covered by clause
(ii) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in Dollar deposits in the interbank eurodollar
market.
"Capital Expenditures": for any period, with respect to any Person,
the aggregate of all expenditures by such Person and its Subsidiaries for
the acquisition or leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment or intangible assets relating
thereto (including replacements, capitalized repairs and improvements
during such period) which should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP, and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of
the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the
date of acquisition issued by any Lender or by any commercial
<PAGE>
5
bank organized under the laws of the United States of America or any state
thereof having combined capital and surplus of not less than $500,000,000;
(c) commercial paper of an issuer rated at least A-2 by Standard & Poor's
Ratings Services ("S&P") or P-2 by Moody's Investors Service, Inc.
("Moody's"), or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing
ratings of commercial paper issuers generally, and maturing within six
months from the date of acquisition; (d) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth
or territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the case
may be) are rated at least A by S&P or A by Moody's; (f) securities with
maturities of six months or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition; or (g) shares
of money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
"C/D Assessment Rate": for any day as applied to any Base Rate Loan,
the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation (the "FDIC") classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. ss. 327.4 (or any successor
provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States.
"C/D Reserve Percentage": for any day as applied to any Base Rate
Loan, that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of the
Board as in effect from time to time) in respect of new non-personal time
deposits in Dollars having a maturity of 30 days or more.
"Closing Date": the date on which the conditions precedent set forth
in Section 5.1 shall have been satisfied, which date shall be not later
than October 9, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all Property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security
Document.
<PAGE>
6
"Commitment": as to any Lender, the sum of the Tranche A Term Loan
Commitment, the Tranche B Term Loan Commitment and the Revolving Credit
Commitment of such Lender.
"Commitment Fee Rate": 1/2 of 1% per annum.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
Memorandum dated September 1998 and furnished to the initial Lenders.
"Consolidated Current Assets": at any date, all amounts (other than
cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on
a consolidated balance sheet of the Borrower and its Subsidiaries at such
date.
"Consolidated Current Liabilities": at any date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet
of the Borrower and its Subsidiaries at such date, but excluding (a) the
current portion of any Funded Debt of the Borrower and its Subsidiaries and
(b) without duplication of clause (a) above, all Indebtedness consisting of
Revolving Credit Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) income tax expense, (b) Consolidated Interest Expense,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with
Indebtedness (including the Loans), (c) depreciation and amortization
expense, (d) amortization of intangibles (including, but not limited to,
goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net
Income for such period, losses on sales of assets outside of the ordinary
course of business) and (f) any other non-cash charges, and minus, to the
extent included in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income (except to the extent deducted in
determining Consolidated Interest Expense), (b) any extraordinary, unusual
or non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of
<PAGE>
7
such Consolidated Net Income for such period, gains on the sales of assets
outside of the ordinary course of business) and (c) any other non-cash
income, all as determined on a consolidated basis.
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio
of (a) Consolidated EBITDA for such period to (b) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
provision for cash income taxes made by the Borrower or any of its
Subsidiaries on a consolidated basis in respect of such period and (c)
scheduled payments made during such period on account of principal of
Indebtedness of the Borrower or any of its Subsidiaries (including
scheduled principal payments in respect of the Term Loans).
"Consolidated Interest Coverage Ratio": for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"Consolidated Interest Expense": for any period, total interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing
and net costs under Hedge Agreements in respect of interest rates to the
extent such net costs are allocable to such period in accordance with
GAAP).
"Consolidated Leverage Ratio": as at the last day of any period of
four consecutive fiscal quarters, the ratio of (a) Consolidated Total Debt
on such day to (b) Consolidated EBITDA for such period; provided that for
purposes of calculating Consolidated EBITDA of the Borrower and its
Subsidiaries for any period, the Consolidated EBITDA of any Person acquired
by the Borrower or its Subsidiaries during such period shall be included on
a pro forma basis for such period (assuming the consummation of such
acquisition and the incurrence or assumption of any Indebtedness in
connection therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the period preceding the acquisition of such
Person and the related consolidated statements of income and stockholders'
equity and of cash flows for the period in respect of which Consolidated
EBITDA is to be calculated (i) have been previously provided to the
Administrative Agent and the Lenders and (ii) either (A) have been reported
on without a qualification arising out of the scope of the audit by
independent certified public accountants of nationally recognized standing
or (B) have been found acceptable by the Administrative Agent.
<PAGE>
8
"Consolidated Net Income": for any period, the consolidated net income
(or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries, (b) the income
(or deficit) of any Person (other than a Subsidiary of the Borrower) in
which the Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by
the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Net Worth": at any date, all amounts which would, in
conformity with GAAP, be included on a consolidated balance sheet of the
Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Total Debt": at any date, the aggregate principal amount
of all Funded Debt of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Directors": the directors of the Borrower on the Closing
Date, and each other director, if, in each case, such other director's
nomination for election to the board of directors of the Borrower is
recommended by at least 66-2/3% of the then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Disposition": with respect to any Property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof;
the terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
<PAGE>
9
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
the laws of any jurisdiction within the United States of America.
"ECF Percentage": with respect to any fiscal year of the Borrower,
50%; provided, that the ECF Percentage for any fiscal year shall be 0% if
the Consolidated Leverage Ratio as of the last day of such fiscal year is
not greater than 2.0 to 1.0.
"Environmental Laws": any and all laws, rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law) of any
international authority, foreign government, the United States, or any
state, local, municipal or other governmental authority, regulating,
relating to or imposing liability or standards of conduct concerning
protection of the environment or of human health, or employee health and
safety, as has been, is now, or may at any time hereafter be, in effect.
"Environmental Permits": any and all permits, licenses, approvals,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on
the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period
appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London
time, two Business Days prior to the beginning of such Interest Period. In
the event that such rate does not appear on Page 3750 of the Telerate
screen (or otherwise on such screen), the "Eurodollar Base Rate" for
purposes of this definition shall be determined by reference to such other
comparable publicly available service for displaying eurodollar rates as
may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent is
offered Dollar deposits at or about 11:00 A.M., New York City time, two
Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange
<PAGE>
10
operations are then being conducted for delivery on the first day of such
Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both,
has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the excess,
if any, of (a) the sum, without duplication, of (i) Consolidated Net Income
for such fiscal year, (ii) an amount equal to the amount of all non-cash
charges (including depreciation and amortization) deducted in arriving at
such Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the aggregate net
non-cash loss on the Disposition of Property by the Borrower and its
Subsidiaries during such fiscal year (other than sales of inventory in the
ordinary course of business), to the extent deducted in arriving at such
Consolidated Net Income and (v) the net increase during such fiscal year
(if any) in deferred tax accounts of the Borrower over (b) the sum, without
duplication, of (i) an amount equal to the amount of all non-cash credits
included in arriving at such Consolidated Net Income, (ii) the aggregate
amount actually paid by the Borrower and its Subsidiaries in cash during
such fiscal year on account of Capital Expenditures (excluding the
principal amount of Indebtedness incurred in connection with such
expenditures and any such expenditures financed with the proceeds of any
Reinvestment Deferred Amount), (iii) the aggregate amount of all
prepayments of Revolving Credit Loans during such fiscal year to the extent
accompanying permanent optional reductions of the Revolving Credit
Commitments and all optional prepayments of the Term Loans and other Funded
Debt during such fiscal year, (iv) the aggregate amount of all regularly
scheduled principal payments of Funded Debt (including, without limitation,
the Term Loans) of the Borrower and its Subsidiaries made during such
fiscal year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in Consolidated Working Capital for such fiscal
<PAGE>
11
year, (vi) an amount equal to the aggregate net non-cash gain on the
Disposition of Property by the Borrower and its Subsidiaries during such
fiscal year (other than sales of inventory in the ordinary course of
business), to the extent included in arriving at such Consolidated Net
Income, (vii) the net decrease during such fiscal year (if any) in deferred
tax accounts of the Borrower and (viii) with respect to the Borrower's 1999
fiscal year only, the amount determined by the Borrower and certified to
the Administrative Agent (which certificate shall include calculations in
reasonable detail) as the Borrower's reasonable estimate of the amount of
Capital Expenditures required in fiscal year 2000 relating to the
Borrower's on-line lottery contract with the State of Florida.
"Excess Cash Flow Application Date": as defined in Section 2.10(c).
"Excluded Assets": as defined in the Guarantee and Collateral
Agreement.
"Excluded Foreign Accounts and Assets": (a) accounts receivable owing
by Persons domiciled in, or Governmental Authorities of, Canada, (b)
accounts receivable owing by Persons domiciled in, or Governmental
Authorities of, Australia in an aggregate amount at any time not exceeding
$10,000,000, provided, that such accounts receivables are payable within 90
days after the creation thereof and are paid on or before the due date
thereof and (c) up to $1,000,000 of Investments (other than accounts) in
Canada.
"Excluded Foreign Subsidiaries": any Foreign Subsidiary in respect of
which either (i) the pledge of all of the Capital Stock of such Subsidiary
as Collateral or (ii) the guaranteeing by such Subsidiary of the
Obligations, would, in the good faith judgment of the Borrower, result in
adverse tax consequences to the Borrower.
"Existing Credit Facilities": collectively (i) the Borrower's Credit
Agreement, dated as of February 16, 1995, as amended, with U.S. Bank, N.A.,
and (ii) the Borrower's note payable to Electronic Data Systems Corporation
arising out of the January 30, 1997 settlement of claims between the
Borrower and Electronic Data Systems Corporation.
"Existing Letters of Credit": as defined in Section 3.9.
"Existing Issuing Bank": as defined in Section 3.9.
"Facility": each of (a) the Tranche A Term Loan Commitments and the
Tranche A Term Loans made thereunder (the "Tranche A Term Loan Facility"),
(b) the Tranche B Term Loan Commitments and the Tranche B Term Loans made
thereunder (the "Tranche B Term Loan Facility"), and (c) the Revolving
Credit Commitments and the extensions of credit made thereunder (the
"Revolving Credit Facility").
<PAGE>
12
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Reference Lender from three federal funds brokers of recognized
standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Funded Debt": as to any Person, all indebtedness of such Person of
the type described in clauses (a)-(e), inclusive, of the definition of
"Indebtedness" in this Section 1.1.
"Funding Office": the office specified from time to time by the
Administrative Agent as its funding office by notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time, except that for purposes of
Section 7.1, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation
of the most recent audited financial statements delivered pursuant to
Section 4.1(b).
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any Property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity
<PAGE>
13
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase Property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect
of which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in
good faith.
"Hedge Agreements": all interest rate swaps, caps or collar agreements
or similar arrangements entered into by the Borrower providing for
protection against fluctuations in interest rates or currency exchange
rates or the exchange of nominal interest obligations, either generally or
under specific contingencies.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of Property or services (other
than trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such Property), (e) all
Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party under acceptance,
letter of credit or similar facilities, (g) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or otherwise acquire
for value any Capital Stock of such Person, (h) all Guarantee Obligations
of such Person in respect of obligations of the kind referred to in clauses
(a) through (g) above; (i) all obligations of the kind referred to in
clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on Property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has
assumed or become liable for the payment of such obligation, (j) for the
purposes of Section 8(e) only, all obligations of such Person in respect of
Hedge Agreements and (k) the liquidation value of any mandatorily
redeemable preferred Capital Stock of such Person or its Subsidiaries held
by any Person other than such Person and its Wholly Owned Subsidiaries.
<PAGE>
14
"Indemnified Liabilities": as defined in Section 10.5.
"Indemnitee": as defined in Section 10.5.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds
and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the last
day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Loan (other than
any Revolving Credit Loan that is a Base Rate Loan), the date of any
repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Borrower in its notice of borrowing
or notice of conversion, as the case may be, given with respect thereto;
and (b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
<PAGE>
15
(ii) any Interest Period that would otherwise extend beyond the
Scheduled Revolving Credit Termination Date or beyond the date final
payment is due on the Tranche A Term Loans or the Tranche B Term
Loans, as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Investments": as defined in Section 7.8.
"Issuing Lender": any Revolving Credit Lender selected by the
Borrower, with the approval of such Revolving Credit Lender and the
Administrative Agent, to be the issuer of Letters of Credit, in its
capacity as such an issuer.
"L/C Commitment": $15,000,000.
"L/C Fee Payment Date": the last day of each March, June, September
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Lender Addendum": with respect to any initial Lender, a Lender
Addendum, substantially in the form of Exhibit J, to be executed and
delivered by such Lender on the Closing Date as provided in Section 10.17.
"Lenders": as defined in the preamble hereto.
"Letters of Credit": as defined in Section 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or
<PAGE>
16
any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter Agreement, the Applications and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower which
is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the holders
of more than 50% of the aggregate unpaid principal amount of the Term Loans
or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Credit
Facility, prior to any termination of the Revolving Credit Commitments, the
holders of more than 50% of the Total Revolving Credit Commitments).
"Majority Revolving Credit Facility Lenders": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a) the
business, assets, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity
or enforceability of this Agreement or any of the other Loan Documents or
the rights or remedies of the Agents or the Lenders hereunder or
thereunder.
"Material Environmental Amount": an amount or amounts payable by the
Borrower and/or any of its Subsidiaries, in the aggregate in excess of
$500,000, for: costs to comply with any Environmental Law; costs of any
investigation, and any remediation, of any Material of Environmental
Concern; and compensatory damages (including, without limitation damages to
natural resources), punitive damages, fines, and penalties pursuant to any
Environmental Law.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any other substances or forces
of any kind, whether or not any such substance or force is defined as
hazardous or toxic under any Environmental Law, that is regulated pursuant
to or could give rise to liability under any Environmental Law.
<PAGE>
17
"Material Contract": any contract, agreement or other undertaking to
which the Borrower or any Subsidiary is a party, pursuant to which the
Borrower or such Subsidiary will receive payments (including payments in
the form of promissory notes or other indebtedness or property) in amounts
which could reasonably be estimated to exceed $2,000,000 in any fiscal year
or $5,000,000 in the aggregate, including, without limitation, the
contracts listed in Schedule 7 to the Guarantee and Collateral Agreement.
"Material Promissory Note": each promissory note, in an unpaid face
amount in excess of $500,000 (or such lesser amount as the Administrative
Agent may establish, by notice to the Borrower), held by the Borrower of
any of its Subsidiaries.
"Mortgaged Properties": the real properties listed on Schedule 1.1, as
to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any Loan
Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit D-1 (with such
changes thereto as shall be advisable under the law of the jurisdiction in
which such mortgage or deed of trust is to be recorded), as the same may be
amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be applied
to the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset Sale or Recovery
Event (other than any Lien pursuant to a Security Document) and other
customary fees and expenses actually incurred in connection therewith and
net of taxes paid or reasonably estimated to be payable as a result thereof
(after taking into account any available tax credits or deductions and any
tax sharing arrangements) and (b) in connection with any issuance or sale
of equity securities or debt securities or instruments or the incurrence of
loans, the cash proceeds received from such issuance or incurrence, net of
attorneys' fees, investment banking fees, accountants' fees, underwriting
discounts and commissions and other customary fees and expenses actually
incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.18(a).
<PAGE>
18
"Non-U.S. Lender": as defined in Section 2.18(d).
"Notes": the collective reference to any promissory note evidencing
Loans.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in the case of
Hedge Agreements, any affiliate of any Lender), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, the Letters of Credit, any Hedge
Agreement entered into with any Lender or any affiliate of any Lender or
any other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
arising from any payment made hereunder or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.
"Participant": as defined in Section 10.6(b).
"Participation Agreement": as defined in Section 3.9.
"Payment Office": the office specified from time to time by the
Administrative Agent as its payment office by notice to the Borrower and
the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
<PAGE>
19
"Prepayment Option Notice": as defined in Section 2.16(d).
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock of any Person
other than the Borrower.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Borrower or any of its Subsidiaries.
"Reference Lender": Citibank, N.A.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Borrower or any of
its Subsidiaries in connection therewith which are not applied to prepay
the Term Loans or reduce the Revolving Credit Commitments pursuant to
Section 2.10(b) as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
Officer stating that no Default or Event of Default has occurred and is
continuing and that the Borrower (directly or indirectly through a
Subsidiary) intends and expects to use all or a specified portion of the
Net Cash Proceeds of an Asset Sale or Recovery Event to acquire assets
useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire
assets useful in the Borrower's business.
<PAGE>
20
"Reinvestment Prepayment Date": with respect to any Reinvestment
Event, the earlier of (a) the date occurring six months after such
Reinvestment Event and (b) the date on which the Borrower shall have
determined not to, or shall have otherwise ceased to, acquire assets useful
in the Borrower's business with all or any portion of the relevant
Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC
Reg. ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of (a)
until the Closing Date, the Commitments and (b) thereafter, the sum of (i)
the aggregate unpaid principal amount of the Term Loans then outstanding
and (ii) the Total Revolving Credit Commitments then in effect or, if the
Revolving Credit Commitments have been terminated, the Total Revolving
Extensions of Credit then outstanding; provided, that so long as Lehman
Commercial Paper Inc. holds more than 50% of the amounts described in the
foregoing clause (a) or (b), as the case may be, the Required Lenders must
be at least two Lenders.
"Required Prepayment Lenders": the Majority Facility Lenders in
respect of each Facility.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Officer": the chief executive officer, president or chief
financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender, if any, to make Revolving Credit Loans and participate in
Letters of Credit, in an aggregate principal and/or face amount not to
exceed the amount set forth under the heading "Revolving Credit Commitment"
opposite such Lender's name on Schedule 1 to the Lender Addendum delivered
by such Lender, or, as the case may be, in the Assignment and Acceptance
pursuant to which such Lender became a party hereto, as
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21
the same may be changed from time to time pursuant to the terms hereof. The
original amount of the Total Revolving Credit Commitments is $50,000,000.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each Lender which has a Revolving Credit
Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Percentage": as to any Revolving Credit Lender at
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the Total Revolving Credit Commitments (or, at any time
after the Revolving Credit Commitments shall have expired or terminated,
the percentage which the aggregate principal amount of such Lender's
Revolving Credit Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Credit Loans then outstanding).
"Revolving Credit Termination Date": September 30, 2003.
"Revolving Extensions of Credit": as to any Revolving Credit Lender at
any time, an amount equal to the sum of (a) the aggregate principal amount
of all Revolving Credit Loans made by such Lender then outstanding, (b)
such Lender's Revolving Credit Percentage of the L/C Obligations then
outstanding and (c) such Lender's Revolving Credit Percentage of the sum of
(i) aggregate undrawn face amount of all Existing Letters of Credit at such
time and (ii) the aggregate amount drawn under Existing Letters of Credit
to the extent such amount has not been reimbursed by the Borrower at such
time.
"Route Companies": the collective reference to Automatic Music Service
of Billings, Inc., a Montana corporation, Automation First, Inc., a Montana
corporation, and Raven's D&R Music, Inc., a Montana corporation, and any
other Subsidiary Guarantor designated in writing by the Borrower and
consented to by the Administrative Agent.
"SEC": the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, the Mortgages, the Aircraft Mortgage and all other
security documents hereafter delivered to the Administrative Agent granting
a Lien on any Property of any Person to secure the obligations and
liabilities of any Loan Party under any Loan Document.
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22
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date,
as such quoted terms are determined in accordance with applicable federal
and state laws governing determinations of the insolvency of debtors, (b)
the present fair saleable value of the assets of such Person will, as of
such date, be greater than the amount that will be required to pay the
liability of such Person on its debts as such debts become absolute and
matured, (c) such Person will not have, as of such date, an unreasonably
small amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature. For purposes of this
definition, (i) "debt" means liability on a "claim", and (ii) "claim" means
any (x) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right
to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than any
Excluded Foreign Subsidiary set forth on Schedule 4.5 hereof.
"Syndication Date": the date on which the Syndication Agent completes
the syndication of the Facilities and the entities selected in such
syndication process become parties to this Agreement.
"Syndication Letter Agreement": the letter agreement, dated as of the
Closing Date, between the Borrower and the Syndication Agent and the
Arranger relating to the syndication of the Facilities.
"Term Loan Facilities": the collective reference to the Tranche A Term
Loan Facility and the Tranche B Term Loan Facility.
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23
"Term Loan Lenders": the collective reference to the Tranche A Term
Loan Lenders and the Tranche B Term Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term Loans and
the Tranche B Term Loans.
"Total Revolving Credit Commitments": at any time, the aggregate
amount of the Revolving Credit Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit
Lenders outstanding at such time.
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Commitment": as to any Lender, the obligation of
such Lender, if any, to make a Tranche A Term Loan to the Borrower
hereunder in a principal amount not to exceed the amount set forth under
the heading "Tranche A Term Loan Commitment" opposite such Lender's name on
Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case
may be, in the Assignment and Acceptance pursuant to which such Lender
became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof. The original aggregate amount of the Tranche
A Term Loan Commitments is $25,000,000.
"Tranche A Term Loan Lender": each Lender which has a Tranche A Term
Loan Commitment or is the holder a Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to Tranche A Term Loan Lender at
any time, the percentage which such Lender's Tranche A Term Loan Commitment
then constitutes of the aggregate Tranche A Term Loan Commitments (or, at
any time after the Closing Date, the percentage which the aggregate
principal amount of such Lender's Tranche A Term Loans then outstanding
constitutes of the aggregate principal amount of the Tranche A Term Loans
then outstanding).
"Tranche B Term Loan": as defined in Section 2.1.
"Tranche B Term Loan Commitment": as to Tranche B Term Loan Lender,
the obligation of such Lender, if any, to make a Tranche B Term Loan to the
Borrower hereunder in a principal amount not to exceed the amount set forth
under the heading "Tranche B Term Loan Commitment" opposite such Lender's
name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as
the case may be, in the Assignment and Acceptance pursuant to which such
Lender became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof. The original aggregate amount of the Tranche
B Term Loan Commitments is $25,000,000.
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24
"Tranche B Term Loan Lender": each Lender which has a Tranche B Term
Loan Commitment or which is the holder of a Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Tranche B Term Loan Commitment then
constitutes of the aggregate Tranche B Term Loan Commitments (or, at any
time after the Closing Date, the percentage which the aggregate principal
amount of such Lender's Tranche B Term Loans then outstanding constitutes
of the aggregate principal amount of the Tranche B Term Loans then
outstanding).
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar
Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other
Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is
a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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25
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions hereof,
(a) each Tranche A Term Loan Lender severally agrees to make a term loan (a
"Tranche A Term Loan") to the Borrower on the Closing Date in an amount not to
exceed the amount of the Tranche A Term Loan Commitment of such Lender and (b)
each Tranche B Term Loan Lender severally agrees to make a term loan (a "Tranche
B Term Loan") to the Borrower on the Closing Date in an amount not to exceed the
amount of the Tranche B Term Loan Commitment of such Lender. The Term Loans may
from time to time be Eurodollar Loans or Base Rate Loans, as determined by the
Borrower and notified to the Administrative Agent in accordance with Sections
2.2 and 2.11.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, one Business Day
prior to the anticipated Closing Date) requesting that the Term Loan Lenders
make the Term Loans on the Closing Date and specifying the amount to be
borrowed. The Term Loans made on the Closing Date shall initially be Base Rate
Loans, and no Term Loan may be converted into or continued as a Eurodollar Loan
having an Interest Period in excess of one month prior to the Syndication Date.
Upon receipt of such notice the Administrative Agent shall promptly notify each
Term Loan Lender thereof. Not later than 12:00 Noon, New York City time, on the
Closing Date each Term Loan Lender shall make available to the Administrative
Agent at the Funding Office an amount in immediately available funds equal to
the Term Loan or Term Loans to be made by such Lender. The Administrative Agent
shall make available to the Borrower the aggregate of the amounts made available
to the Administrative Agent by the Term Loan Lenders in like funds as received
by the Administrative Agent from the Lenders.
2.3 Repayment of Term Loans. (a) The Tranche A Term Loan of each
Tranche A Lender shall mature in 20 consecutive quarterly installments,
commencing on December 31, 1998, each of which shall be in an amount equal to
such Lender's Tranche A Term Loan Percentage multiplied by the amount set forth
below opposite such installment:
Installment Principal Amount
----------- ----------------
December 31, 1998 $ 625,000
March 31, 1999 625,000
June 30, 1999 625,000
September 30, 1999 625,000
December 31, 1999 625,000
March 31, 2000 625,000
June 30, 2000 625,000
September 30, 2000 625,000
December 31, 2000 937,500
March 31, 2001 937,500
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26
June 30, 2001 937,500
September 30, 2001 937,500
December 31, 2001 937,500
March 31, 2002 937,500
June 30, 2002 937,500
September 30, 2002 937,500
December 31, 2002 3,125,000
March 31, 2003 3,125,000
June 30, 2003 3,125,000
September 30, 2003 3,125,000
(b) The Tranche B Term Loan of each Tranche B Lender shall mature in
24 consecutive quarterly installments, commencing on December 31, 1998, each of
which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount
----------- ----------------
December 31, 1998 $ 62,500
March 31, 1999 62,500
June 30, 1999 62,500
September 30, 1999 62,500
December 31, 1999 62,500
March 31, 2000 62,500
June 30, 2000 62,500
September 30, 2000 62,500
December 31, 2000 62,500
March 31, 2001 62,500
June 30, 2001 62,500
September 30, 2001 62,500
December 31, 2001 62,500
March 31, 2002 62,500
June 30, 2002 62,500
September 30, 2002 62,500
December 31, 2002 62,500
March 31, 2003 62,500
June 30, 2003 62,500
September 30, 2003 62,500
December 31, 2003 62,500
March 31, 2004 62,500
June 30, 2004 62,500
September 30, 2004 62,500
December 31, 2004 23,500,000
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27
2.4 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the L/C Obligations then outstanding, does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving Credit
Commitment Period the Borrower may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.11, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan after the day that is one month prior to the
Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans on
the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans), specifying (i) the amount and Type of Revolving Credit Loans to be
borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar
Loans, the length of the initial Interest Period therefor. Any Revolving Credit
Loans made on the Closing Date shall initially be Base Rate Loans, and no
Revolving Credit Loan may be made as, converted into or continued as a
Eurodollar Loan having an Interest Period in excess of one month prior to the
Syndication Date. Each borrowing under the Revolving Credit Commitments shall be
in an amount equal to (x) in the case of Base Rate Loans, $500,000 or a whole
multiple thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $2,500,000 or a whole multiple of $500,000 in excess thereof.
Upon receipt of any such notice from the Borrower, the Administrative Agent
shall promptly notify each Revolving Credit Lender thereof. Each Revolving
Credit Lender will make the amount of its pro rata share of each borrowing
available to the Administrative Agent for the account of the Borrower at the
Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent in like funds as received by the Administrative Agent.
2.6 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid
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principal amount of each Revolving Credit Loan of such Revolving Credit Lender
on the Revolving Credit Termination Date (or such earlier date on which the
Loans become due and payable pursuant to Section 8), and (ii) the principal
amount of each Term Loan of such Term Loan Lender in installments according to
the amortization schedule set forth in Section 2.3 (or on such earlier date on
which the Loans become due and payable pursuant to Section 8). The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 2.13.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 10.6(e), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.6(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing any Term Loans or Revolving Credit
Loans, as the case may be, of such Lender, substantially in the forms of Exhibit
G-1 or G-2, respectively, with appropriate insertions as to date and principal
amount.
2.7 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
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29
(b) The Borrower agrees to pay to the Syndication Agent the fees in
the amounts and on the dates previously agreed to in writing by the Borrower and
the Syndication Agent.
(c) The Borrower agrees to pay to the Administrative Agent the fees in
the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent.
2.8 Termination or Reduction of Revolving Credit Commitments; Increase
of Revolving Credit Commitments. (a) The Borrower shall have the right, upon not
less than three Business Days' notice to the Administrative Agent, to terminate
the Revolving Credit Commitments or, from time to time, to reduce the amount of
the Revolving Credit Commitments; provided that no such termination or reduction
of Revolving Credit Commitments shall be permitted if, after giving effect
thereto and to any prepayments of the Revolving Credit Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Credit Commitments. Any such reduction shall be in an amount
equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently
the Revolving Credit Commitments then in effect.
(b) In the event that the Borrower wishes to increase the aggregate
Revolving Credit Commitments at any time when no Default or Event of Default has
occurred and is continuing, it shall notify the Administrative Agent in writing
of the amount (the "Offered Increase Amount") of such proposed increase (such
notice, a "Revolving Credit Commitment Increase Notice"). The Borrower shall
offer each of the Lenders the opportunity to participate in its Revolving Credit
Percentage of the Offered Increase Amount pursuant to paragraph (c) below and if
any Lender, in its sole discretion, elects not to participate in its portion of
the Offered Increase Amount, the Borrower may, with the consent of the
Administrative Agent (which consent shall not be unreasonably withheld), offer
one or more additional banks or financial institutions the opportunity to
participate in such portion of the Offered Increase Amount pursuant to paragraph
(d) below. The Borrower or, if requested by the Borrower, the Administrative
Agent, will notify all Lenders, and, if applicable, the other banks or financial
institutions, of such offer.
(c) Any Lender which accepts an offer to it by the Borrower to
increase its Revolving Credit Commitment pursuant to this Section shall, in each
case, execute a Revolving Credit Commitment Increase Supplement with the
Borrower and the Administrative Agent, substantially in the form of Exhibit K,
whereupon such Lender shall be bound by and entitled to the benefits of this
Agreement with respect to the full amount of its Revolving Credit Commitment as
so increased.
(d) Any additional bank, financial institution or other entity which
the Borrower selects to offer participation in the increased Revolving Credit
Commitments and which elects to become a party to this Agreement and provide a
Revolving Credit Commitment in an amount so offered and accepted by it pursuant
to this Section shall execute a New Lender
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30
Supplement with the Borrower and the Administrative Agent, substantially in the
form of Exhibit L, whereupon such bank, financial institution or other entity
shall become a Lender for all purposes and to the same extent as if originally a
party hereto and shall be bound by and entitled to the benefits of this
Agreement, provided that the Revolving Credit Commitment of any such new Lender
shall be in an amount not less than $5,000,000.
(e) Notwithstanding anything to the contrary in this Section, (i) in
no event shall any transaction effected pursuant to this Section cause the
aggregate Revolving Credit Commitments to exceed $75,000,000 and (ii) no Lender
shall have any obligation to increase its Revolving Credit Commitment unless it
agrees to do so in its sole discretion.
2.9 Optional Prepayments. The Borrower may at any time and from time
to time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of Base Rate Loans, which notice shall specify the
date and amount of prepayment and whether the prepayment is of Eurodollar Loans
or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto, the Borrower
shall also pay any amounts owing pursuant to Section 2.19. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with accrued interest
to such date on the amount prepaid. Partial prepayments of Term Loans and
Revolving Credit Loans shall be in an aggregate principal amount of $1,000,000
or a whole multiple thereof.
2.10 Mandatory Prepayments and Commitment Reductions. (a) Unless the
Required Prepayment Lenders shall otherwise agree, if any Indebtedness shall be
incurred by the Borrower or any of its Subsidiaries (excluding any Indebtedness
incurred in accordance with Section 7.2 as in effect on the date of this
Agreement), an amount equal to 100% of the Net Cash Proceeds thereof shall be
applied on the date of such incurrence toward the prepayment of the Term Loans
and the reduction of the Revolving Credit Commitments as set forth in Section
2.10(d).
(b) Unless the Required Prepayment Lenders shall otherwise agree, if
on any date, the Borrower or any of its Subsidiaries shall receive Net Cash
Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied on such date toward the prepayment of the Term Loans and the reduction
of the Revolving Credit Commitments as set forth in Section 2.10(d); provided,
that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of
Asset Sales and Recovery Events that may be excluded from the foregoing
prepayment requirement pursuant to a Reinvestment Notice shall not exceed
$5,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be
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31
applied toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.10(d).
(c) Unless the Required Prepayment Lenders shall otherwise agree, if,
for any fiscal year of the Borrower commencing with the fiscal year ending
December 31, 1999, there shall be Excess Cash Flow, the Borrower shall, on the
relevant Excess Cash Flow Application Date, apply the ECF Percentage of such
Excess Cash Flow toward the prepayment of the Term Loans and the reduction of
the Revolving Credit Commitments as set forth in Section 2.10(d). Each such
prepayment and commitment reduction shall be made on a date (an "Excess Cash
Flow Application Date") no later than five days after the earlier of (i) the
date on which the financial statements of the Borrower referred to in Section
6.1(a), for the fiscal year with respect to which such prepayment is made, are
required to be delivered to the Lenders and (ii) the date such financial
statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to this Section shall be applied, first, to
the prepayment of the Term Loans and, second, to reduce permanently the
Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of the Revolving Credit Loans to
the extent, if any, that the Total Revolving Extensions of Credit exceed the
amount of the Total Revolving Credit Commitments as so reduced, provided that if
the aggregate principal amount of Revolving Credit Loans then outstanding is
less than the amount of such excess (because L/C Obligations constitute a
portion thereof), the Borrower shall, to the extent of the balance of such
excess, replace outstanding Letters of Credit and/or deposit an amount in cash
in a cash collateral account established with the Administrative Agent for the
benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent. The application of any prepayment pursuant to this Section
shall be made, first, to Base Rate Loans and, second, to Eurodollar Loans. Each
prepayment of the Loans under this Section (except in the case of Revolving
Credit Loans that are Base Rate Loans) shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.
2.11 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Base Rate Loans to Eurodollar Loans by
giving the Administrative Agent at least three Business Days' prior irrevocable
notice of such election (which notice shall specify the length of the initial
Interest Period therefor), provided that no Base Rate Loan under a particular
Facility may be converted into a Eurodollar Loan (i) when any Event of Default
has occurred and is continuing and the Administrative Agent or the Majority
Facility Lenders in respect of such Facility have determined in its or their
sole discretion not to permit such conversions or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
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(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of such Facility, and provided, further, that if the Borrower
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to Base Rate Loans on the last day of
such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, (a) after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar Tranche shall be equal to $2,500,000 or a whole multiple of $500,000
in excess thereof and (b) no more than five Eurodollar Tranches shall be
outstanding at any one time.
2.13 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
or (y) in the case of Reimbursement Obligations, the rate applicable to Base
Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a
portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate then applicable
to Base Rate Loans under the relevant Facility plus 2% (or, in the case of any
such other amounts that do not relate to a particular Facility, the rate then
applicable to Base Rate Loans under the Revolving Credit Facility plus 2%), in
each case, with respect to clauses
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(i) and (ii) above, from the date of such non-payment until such amount is paid
in full (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
2.14 Computation of Interest and Fees. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.13(a).
2.15 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as Base Rate
Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans
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34
shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans
under the relevant Facility shall be converted, on the last day of the then
current Interest Period with respect thereto, to Base Rate Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans under the relevant Facility shall be made or continued as such, nor shall
the Borrower have the right to convert Loans under the relevant Facility to
Eurodollar Loans.
2.16 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made pro rata according to the respective Tranche A Term Loan Percentages,
Tranche B Term Loan Percentages or Revolving Credit Percentages, as the case may
be, of the relevant Lenders. Each payment (other than prepayments) in respect of
principal or interest in respect of the Loans, each payment in respect of fees
payable hereunder, and each payment in respect of Reimbursement Obligations,
shall be applied to the amounts of such obligations owing to the Lenders pro
rata according to the respective amounts then due and owing to the Lenders.
(b) Each mandatory prepayment required by Section 2.10 to be applied
to Term Loans shall be allocated among the Term Loan Facilities pro rata
according to the respective outstanding principal amounts of Term Loans under
such Facilities. Each optional prepayment in respect of the Term Loans shall be
allocated among the Term Loan Facilities in accordance with the Borrower's
instructions. Each payment (including each prepayment) of the Term Loans
outstanding under any Term Loan Facility shall be allocated among the Term Loan
Lenders holding such Term Loans pro rata based on the principal amount of such
Term Loans held by such Term Loan Lenders, and shall be applied to the
installments of such Term Loans pro rata based on the remaining outstanding
principal amount of such installments. Amounts prepaid on account of the Term
Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Sections 2.9, 2.10 or
2.16, so long as any Tranche A Term Loans are outstanding, each Tranche B Term
Loan Lender may, at its option, decline up to 100% of the portion of any
optional prepayment or mandatory payment applicable to the Tranche B Term Loans
of such Lender; accordingly, with respect to the amount of any optional
prepayment described in Section 2.9 or mandatory prepayment described in Section
2.10 that is allocated to Tranche B Term Loans (such amounts, the "Tranche B
Prepayment Amount"), at any time when Tranche A Term Loans remain outstanding,
the Borrower will, (i) in the case of any optional prepayment which the Borrower
wishes to make, not later than 20 Business Days prior to the date on which the
Borrower wishes to make such optional prepayment, and (ii) in the case of any
mandatory prepayment required to be made pursuant to Section 2.10, in lieu of
applying such amount to the
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35
prepayment of Tranche B Term Loans, as provided in paragraph Section 2.10(d), on
the date specified in Section 2.10 for such prepayment, give the Administrative
Agent telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Tranche B Lender a notice
(each, a "Prepayment Option Notice") as described below. As promptly as
practicable after receiving such notice from the Borrower, the Administrative
Agent will send to each Tranche B Lender a Prepayment Option Notice, which shall
be in the form of Exhibit H, and shall include an offer by the Borrower to
prepay on the date (each a "Prepayment Date") that is 10 Business Days after the
date of the Prepayment Option Notice, the Tranche B Term Loans of such Lender by
an amount equal to the portion of the Prepayment Amount indicated in such
Lender's Prepayment Option Notice as being applicable to such Lender's Tranche B
Term Loans. On the Prepayment Date, (i) the Borrower shall pay to the
Administrative Agent the aggregate amount necessary to prepay that portion of
the outstanding relevant Term Loans in respect of which Tranche B Lenders have
accepted prepayment as described above (such Lenders, the "Accepting Lenders")
with such amount being applied to reduce the Tranche B Prepayment Amounts with
respect to each Accepting Lender, and (ii) the Borrower shall pay to the
Administrative Agent an amount equal to the portion of the Tranche B Prepayment
Amount not accepted by the Accepting Lenders with such amount being applied to
the prepayment of the Tranche A Term Loans.
(e) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Payment Office, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(f) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such
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36
amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this paragraph shall be conclusive in the absence of manifest error. If
such Lender's share of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon at the rate per annum applicable to Base Rate Loans under
the relevant Facility, on demand, from the Borrower.
(g) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.17 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by Section 2.18 and changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall
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37
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
Section, it shall promptly notify the Borrower (with a copy to the
Administrative Agent) of the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.18 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on any Agent or any Lender as a result of a present or former connection
between such Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from such
Agents or such Lenders having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are
required to be withheld from any amounts payable to any Agent or any Lender
hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section or
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(ii) that are United States withholding taxes imposed on amounts payable to such
Lender at the time the Lender becomes a party to this Agreement, except to the
extent that such Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
Non-Excluded Taxes pursuant to Section 2.18(a).
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agents and the Lenders
for any incremental taxes, interest or penalties that may become payable by any
Agent or any Lender as a result of any such failure. The agreements in this
Section 2.18 shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest" a statement substantially in the form of
Exhibit I and a Form W-8, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be
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39
required to deliver any form pursuant to this paragraph that such Non-U.S.
Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation and in such
Lender's reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
2.19 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on
a day which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.20 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If
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40
any such conversion of a Eurodollar Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the Borrower shall
pay to such Lender such amounts, if any, as may be required pursuant to Section
2.19.
2.21 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.17, 2.18(a) or
2.20 with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.17, 2.18(a) or 2.20.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day during the
Revolving Credit Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate amount of the Available Revolving Credit Commitments would be less
than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii)
expire no later than the earlier of (x) the first anniversary of its date of
issuance and (y) the date which is five Business Days prior to the Scheduled
Revolving Credit Termination Date, provided that any Letter of Credit with a
one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(c) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may from
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and
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41
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof. The
Issuing Lender shall promptly furnish to the Administrative Agent, which shall
in turn promptly furnish to the Lenders, notice of the issuance of each Letter
of Credit (including the amount thereof).
3.3 Fees and Other Charges. (a) The Borrower will pay a fee on the
aggregate drawable amount of all outstanding Letters of Credit at a per annum
rate equal to the Applicable Margin then in effect with respect to Eurodollar
Loans under the Revolving Credit Facility, shared ratably among the Revolving
Credit Lenders and payable quarterly in arrears on each L/C Fee Payment Date
after the issuance date. In addition, the Borrower shall pay to the Issuing
Lender for its own account a fronting fee on the aggregate drawable amount of
all outstanding Letters of Credit of 1/8 of 1% per annum, payable quarterly in
arrears on each L/C Fee Payment Date after the issuance date.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily
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42
average Federal Funds Effective Rate during the period from and including the
date such payment is required to the date on which such payment is immediately
available to the Issuing Lender, times (iii) a fraction the numerator of which
is the number of days that elapse during such period and the denominator of
which is 360. If any such amount required to be paid by any L/C Participant
pursuant to Section 3.4(a) is not made available to the Issuing Lender by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Base Rate Loans under the Revolving Credit
Facility. A certificate of the Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Each such payment shall be made
to the Issuing Lender at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Section from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full at the
rate set forth in (i) until the second Business Day following the date of the
applicable drawing, Section 2.13(b) and (ii) thereafter, Section 2.13(c). Each
drawing under any Letter of Credit shall (unless an event of the type described
in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with
respect to the Borrower, in which case the procedures specified in Section 3.4
for funding by L/C Participants shall apply) constitute a request by the
Borrower to the Administrative Agent for a borrowing pursuant to Section 2.5 of
Base Rate Loans in the amount of such drawing. The Borrowing Date with respect
to such borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower
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43
also agrees with the Issuing Lender that the Issuing Lender shall not be
responsible for, and the Borrower's Reimbursement Obligations under Section 3.5
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall in
fact prove to be invalid, fraudulent or forged, or any dispute between or among
the Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Issuing Lender. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards or care specified in
the Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender to the
Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
3.9 Participating Interest in Existing Letters of Credit. (a) Prior to
the date of this Agreement, U.S. Bank, N.A. (the "Existing Issuing Bank")
issued, for the account of the Borrower, the letters of credit described on
Schedule 3.9 (the "Existing Letters of Credit"). On the Closing Date, LCPI, will
enter into the Participation Agreement, substantially in the form of Exhibit M
(the "Participation Agreement").
(b) LCPI irrevocably agrees to grant and hereby grants to each
Revolving Credit Lender, and, to induce LCPI to enter into the Participation
Agreement, each Revolving Credit Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from LCPI, on the terms and conditions
hereinafter stated, for such Revolving Credit Lender's own account and risk, an
undivided interest equal to such Revolving Credit Lender's Revolving Credit
Percentage in LCPI's obligations and rights under the Participation Agreement.
Each Revolving Credit Lender unconditionally and irrevocably agrees with LCPI
that, if LCPI makes a payment to the Existing Issuing Bank under the
Participation Agreement
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44
for which LCPI is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such Revolving Credit Lender shall pay to LCPI upon
demand at the Payment Office an amount equal to such Revolving Credit Lender's
Revolving Credit Percentage of the amount of such payment, or any part thereof,
which is not so reimbursed.
(c) If any amount required to be paid by any Revolving Credit Lender
to LCPI pursuant to this Section is paid to LCPI within three Business Days
after the date such payment is due, such Revolving Credit Lender shall pay to
LCPI on demand an amount equal to the product of (i) such amount, times (ii) the
daily average Federal Funds Effective Rate during the period from and including
the date such payment is required to the date on which such payment is
immediately available to LCPI, times (iii) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any Revolving Credit Lender
pursuant to this Section is not made available to LCPI by such Revolving Credit
Lender within three Business Days after the date such payment is due, LCPI shall
be entitled to recover from such Revolving Credit Lender, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans under the Revolving Credit Facility. A certificate
of LCPI submitted to any Revolving Credit Lender with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.
(d) Whenever, at any time after LCPI has made payment under the
Participation Agreement and has received from any Revolving Credit Lender its
pro rata share of such payment in accordance with Section 3.4(a), LCPI receives
any payment related to such payment (whether directly from the Borrower or
otherwise, including proceeds of collateral applied thereto by LCPI), or any
payment of interest on account thereof, LCPI will distribute to such Revolving
Credit Lender its pro rata share thereof; provided, however, that in the event
that any such payment received by LCPI shall be required to be returned by LCPI,
such Revolving Credit Lender shall return to LCPI the portion thereof previously
distributed by LCPI to it.
(e) The Borrower agrees to reimburse LCPI on each date on which LCPI
notifies the Borrower of the date and amount of a payment made by it under the
Participation Agreement for the amount of (i) such payment and (ii) any taxes,
fees, charges or other costs or expenses incurred by LCPI in connection with
such payment. Each such payment shall be made to LCPI at the Payment Office in
lawful money of the United States of America and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Section from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full at the
rate set forth in Section 2.13(c).
(f) The Borrower will pay a fee on the aggregate drawable amount of
all outstanding Existing Letters of Credit at a per annum rate equal to the
Applicable Margin then in effect with respect to Eurodollar Loans under the
Revolving Credit Facility, shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee
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45
Payment Date. In addition, the Borrower shall pay to LCPI for its own account a
fronting fee on the aggregate drawable amount of all outstanding Existing
Letters of Credit of 1/8 of 1% per annum, payable quarterly in arrears on each
L/C Fee Payment Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and
to make the Loans and issue or participate in the Letters of Credit, the
Borrower hereby represents and warrants to each Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at June 30, 1998 (including the notes thereto) (the "Pro Forma Balance Sheet"),
copies of which have heretofore been furnished to each Lender, has been prepared
giving effect (as if such events had occurred on such date) to (i) the Loans to
be made on the Closing Date and the use of proceeds thereof and (ii) the payment
of fees and expenses in connection with the foregoing. The Pro Forma Balance
Sheet has been prepared based on the best information available to the Borrower
as of the date of delivery thereof, and presents fairly on a pro forma basis the
estimated financial position of Borrower and its consolidated Subsidiaries as at
June 30, 1998, assuming that the events specified in the preceding sentence had
actually occurred at such date.
(b) The audited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as at December 31, 1996 and December 31, 1997, and the
related consolidated statements of income and of cash flows for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report
from KPMG Peat Marwick LLP, present fairly the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at June 30, 1998, and the
related unaudited consolidated statements of income and cash flows for the
six-month period ended on such date, present fairly the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of its operations and its consolidated cash flows for
the six-month period then ended (subject to normal year-end audit adjustments).
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). The Borrower and its Subsidiaries do not
have any material Guarantee Obligations, contingent liabilities and liabilities
for taxes, or any long-term leases or unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, which are
not reflected in the most recent financial statements referred to in this
paragraph. During the period from December 31, 1997 to and including the date
hereof there has been no Disposition by the Borrower or any Subsidiary of any
material part of its business or Property.
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46
4.2 No Change. Since December 31, 1997 there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the Borrower and
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the corporate
power and authority, and the legal right, to own and operate its Property, to
lease the Property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such
qualification, except to the extent that any failure to be so qualified could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect and (ii) the
filings referred to in Section 4.19. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party thereto, enforceable against each such
Loan Party in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of the Borrower or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents). No Requirement of Law or Contractual
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47
Obligation applicable to the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) which could reasonably be expected to have a Material
Adverse Effect.
4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other Property, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its Subsidiaries
owns, or is licensed to use, all Intellectual Property necessary for the conduct
of its business as currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property, nor does
or the Borrower know of any valid basis for any such claim. The use of
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person in any material respect.
4.10 Taxes. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all Federal, state and other material tax returns
which are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
Property and all other taxes, fees or other charges imposed on it or any of its
Property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose which violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent
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48
and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 or FR Form G-3, as applicable, referred to in
Regulation U. The assets of the Borrower and its Subsidiaries constituting
"margin stock" within the meaning of Regulation U do not and will not at any
time constitute more than 7% in value of the assets of the Borrower and its
Subsidiaries.
4.12 Labor Matters. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of
the Borrower, threatened that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. All payments due from
the Borrower or any of its Subsidiaries on account of employee health and
welfare insurance that (individually or in the aggregate) could reasonably be
expected to have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of the Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan
which has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 4.15
constitute all the Subsidiaries of the Borrower at the date hereof, Schedule
4.15 sets forth as of the Closing
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49
Date the name and jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by any
Loan Party.
(b) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees or directors and directors' qualifying shares) of any nature relating
to any Capital Stock of the Borrower or any Subsidiary.
4.16 Use of Proceeds. The proceeds of the Term Loans shall be used to
refinance in full all Indebtedness under the Existing Credit Facilities, to
finance repurchases by the Borrower of its common stock to the extent permitted
by Section 7.6(b) and to fund Capital Expenditures and general corporate
purposes of the Borrower and its Subsidiaries. The proceeds of the Revolving
Credit Loans and the Letters of Credit shall be used to fund letters of credit,
Capital Expenditures and general working capital purposes of the Borrower and
its Subsidiaries in the ordinary course of business.
4.17 Environmental Matters. Other than exceptions to any of the
following that could not, individually or in the aggregate, reasonably be
expected to result in the payment of a Material Environmental Amount:
(a) the Borrower and its Subsidiaries: (i) are, and within the period
of all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws; (ii) hold all Environmental Permits (each of
which is in full force and effect) required for any of their current or
intended operations or for any property owned, leased, or otherwise
operated by any of them; (iii) are, and within the period of all applicable
statutes of limitation have been, in compliance with all of their
Environmental Permits; and (iv) reasonably believe that: each of their
Environmental Permits will be timely renewed and complied with, without
material expense; any additional Environmental Permits that may be required
of any of them will be timely obtained and complied with, without material
expense; and compliance with any Environmental Law that is or is expected
to become applicable to any of them will be timely attained and maintained,
without material expense.
(b) Materials of Environmental Concern are not present at, on, under,
in, or about any real property now or formerly owned, leased or operated by
the Borrower or any of its Subsidiaries, or at any other location
(including, without limitation, any location to which Materials of
Environmental Concern have been sent for re-use or recycling or for
treatment, storage, or disposal) which could reasonably be expected to (i)
give rise to liability of the Borrower or any of its Subsidiaries under any
applicable Environmental Law or otherwise result in costs to the Borrower
or any of its Subsidiaries, or (ii) interfere with the Borrower's or any of
its Subsidiaries' continued operations, or (iii) impair the fair saleable
value of any real property owned or leased by the Borrower or any of its
Subsidiaries.
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(c) There is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating
to any Environmental Law to which the Borrower or any of its Subsidiaries
is, or to the knowledge of the Borrower or any of its Subsidiaries will be,
named as a party that is pending or, to the knowledge of the Borrower or
any of its Subsidiaries, threatened.
(d) Neither the Borrower nor any of its Subsidiaries has received any
written request for information, or been notified that it is a potentially
responsible party under or relating to the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or with respect to any Materials of Environmental
Concern.
(e) Neither the Borrower nor any of its Subsidiaries has entered into
or agreed to any consent decree, order, or settlement or other agreement,
or is subject to any judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum for dispute resolution,
relating to compliance with or liability under any Environmental Law.
(f) Neither the Borrower nor any of its Subsidiaries has assumed or
retained, by contract or operation of law, any liabilities of any kind,
fixed or contingent, known or unknown, under any Environmental Law or with
respect to any Material of Environmental Concern.
4.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
to the Administrative Agent or the Lenders or any of them, by or on behalf of
any Loan Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished (or, in the case of the
Confidential Information Memorandum, as of the date of this Agreement), any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. The projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the Agents and the Lenders for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
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4.19 Security Documents. (a) The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Collateral Agreement, when any stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 4.19(a) (which financing statements have been duly
completed and executed and delivered to the Administrative Agent) and such other
filings as are specified on Schedule 3 to the Guarantee and Collateral Agreement
(all of which filings have been duly completed), the Guarantee and Collateral
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in such Collateral and the
proceeds thereof, as security for the Obligations (as defined in the Guarantee
and Collateral Agreement), in each case prior and superior in right to any other
Person (except, in the case of Collateral other than Pledged Stock, Liens
permitted by Section 7.3).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b), each such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Mortgaged Properties and the proceeds thereof, as security for the Obligations
(as defined in the relevant Mortgage), in each case prior and superior in right
to any other Person.
(c) The Aircraft Mortgage is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Aircraft and proceeds thereof, and when the filings and
recordings specified in the Aircraft Mortgage have been duly effected, the
Aircraft Mortgage shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in the Aircraft
and the proceeds thereof, as security for the Obligations (as defined in the
Aircraft Mortgage), prior and superior in right to any other Person.
4.20 Solvency. Each Loan Party is, and after giving effect to the
incurrence of all Indebtedness and obligations being incurred in connection
herewith will be and will continue to be, Solvent (excluding in such
determination any payables or receivables between or among one or more Loan
Parties).
4.21 Regulation H. No Mortgage encumbers improved real property which
is located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
4.22 Year 2000 Matters. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's
computer systems and (ii)
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equipment containing embedded microchips (including systems and equipment
supplied by others or with which Borrower's systems interface) and the testing
of all such material systems and equipment, as so reprogrammed, will be
completed by January 1, 1999. The cost to the Borrower of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower (including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
the Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient to
permit the Borrower to conduct its business without Material Adverse Effect.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of the Borrower and each Subsidiary
Guarantor, (iii) a Mortgage covering each of the Mortgaged Properties,
executed and delivered by a duly authorized officer of each party thereto,
(iv) the Aircraft Mortgage, executed by a duly authorized officer of each
party thereto, and (v) for the account of each relevant Lender, Notes
conforming to the requirements hereof and executed and delivered by a duly
authorized officer of the Borrower.
(b) Pro Forma Balance Sheet; Financial Statements. The Lenders shall
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of the Borrower and its consolidated Subsidiaries for
the 1996 and 1997 fiscal years and (iii) unaudited interim consolidated
financial statements of the Borrower and its consolidated Subsidiaries for
each fiscal quarterly period ended subsequent to the date of the latest
applicable financial statements delivered pursuant to clause (ii) of this
paragraph as to which such financial statements are available, and such
financial statements shall not, in the reasonable judgment of the Lenders,
reflect any material adverse change in the consolidated financial condition
of the Borrower and its consolidated Subsidiaries, as reflected in the
financial statements or projections contained in the Confidential
Information Memorandum.
(c) Approvals. All governmental and third party approvals necessary in
connection with the continuing operations of the Borrower and its
Subsidiaries and the
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53
transactions contemplated hereby shall have been obtained and be in full
force and effect.
(d) Related Agreements. The Administrative Agent shall have received
(in a form reasonably satisfactory to the Syndication Agent), with a copy
for each Lender, true and correct copies, certified as to authenticity by
the Borrower, of such documents or instruments as may be reasonably
requested by the Syndication Agent, including, without limitation, copies
of contracts with lottery authorities and licenses issued by any
Governmental Authority and a copy of any debt instrument, security
agreement or other material contract to which the Loan Parties may be a
party.
(e) Termination of Existing Credit Facilities. The Administrative
Agent shall have received evidence satisfactory to the Administrative Agent
and the Syndication Agent that the Existing Credit Facilities shall be
simultaneously terminated, all amounts thereunder shall be simultaneously
paid in full and arrangements satisfactory to the Syndication Agent and the
Administrative Agent shall have been made for the termination of Liens and
security interests granted in connection therewith.
(f) Fees. The Lenders, Syndication Agent and the Administrative Agent
shall have received all fees required to be paid, and all expenses for
which invoices have been presented (including reasonable fees,
disbursements and other charges of counsel to the Agents), on or before the
Closing Date. All such amounts will be paid with proceeds of Loans made on
the Closing Date and will be reflected in the funding instructions given by
the Borrower to the Administrative Agent on or before the Closing Date.
(g) Business Plan. The Lenders shall have received a satisfactory
business plan for fiscal years 1998-2004 and a satisfactory written
analysis of the business and prospects of the Borrower and its Subsidiaries
for the period from the Closing Date through September 30, 2004.
(h) Solvency Analysis. The Lenders shall have received a reasonably
satisfactory solvency analysis certified by the chief financial officer of
the Borrower which shall document the solvency of the Borrower and its
Subsidiaries considered as a whole after giving effect to the transactions
contemplated hereby.
(i) Lien Searches. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no liens on
any of the assets of the Borrower or its Subsidiaries except for liens
permitted by Section 7.3.
(j) Environmental Matters. The Administrative Agent shall have
received, with a copy for each Lender, a written environmental assessment
regarding the Borrower and its Subsidiaries, prepared by an environmental
consultant acceptable to the
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54
Administrative Agent, in form, scope, and substance satisfactory to the
Administrative Agent, together with a letter from the environmental
consultant permitting the Agents and the Lenders to rely on the
environmental assessment as if addressed to and prepared for each of them.
(k) Closing Certificate. The Administrative Agent shall have received
a certificate of each Loan Party, dated the Closing Date, substantially in
the form of Exhibit C, with appropriate insertions and attachments.
(l) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:
(i) the legal opinion of Rogers & Hardin, counsel to the Borrower
and its Subsidiaries, substantially in the form of Exhibit F-1; and
(ii) the legal opinion of Daugherty, Fowler & Peregrin, Special
Counsel for matters related to the Aircraft, and
(iii) the legal opinion of local counsel in each of Delaware,
Florida, Montana, New Mexico, Nevada, and Pennsylvania and of such
other special and local counsel as may be required by the
Administrative Agent
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(m) Pledged Stock; Stock Power; Pledged Notes . The Administrative
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral Agreement,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the pledgor thereof and (ii) each
Material Promissory Note pledged to the Administrative Agent pursuant to
the Guarantee and Collateral Agreement endorsed (without recourse) in blank
(or accompanied by an executed transfer form in blank satisfactory to the
Syndication Agent) by the pledgor thereof.
(n) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
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55
(o) Title Insurance; Flood Insurance. (i) If requested by the
Administrative Agent, the Administrative Agent shall have received, and the
title insurance company issuing the policy referred to in clause (ii) below
(the "Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of the Mortgaged Properties certified to the
Administrative Agent and the Title Insurance Company in a manner
satisfactory to them, dated a date satisfactory to the Administrative Agent
and the Title Insurance Company by an independent professional licensed
land surveyor satisfactory to the Administrative Agent and the Title
Insurance Company, which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the foregoing,
there shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings, structures
and other improvements and the established building setback lines; (B) the
lines of streets abutting the sites and width thereof; (C) all access and
other easements appurtenant to the sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building structures and
improvements on the sites; (F) if the site is described as being on a filed
map, a legend relating the survey to said map; and (G) the flood zone
designations, if any, in which the Mortgaged Properties are located.
(ii) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such insurance. Each such policy shall
(A) be in an amount satisfactory to the Administrative Agent; (B) be issued
at ordinary rates; (C) insure that the Mortgage insured thereby creates a
valid first Lien on such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (D) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (E) be in
the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or
equivalent policies); (F) contain such endorsements and affirmative
coverage as the Administrative Agent may reasonably request and (G) be
issued by title companies satisfactory to the Administrative Agent
(including any such title companies acting as co-insurers or reinsurers, at
the option of the Administrative Agent). The Administrative Agent shall
have received evidence satisfactory to it that all premiums in respect of
each such policy, all charges for mortgage recording tax, and all related
expenses, if any, have been paid.
(iii) If requested by the Administrative Agent, the Administrative
Agent shall have received (A) a policy of flood insurance which (1) covers
any parcel of improved real property which is encumbered by any Mortgage
(2) is written in an amount not less than the outstanding principal amount
of the indebtedness secured by such Mortgage
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56
which is reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property
under the National Flood Insurance Act of 1968, whichever is less, and (3)
has a term ending not later than the maturity of the Indebtedness secured
by such Mortgage and (B) confirmation that the Borrower has received the
notice required pursuant to Section 208(e)(3) of Regulation H of the Board.
(iv) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in clause (ii) above and a copy of all
other material documents affecting the Mortgaged Properties.
(p) Insurance. The Administrative Agent shall have received insurance
certificates satisfying the requirements of Section 5.3 of the Guarantee
and Collateral Agreement.
5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall and shall cause
each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the
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57
Borrower and its consolidated Subsidiaries as at the end of such year and
the related audited consolidated statements of income and of cash flows for
such year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by KPMG Marwick LLP or other independent certified public
accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Agent and each
Lender, or, in the case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of each such Responsible Officer's knowledge, each Loan
Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (ii) in the case of quarterly or annual
financial statements, (x) a Compliance Certificate containing all
information and calculations necessary for determining compliance by the
Borrower and its Subsidiaries with the provisions of this Agreement
referred to therein as of the last day of the fiscal quarter or fiscal year
of the Borrower, as the case may be, and (y) to the extent not previously
disclosed to the Administrative Agent, a listing of any county or state
within the United States where any Loan Party keeps inventory or equipment
having an aggregate book value in excess
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58
of $250,000 for any such state (excluding Excluded Assets) and of any
Intellectual Property acquired by any Loan Party since the date of the most
recent list delivered pursuant to this clause (y) (or, in the case of the
first such list so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45 days after
the end of each fiscal year of the Borrower, a detailed consolidated budget
for the following fiscal year (including a projected consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of the following
fiscal year, and the related consolidated statements of projected cash
flow, projected changes in financial position and projected income), and,
as soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrower, an analysis of the financial condition and results of operations
of the Borrower and its Subsidiaries for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of
such fiscal quarter, as compared to the portion of the current Projections
covering such periods and to the comparable periods of the previous year;
(e) within five days after the same are sent, copies of all financial
statements and reports which the Borrower sends to the holders of any class
of its debt securities or public equity securities and, within five days
after the same are filed, copies of all financial statements and reports
which the Borrower may make to, or file with, the SEC;
(f) as soon as possible and in any event within five Business Days of
obtaining knowledge thereof: (i) any development, event, or condition that,
individually or in the aggregate with other developments, events or
conditions, could reasonably be expected to result in the payment by the
Borrower and its Subsidiaries, in the aggregate, of a Material
Environmental Amount; and (ii) any notice that any governmental authority
may deny any application for an Environmental Permit sought by, or revoke
or refuse to renew any Environmental Permit held by, the Borrower; and
(g) promptly, such additional financial and other information as any
Lender, through the Administrative Agent, may from time to time reasonably
request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in
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59
good faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or its
Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence, etc. (a) (i)
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all Property and
systems useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance on all its Property in at
least such amounts and against at least such risks (but including in any event
public liability, product liability and business interruption insurance, and
errors and omissions insurance in respect of each Material Contract as are
usually insured against in the same general area by companies engaged in the
same or a similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants; provided, that the
Lenders will coordinate all such visits through the Administrative Agent such
that, so long as no Event of Default shall be in existence, there shall be no
more than 4 such visits in any fiscal year.
6.7 Notices. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries (other than as
specified in Section 6.7(d)) or (ii) litigation, investigation or
proceeding which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority, which in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
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60
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $2,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan;
(e) any of the following events, immediately after becoming aware
thereof: (i) the election by any party to any Material Contract (other than
the Borrower and its Subsidiaries) to terminate, or not to exercise in a
timely fashion, any option to renew or extend such Material Contract, if,
after giving pro forma effect to the termination of such Material Contract
as of the last day of the fiscal quarter most recently ended, the Borrower
would be in violation of any covenant contained in Section 7.1 or (ii) any
notice from any such party to any such Material Contract to the effect that
the Borrower or its Subsidiary, as the case may be, is in default under
such Material Contract; and
(f) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or the relevant Subsidiary proposes to take
with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with, and
ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Interest Rate Protection. In the case of the Borrower, within 90
days after the Closing Date, enter into Hedge Agreements to the extent necessary
to provide that at least
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61
$25,000,000 of the aggregate principal amount of the Term Loans is subject to
interest rate protection for a period of not less than thirty months, which
Hedge Agreements shall have terms and conditions reasonably satisfactory to the
Administrative Agent.
6.10 Additional Collateral, etc. (a) With respect to any Property
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than (w) Excluded Assets, (x) any real property or the Capital Stock of
any new Subsidiary, (y) any Property subject to a Lien expressly permitted by
Section 7.3(g) and (z) Property acquired by an Excluded Foreign Subsidiary) as
to which the Administrative Agent, for the benefit of the Lenders, does not have
a perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a security interest in
such Property and (ii) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in such Property, including without limitation, the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $2,000,000 acquired after
the Closing Date by the Borrower or any of its Subsidiaries (other than any such
real property owned by an Excluded Foreign Subsidiary subject to a Lien
expressly permitted by Section 7.3(g)), promptly (i) execute and deliver a first
priority Mortgage in favor of the Administrative Agent, for the benefit of the
Lenders, covering such real property, (ii) if requested by the Administrative
Agent, provide the Lenders with (x) title and extended coverage insurance
covering such real property in an amount at least equal to the purchase price of
such real estate (or such other amount as shall be reasonably specified by the
Administrative Agent) as well as a current ALTA survey thereof, together with a
surveyor's certificate and (y) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection with such
mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent and (iii) if requested by
the Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary), by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Collateral Agreement as the Administrative Agent deems
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in the Capital Stock
of such new Subsidiary which is owned by the Borrower or any of its Subsidiaries
(unless such
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62
Capital Stock constitutes Excluded Assets), (ii) deliver to the Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers, in blank, executed and delivered by a duly authorized officer of
the Borrower or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and
(B) to take such actions necessary or advisable to grant to the Administrative
Agent for the benefit of the Lenders a perfected first priority security
interest in the Collateral described in the Guarantee and Collateral Agreement
with respect to such new Subsidiary, including, without limitation, the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Collateral Agreement as the Administrative Agent deems
necessary or advisable in order to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Borrower or any of
its Subsidiaries (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, and take such other action as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Lien of the
Administrative Agent thereon, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
6.11 Further Assurances. In the case of the Borrower, from time to
time execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates or documents, and take all such actions, as the
Administrative Agent may reasonably request, for the purposes of implementing or
effectuating the provisions of this Agreement and the other Loan Documents, or
of more fully perfecting or renewing the rights of the Administrative Agent and
the Lenders with respect to the Collateral (or with respect to any additions
thereto or replacements or proceeds thereof or with respect to any other
property or assets hereafter acquired by the Borrower which may be deemed to be
part of the Collateral) pursuant hereto or thereto. Upon the exercise by the
Administrative Agent or any Lender of any power, right, privilege or remedy
pursuant to this Agreement or the other Loan Documents which requires any
consent, approval, recording, qualification or authorization of any Governmental
Authority, the Borrower will execute and deliver, or will cause the execution
and delivery of, all applications, certifications, instruments and other
documents and papers that the Administrative Agent or such Lender may be
required to obtain from the
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63
Borrower or any of its Subsidiaries for such governmental consent, approval,
recording, qualification or authorization.
6.12 Removal of Prohibition on Negative Pledge. On the Closing Date or
promptly thereafter, initiate and pursue all actions and execute all
instruments, documents, certificates and agreements necessary to remove the
prohibition on the negative pledge of assets in the State of Nevada.
6.13 Completion of Phase II Evaluation. Within sixty days of the
Closing Date, (i) have conducted and completed by an environmental consultant
acceptable to the Administrative Agent (the "Environmental Consultant") a Phase
II written environmental assessment of the property of Nuevo Sol Turf Club Inc.
commonly known as "Sunland Park" and located in Dona Ana County, New Mexico and
in El Paso County, Texas in form, scope and substance satisfactory to the
Administrative Agent, together with a letter from such environmental consultant
permitting the Agents and the Lenders to rely on the environmental assessment as
if addressed to and prepared for each of them and (ii) with respect to any
recommendation in such assessment, such recommendation shall have been completed
to the satisfaction of the Environmental Consultant (as set forth in a
certificate signed by the Environmental Consultant) or the Administrative Agent
shall be satisfied that appropriate actions have been taken so that such
recommendation will be implemented in a timely manner.
6.14 Surveys. Within sixty days of the Closing Date, deliver or have
delivered to both the Administrative Agent and the applicable title insurance
company maps or plats of an as-built survey of the sites of the owned real
property covered by the Mortgages certified to the Administrative Agent and the
applicable title insurance company in a manner reasonably satisfactory to them,
dated a date reasonably satisfactory to the Administrative Agent and the
applicable title insurance company by an independent professional licensed land
surveyor reasonably satisfactory to the Administrative Agent and the applicable
title insurance company, which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard Detail Requirements
for Land Title Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be surveyed
and shown on such maps, plats or surveys the following: (i) the locations on
such sites of all the buildings, structures and other improvements and the
established building setback lines; (ii) the lines of streets abutting the sites
and width thereof; (iii) all access and other easements appurtenant to the sites
necessary to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances affecting the
sites, whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (v) any encroachments on any adjoining property
by the building structures and improvements on the sites; and (vi) if the site
is described as being on a filed map, a legend relating the survey to said map.
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64
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to the
Closing Date) ending during any period set forth below to exceed the ratio set
forth below opposite such period:
Consolidated
Period Leverage Ratio
------ --------------
Closing Date - 12/31/00 3.0 to 1.0
Thereafter 2.5 to 1.0
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to the
Closing Date) ending during any period set forth below to be less than the ratio
set forth below opposite such fiscal quarter:
Consolidated Interest
Fiscal Quarter Coverage Ratio
Closing Date - 12/31/98 3.5 to 1.0
1/1/99-12/31/99 4.0 to 1.0
1/1/00-12/31/00 4.5 to 1.0
thereafter 5.0 to 1.0
(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrower (or, if less, the number of full fiscal quarters subsequent to
the Closing Date) to be less than 2.50 to 1.00.
(d) Maintenance of Consolidated Net Worth. Permit Consolidated Net
Worth as of the last day of any fiscal quarter of the Borrower to be less than
the sum of (i) $76,449,000 plus (ii) 75% of the sum of (A) all proceeds received
by the Borrower after the Closing Date and on or prior to the last day of such
fiscal quarter from the sale of the Borrower's equity plus (B) the amount of
positive Consolidated Net Income for each fiscal
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65
quarter ended after the Closing Date through and including the fiscal quarter in
respect of which the calculation is being made.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any Wholly
Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
(c) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $3,000,000 at any one time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on Schedule
7.2(d) and any refinancings, refundings, renewals or extensions thereof
(without any increase in the principal amount thereof or any shortening of
the maturity of any principal amount thereof);
(e) Indebtedness of any Foreign Subsidiary, so long as (i) the holders
of such Indebtedness have no recourse to the Borrower or any of its
Domestic Subsidiaries or to any assets other than the assets of such
Foreign Subsidiary and (ii) the aggregate principal amount of such
Indebtedness of all Foreign Subsidiaries does not at any time exceed
$15,000,000; and
(f) Guarantee Obligations made in the ordinary course of business (i)
by the Borrower or any of its Subsidiaries of obligations of the Borrower
or any Subsidiary Guarantor, and (ii) by the Route Companies of obligations
of any current or prospective customer or client in respect of any
remodeling or upgrading that would enable such customer or client to lease
or purchase equipment from such Route Company; provided, however, that the
total amount of Guarantee Obligations permitted under this clause (ii)
shall not exceed an aggregate of $1,500,000.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except
for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a
<PAGE>
66
period of more than 30 days or which are being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(d), provided that no such
Lien is spread to cover any additional Property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition
of fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any Property other than
the Property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) Liens on Property used to operate on-line lottery systems created
by contracts with any state lottery commission relating to such systems;
and
(j) any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased.
provided, however, that until the prohibition on the negative pledge of assets
in the State of Nevada has been removed, the provisions of this Section 7.3
shall not apply to the Capital Stock of Video Lottery Consultants, Inc. and VLC
of Nevada, Inc.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, except that:
<PAGE>
67
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Subsidiary Guarantor (provided
that the Subsidiary Guarantor shall be the continuing or surviving
corporation); and
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary Guarantor.
7.5 Limitation on Disposition of Property. Dispose of any of its
Property (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) the sale of inventory in the ordinary course of business, and the
sale of receivables for collection in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Subsidiary Guarantor;
(e) the Disposition of other assets having a fair market value not to
exceed $5,000,000 in the aggregate for any fiscal year of the Borrower; and
(f) any Recovery Event, provided, that the requirements of Section
2.10(b) are complied with in connection therewith.
provided, however, that until the prohibition on the negative pledge of assets
in the State of Nevada has been approved, the provisions of this Section 7.5
shall not apply to the Capital Stock of Video Lottery Consultants, Inc. and VLC
of Nevada, Inc.
7.6 Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of the Borrower or any
Subsidiary, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Borrower or any Subsidiary (collectively, "Restricted
Payments"), except that:
<PAGE>
68
(a) any Subsidiary may make Restricted Payments to the Borrower or any
Subsidiary Guarantor; and
(b) so long as no Default or Event of Default shall have occurred and
be continuing, the Borrower may spend up to $10,000,000 in the aggregate to
repurchase shares of the Borrower's common stock.
7.7 Limitation on Capital Expenditures. Make or commit to make any
Capital Expenditure, except (a) Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business not exceeding, for any fiscal
year set forth below, the amount set forth opposite such fiscal year:
Fiscal Year Amount
1998 $42,000,000
1999 50,000,000
2000 52,000,000
2001 23,000,000
2002 30,000,000
2003 30,000,000
2004 16,000,000
provided, that (i) up to 25% of any such amount referred to above, if not so
expended in the fiscal year for which it is permitted, may be carried over for
expenditure in the next succeeding fiscal year and (ii) Capital Expenditures
made pursuant to this clause (a) during any fiscal year shall be deemed made,
first, in respect of amounts carried over from the prior fiscal year pursuant to
subclause (i) above and, second, in respect of amounts permitted for such fiscal
year as provided above and (b) Capital Expenditures made with the proceeds of
any Reinvestment Deferred Amount.
7.8 Limitation on Investments. Make any advance, loan, extension of
credit (by way of guaranty or otherwise) or capital contribution to, or purchase
any Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting an ongoing business from, or make any other investment in,
any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of
Indebtedness permitted by Section 7.2(b) and (e) ;
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69
(d) loans and advances to employees of the Borrower or any
Subsidiaries of the Borrower in the ordinary course of business (including,
without limitation, for travel, entertainment and relocation expenses) in
an aggregate amount for the Borrower and Subsidiaries of the Borrower not
to exceed $1,000,000 at any one time outstanding;
(e) Investments by the Borrower and its Subsidiaries in potential
business partners in the United States, such as race tracks, technology
companies, casinos and other similar entities engaged in the same or
similar lines of business as those engaged in on the Closing Date by the
Borrower and its Subsidiaries, in an aggregate amount not exceeding
$10,000,000;
(f) Investments by the Borrower and its Domestic Subsidiaries in
Foreign Subsidiaries, provided, that such Investments are permitted by
Section 7.15;
(g) Investments in assets useful in the Borrower's business made by
the Borrower or any of its Subsidiaries with the proceeds of any
Reinvestment Deferred Amount; and
(h) Investments (other than those relating to the incurrence of
Indebtedness permitted by Section 7.8(c)) by the Borrower or any of its
Subsidiaries in the Borrower or any Person that, prior to such investment,
is a Subsidiary Guarantor.
7.9 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of the
Borrower or such Subsidiary, as the case may be, and (c) upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate.
7.10 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.
7.11 Limitation on Changes in Fiscal Periods. Permit the fiscal year
of the Borrower to end on a day other than December 31 or change the Borrower's
method of determining fiscal quarters.
7.12 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
the Borrower or any of
<PAGE>
70
its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
of its Property or revenues, whether now owned or hereafter acquired, to secure
the Obligations or, in the case of any guarantor, its obligations under the
Guarantee and Collateral Agreement, other than (a) this Agreement and the other
Loan Documents, (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby), (c) any
agreements with state lottery authorities or other Governmental Authorities with
respect to Property used in connection with the operation of on-line lottery
systems, and (d) any prohibitions imposed by any Requirement of Law.
7.13 Limitation on Restrictions on Subsidiary Distributions. Enter
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (a) make Restricted Payments in
respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness
owed to, the Borrower or any other Subsidiary, (b) make Investments in the
Borrower or any other Subsidiary or (c) transfer any of its assets to the
Borrower or any other Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents and (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement which has been entered into in connection with the
Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary.
7.14 Limitation on Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries are engaged on the date of this Agreement and any
business directly related thereto.
7.15 Foreign Exposure Limitation. Permit the aggregate amount, without
duplication, of (a) Investments by the Borrower and its Domestic Subsidiaries in
Foreign Subsidiaries plus (b) of (1) all equipment and inventory located outside
the United States and owned by the Borrower and its Subsidiaries (including
Foreign Subsidiaries) and (2) all accounts receivable (whether or not evidenced
by a promissory note or other instrument, but in any event excluding Excluded
Foreign Accounts and Assets) owing to the Borrower and its Subsidiaries by
Persons other than Governmental Authorities of, or Persons organized under the
laws of, or resident in, the United States or any state thereof, including the
District of Columbia, to exceed at any time (i) $20,000,000 in the aggregate or
(ii) $10,000,000 in respect of any one country other than [Intentionally
Deleted] or (iii) $15,000,000, in the case of [Intentionally Deleted].
7.16 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of any Indebtedness other than the Loans or
(b) amend, modify or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of any other
Indebtedness, if such change would shorten its maturity or increase the interest
rate or fees applicable thereto or make any other change which would be
materially adverse to the interests of the Lenders.
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71
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or performance
of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to the Borrower only), Section 6.7(a), Section 7 or Sections 5.1,
5.5, 5.6, 5.7 and 5.9 of the Guarantee and Collateral Agreement or (ii) an
"Event of Default" under and as defined in any Mortgage shall have occurred
and be continuing; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days; or
(e) The Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness (including, without
limitation, any Guarantee Obligation, but excluding the Loans) on the
scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or condition
described in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii)
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72
and (iii) of this paragraph (e) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds
in the aggregate $500,000; or
(f) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or
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73
conditions, if any, could, in the sole judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving for the Borrower and its
Subsidiaries taken as a whole a liability (not paid or fully covered by
insurance as to which the relevant insurance company has acknowledged
coverage) of $2,000,000 or more, and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within
30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party or any Affiliate of any Loan
Party shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect, or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) (i) Any Material Contract shall be terminated or shall expire by
reason of the failure of any party thereto (other than the Borrower or any
Subsidiary of the Borrower) to exercise any right to extend such Material
Contract, if, after giving pro forma effect to the termination of such
Material Contract as of the first day of the period of four full fiscal
quarters most recently ended prior to the date of such termination or
expiration, the Borrower would be in violation of any covenant contained in
Section 7.1 or (ii) any license issued by any Governmental Authority to the
Borrower or any Subsidiary shall be terminated by such Governmental
Authority; or
(l) (i) Any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall become, or obtain rights (whether by means or
warrants, options or otherwise) to become, the "beneficial owner" (as
defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of more than 25% of the outstanding common stock of the
Borrower or (ii) the board of directors of the Borrower shall cease to
consist of a majority of Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default,
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74
either or both of the following actions may be taken: (i) with the consent of
the Majority Revolving Credit Facility Lenders, the Administrative Agent may, or
upon the request of the Majority Revolving Credit Facility Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Revolving
Credit Commitments to be terminated forthwith, whereupon the Revolving Credit
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) to be due and payable forthwith, whereupon the
same shall immediately become due and payable. With respect to all Letters of
Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower (or such other Person as may be lawfully entitled thereto).
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent
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shall be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform its obligations
hereunder or thereunder. The Agents shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any instrument, writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Loan Parties), independent accountants and other
experts selected by such Agent. The Agents may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. Each Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders (or,
if so specified by this Agreement, all Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
9.5 Notice of Default. No Agent shall be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless
such Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof
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to the Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders (or, if so specified by this Agreement, all Lenders); provided that
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent shall have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party which may
come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by or the Borrower and without
limiting the obligation of or the Borrower to do so), ratably according to their
respective Aggregate Exposure Percentages in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with such Aggregate Exposure
Percentages immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by such
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77
Agent under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements which are found by a final and nonappealable decision of a court
of competent jurisdiction to have resulted from such Agent's gross negligence or
willful misconduct. The agreements in this Section 9.7 shall survive the payment
of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With respect
to its Loans made or renewed by it and with respect to any Letter of Credit
issued or participated in by it, each Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
9.9 Successor Agents. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f) with
respect to the Borrower shall have occurred and be continuing) be subject to
approval by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective, and the
Lenders shall assume and perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. The Syndication Agent may, at any time, by notice
to the Lenders and the Administrative Agent, resign as Syndication Agent
hereunder, whereupon the duties, rights, obligations and responsibilities of the
Syndication Agent hereunder shall automatically be assumed by, and inure to the
benefit of, the Administrative Agent, without any further act by the Syndication
Agent, the Administrative Agent or any Lender. After any retiring Agent's
resignation as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
9.10 Authorization to Release Liens. The Administrative Agent is
hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the
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Borrower or any of its Subsidiaries that is the subject of a Disposition which
is permitted by this Agreement or which has been consented to in accordance with
Section 10.1.
9.11 The Arranger and the Documentation Agent. The Arranger and the
Documentation Agent, in their respective capacities as such, shall have no
duties or responsibilities, and shall incur no liability, under this Agreement
and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party to the relevant Loan Document may, or (with
the written consent of the Required Lenders) the Agents and each Loan Party to
the relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
(including amendments and restatements hereof or thereof) for the purpose of
adding any provisions to this Agreement or the other Loan Documents or changing
in any manner the rights of the Lenders or of the Loan Parties hereunder or
thereunder or (b) waive, on such terms and conditions as may be specified in the
instrument of waiver, any of the requirements of this Agreement or the other
Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (i) forgive the principal amount or extend the final
scheduled date of maturity of any Loan or Reimbursement Obligation, extend the
scheduled date of any amortization payment in respect of any Term Loan, reduce
the stated rate of any interest or fee payable hereunder or extend the scheduled
date of any payment thereof, or increase the amount or extend the expiration
date of any Commitment of any Lender, in each case without the consent of each
Lender directly affected thereby; (ii) amend, modify or waive any provision of
this Section or reduce any percentage specified in the definition of Required
Lenders or Required Prepayment Lenders, consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement and the
other Loan Documents, release all or substantially all of the Collateral or
release all or substantially all of the Subsidiary Guarantors from their
guarantee obligations under the Guarantee and Collateral Agreement, in each case
without the consent of all Lenders; (iii) amend, modify or waive any condition
precedent to any extension of credit under the Revolving Credit Facility set
forth in Section 5.2 (including, without limitation, the waiver of an existing
Default or Event of Default required to be waived in order for such extension of
credit to be made) without the consent of any Majority Revolving Credit Facility
Lenders; (iv) reduce the percentage specified in the definition of Majority
Facility Lenders with respect to any Facility without the written consent of all
Lenders under such Facility; (v) amend, modify or waive any provision of Section
9 without the consent of any Agent directly affected thereby; (vi) amend, modify
or waive any provision of Section 2.18 without the consent of each Lender
directly affected thereby; or (vii) amend, modify or waive any provision of
Section 3 without the consent of the Issuing Lender. Any such waiver and any
such amendment, supplement or
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modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon. Any such waiver, amendment, supplement or
modification shall be effected by a written instrument signed by the parties
required to sign pursuant to the foregoing provisions of this Section; provided,
that delivery of an executed signature page of any such instrument by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof. For the avoidance of doubt, this Agreement may be amended (or amended
and restated) with the written consent of the Required Lenders, the
Administrative Agent and each Loan Party to each relevant Loan Document (x) to
add one or more additional credit facilities to this Agreement and to permit the
extensions of credit from time to time outstanding thereunder and the accrued
interest and fees in respect thereof (collectively, the "Additional Extensions
of Credit") to share ratably in the benefits of this Agreement and the other
Loan Documents with the Term Loans and Revolving Extensions of Credit and the
accrued interest and fees in respect thereof and (y) to include appropriately
the Lenders holding such credit facilities in any determination of the Required
Lenders, Required Prepayment Lenders and Majority Revolving Facility Lenders;
provided, however, that no such amendment shall permit the Additional Extensions
of Credit to share ratably with or with preference to the Term Loans in the
application of mandatory prepayments without the consent of the Required
Prepayment Lenders or otherwise to share ratably with or with preference to the
Revolving Extensions of Credit without the consent of the Majority Revolving
Facility Lenders.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed (a) in the case of the Borrower and the Agents, as follows
and (b) in the case of the Lenders, as set forth on Schedule I to the Lender
Addendum to which such Lender is a party or, in the case of a Lender which
becomes a party to this Agreement pursuant to an Assignment and Acceptance, in
such Assignment and Acceptance or (c) in the case of any party, to such other
address as such party may hereafter notify to the other parties hereto:
The Borrower: Powerhouse Technologies, Inc.
2311 South Seventh Avenue
Bozeman, Montana 59715
Attention: Susan Carstensen
Telecopy: (406) 582-4006
Telephone: (406) 585-6600
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The Syndication Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 528-0819
Telephone: (212) 526-0437
The Administrative Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 528-0819
Telephone: (212) 526-0437
provided that any notice, request or demand to or upon the either Agent or any
Lender shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the either Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse
the Agents for all their reasonable out-of-pocket costs and expenses incurred in
connection with the syndication of the Facilities (other than fees payable to
syndicate members) and the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements and other charges of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Agents for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the other Loan
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Documents and any such other documents, including, without limitation, the fees
and disbursements of counsel (including the allocated fees and disbursements and
other charges of in-house counsel) to each Lender and of counsel to the Agents,
(c) to pay, indemnify, and hold each Lender and the Agents harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender, the Agents, their respective affiliates and their respective officers,
directors, trustees, employees, agents and controlling persons (each, an
"Indemnitee") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, any of the foregoing relating to the use of proceeds of the
Loans or the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower any of its
Subsidiaries or any of the Properties and the fees and disbursements and other
charges of legal counsel in connection with claims, actions or proceedings by
any indemnitee against the Borrower hereunder (all the foregoing in this clause
(d), collectively, the "Indemnified Liabilities"), provided, that the Borrower
shall have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified Liabilities are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such Indemnitee. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and
hereby waives and agrees to cause its Subsidiaries so to waive, all rights for
contribution or any other rights of recovery with respect to all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any indemnitee. The agreements
in this Section shall survive repayment of the Loans and all other amounts
payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Agents, all future holders of the Loans and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks or financial
institutions (each, a "Participant") participating interests in any Loan owing
to such Lender, any Commitment of such Lender or any other interest of such
Lender hereunder and under the other Loan Documents. In the event of any such
sale by a Lender of a participating interest to a
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Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agents shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Loans or
any fees payable hereunder, or postpone the date of the final maturity of the
Loans, in each case to the extent subject to such participation. The Borrower
agrees that if amounts outstanding under this Agreement and the Loans are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in Section 10.7(a) as
fully as if it were a Lender hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.17, 2.18 and 2.19
with respect to its participation in the Commitments and the Loans outstanding
from time to time as if it was a Lender; provided that, in the case of Section
2.18, such Participant shall have complied with the requirements of said Section
and provided, further, that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law
and upon written notice to the Syndication Agent, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of the
Borrower, the Issuing Lender, (in the case of assignments of Revolving Credit
Commitments only) and the Administrative Agent (which, in each case, shall not
be unreasonably withheld or delayed) (provided (x) that no such consent need be
obtained by Lehman Commercial Paper Inc. for a period of 180 days following the
Closing Date and (y) the consent of the Issuing Lender and the Borrower need not
be obtained with respect to any assignment of Term Loans), to an additional
bank, financial institution or other entity (an "Assignee") all or any part of
its rights and obligations under this Agreement pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit E, executed by such Assignee
and such Assignor (and, where the consent of the Borrower, the Agents or the
Issuing Lender is required pursuant to the foregoing provisions, by the Borrower
and such other Persons) and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that no such assignment to an
Assignee (other than any Lender or any affiliate thereof) shall be in an
aggregate principal amount of less than $5,000,000, and after giving effect
thereto, the assigning Lender shall have
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Commitments and Loans aggregating at least $5,000,000 (other than in the case of
an assignment of all of a Lender's interests under this Agreement), unless
otherwise agreed by the Borrower, the Syndication Agent and the Administrative
Agent. Any such assignment need not be ratable as among the Facilities. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment and/or Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such Assignor shall cease to be a party hereto).
Notwithstanding any provision of this Section, the consent of the Borrower shall
not be required for any assignment which occurs at any time when any Event of
Default shall have occurred and be continuing.
(d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Administrative Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loans and any
Notes evidencing such Loans recorded therein for all purposes of this Agreement.
Any assignment of any Loan, whether or not evidenced by a Note, shall be
effective only upon appropriate entries with respect thereto being made in the
Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register
only upon surrender for registration of assignment or transfer of the Note
evidencing such Loan, accompanied by a duly executed Assignment and Acceptance;
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the designated Assignee, and the old Notes shall be returned by the
Administrative Agent to the Borrower marked "cancelled". The Register shall be
available for inspection by the Borrower or any Lender or any Agent at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 10.6(c), by each such other Person) together with payment
to the Administrative Agent of a registration and processing fee of $3,500
(except that no such registration and processing fee shall be payable in the
case of an Assignee which is already a Lender or is an affiliate of a Lender or
a Person under common management with a Lender), the Administrative Agent shall
(i) promptly accept such Assignment and Acceptance and (ii) on the effective
date determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation, to the Lenders, the
Agents and the Borrower. On or prior to such effective date, the Borrower, at
its own expense, upon request, shall execute and deliver to the Administrative
Agent (in exchange for the Revolving Credit Note and/or
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applicable Term Notes, as the case may be, of the assigning Lender) a new
Revolving Credit Note and/or applicable Term Notes, as the case may be, to the
order of such Assignee in an amount equal to the Revolving Credit Commitment
and/or applicable Term Loans, as the case may be, assumed or acquired by it
pursuant to such Assignment and Acceptance and, if the Assignor has retained a
Revolving Credit Commitment and/or Term Loans, as the case may be, upon request,
a new Revolving Credit Note and/or Term Notes, as the case may be, to the order
of the Assignor in an amount equal to the Revolving Credit Commitment and/or
applicable Term Loans, as the case may be, retained by it hereunder. Such new
Note or Notes shall be dated the Closing Date and shall otherwise be in the form
of the Note or Notes replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
(g) Each Lender, by becoming a Lender hereunder, represents that it is
a financial institution regulated by a Governmental Authority of the United
States or a State thereof, or is a wholly-owned subsidiary of, or is managed by,
such a financial institution.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to a particular Lender or to the
Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefitted
Lender to share the excess payment or benefits of such collateral ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or
<PAGE>
85
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify the Borrower and
the Administrative Agent after any such setoff and application made by such
Lender, provided that the failure to give such notice shall not affect the
validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Agents and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by any Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
<PAGE>
86
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 10.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
10.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither any Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
the Agents and Lenders, on one hand, and the Borrower, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor;
and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower and the Lenders.
10.14 Confidentiality. Each of the Agents and the Lenders agrees to
keep confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to any Agent, any other Lender or any
affiliate of any Lender, (b) to any Participant or Assignee (each, a
"Transferee") or prospective Transferee which agrees to comply with the
provisions of this Section, (c) any of its employees, directors, agents,
attorneys, accountants and other professional advisors, (d) upon the request or
demand of any Governmental Authority having jurisdiction over it, provided that
such Agent or Lender shall notify the Borrower of any such disclosure, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
which has been publicly disclosed other than in breach of this Section 10.15,
(h) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection
<PAGE>
87
with ratings issued with respect to such Lender or (i) in connection with the
exercise of any remedy hereunder or under any other Loan Document.
10.15 Release of Collateral Security and Guarantee Obligations.
Notwithstanding anything to the contrary contained herein or in the Guarantee
and Collateral Agreement, upon request of the Borrower, the Administrative Agent
shall (without notice to or vote or consent of any Lender) take action having
the effect of releasing any Collateral and/or guarantee obligations provided for
in the Guarantee and Collateral Agreement to the extent necessary to permit
consummation, by the relevant Person in accordance with the terms of this
Agreement and the other Loan Documents, of any transaction not prohibited
hereunder.
10.16 Accounting Changes. In the event that any "Accounting Change"
(as defined below) shall occur and such change results in a change in the method
of calculation of financial covenants, standards or terms in this Agreement,
then the Borrower and the Administrative Agent agree to enter into negotiations
in order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for evaluating
the Borrower's financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Borrower, the
Administrative Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated or
construed as if such Accounting Changes had not occurred. "Accounting Changes"
refers to changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.
10.17 Delivery of Lender Addenda. Each initial Lender shall become a
party to this Agreement by delivering to the Administrative Agent and the
Syndication Agent a Lender Addendum duly executed by such Lender, the Borrower
and each Agent.
10.18 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE>
88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
POWERHOUSE TECHNOLOGIES, INC.
By: /S/ Susan J. Carstensen
---------------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
LEHMAN BROTHERS INC.,
as Arranger
By: /S/ William J. Gallagher
---------------------------------------
Name: William J. Gallagher
Title: Authorized Signatory
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent and as a Lender
By: /S/ William J. Gallagher
---------------------------------------
Name: William J. Gallagher
Title: Authorized Signatory
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent
By: /S/ William J. Gallagher
---------------------------------------
Name: William J. Gallagher
Title: Authorized Signatory
<PAGE>
89
CANADIAN IMPERIAL BANK OF
COMMERCE, as Documentation Agent
By: /S/ Paul J. Chakmak
----------------------------------
Name: Paul J. Chakmak
Title: Managing Director
CIBC Oppenheimer Corp., AS AGENT
CIBC Inc., as Lender
By: /S/ Paul J. Chakmak
----------------------------------
Name: Paul J. Chakmak
Title: Managing Director
CIBC Oppenheimer Corp., AS AGENT
<PAGE>
90
<TABLE>
<CAPTION>
Annex A
PRICING GRID
Applicable Margin for
Consolidated Leverage Tranche A Loans and Applicable Margin
Ratio Revolving Credit Loans for Tranche B Loans
----- ---------------------- -------------------
Eurodollar Base Rate Eurodollar Base Rate
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
< 1.5 to 1.0 1.75% .75%
>/= 1.5 to 1.0 but 2.00% 1.00%
< 2.0 to 1.0
>/= 2.0 to 1.0 2.25% 1.25%
=================================================================================================================
</= 2.0 to 1.0 2.50% 1.50%
> 2.0 to 1.0 2.75% 1.75%
=================================================================================================================
</TABLE>
Changes in the Applicable Margin with respect to any Loans resulting from
changes in the Consolidated Leverage Ratio shall become effective on the date
(the "Adjustment Date") on which financial statements are delivered to the
Lenders pursuant to Section 6.1 (but in any event not later than the 45th day
after the end of each of the first three quarterly periods of each fiscal year
or the 90th day after the end of each fiscal year, as the case may be) and shall
remain in effect until the next change to be effected pursuant to this
paragraph; provided, that the first Adjustment Date shall be the date which is
six months after the Closing Date, and any adjustment made on such date shall be
based on the financial statements most recently delivered pursuant to Section
6.1. If any financial statements referred to above are not delivered within the
time periods specified above, then, until such financial statements are
delivered, the Consolidated Leverage Ratio as at the end of the fiscal period
that would have been covered thereby shall for the purposes of this definition
be deemed to be greater than 2.0 to 1.0. In addition, at all times while an
Event of Default shall have occurred and be continuing, the Consolidated
Leverage Ratio shall for the purposes of this definition be deemed to be greater
than 2.0 to 1.0. Each determination of the Consolidated Leverage Ratio pursuant
to this definition shall be made with respect to the period of four consecutive
fiscal quarters of the Borrower ending at the end of the period covered by the
relevant financial statements.
<PAGE>
91
SCHEDULE 1.1
MORTGAGED PROPERTY
New Mexico Property
- -------------------
Approximately 164 acres located in Sections 5 and 8, Township 29
South, Range 4 East, New Mexico Principal Meridian, Dona Ana County, New Mexico.
Texas Property
- --------------
Approximately 1.8 acres located in El Paso County, Texas.
Montana Property
- ----------------
Tracts 1B and 2B of Certificate of Survey No. 1393A, said survey
located in the Northeast Quarter of Section 24, Township 2 South, Range 5 East,
P.M.M., City of Bozeman, Gallatin County, Montana according to the official plat
thereof on file and of record in the office of the County Clerk and Recorder,
Gallatin County, Montana.
<PAGE>
92
SCHEDULE 2
Pledged Stock of Subsidiaries:
Shares
Subsidiary Incorporation Outstanding
Automated Wagering International, Inc. Delaware 100
Automatic Music Service of Billings, Inc. Montana 8,760
Automation First, Inc. Montana 1,000
Nuevo Sol Turf Club Inc. New Mexico 10,000
Piper Lance, Inc. Montana 5,000
Raven's D&R Music, Inc. Montana 9,000
United Tote Company Montana 1,000
United Wagering Systems, Inc. Delaware 1,000
<PAGE>
93
SCHEDULE 3.9 Existing Letters of Credit
BENEFICIARY BANK L/C
- -------------------------------------------------------------------------------
AMOUNT TERM REASON
- --------------------------------------------------------------------------------
CNA SURETY CO. US BANK, N.A. $7,500,000 RENEWABLE COLLATERAL
AWI PERF
BOND
T&L MFG, INC. US BANK, N.A. $ 475,000 EXP 1/31/99 SECURE
INTL.
INVENTORY
BUY
<PAGE>
94
SCHEDULE 4.4
CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES
None.
<PAGE>
95
SCHEDULE 4.15
The following corporations are either direct or indirect, wholly-owned
subsidiaries of the Powerhouse Technologies, Inc.:
Subsidiary Incorporation
Automated Wagering International, Inc. Delaware
Automatic Music Service of Billings, Inc. Montana
Automation First, Inc. Montana
Nuevo Sol Turf Club Inc. New Mexico
Piper Lance, Inc. Montana
Raven's D&R Music, Inc. Montana
United Tote Canada, Inc. Canada
United Tote Company Montana
United Wagering Systems, Inc. Delaware
Video Lottery Consultants, Inc. Montana
VLC of Nevada, Inc. Nevada
<PAGE>
96
SCHEDULE 4.19(a)
UCC FILING JURISDICTIONS
For Powerhouse Technologies, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Georgia Clerks Cooperative Authority
DeKalb County, Georgia Clerk of Superior Court
For Automated Wagering International, Inc.
Delaware Secretary of State
New Jersey Secretary of State
Bergen County, New Jersey, County Clerk
Minnesota Secretary of State
Ramsey County, Minnesota County Recorder
Pennsylvania Secretary of the Commonwealth
Florida Department of State
Georgia Clerks Cooperative Authority
Montana Secretary of State
South Dakota Secretary of State
Maryland State Department of Assessments and Taxation
For Automated Music Service of Billings, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Yellowstone County, Montana, Clerk and Recorder
For Automation First, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Park County, Montana, Clerk and Recorder
For Ravens D & R Music, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
<PAGE>
1
UCC FILING JURISDICTIONS
For Video Lottery Consultants, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Kent County, Delaware, Recorder of Deeds
New Castle County, Delaware, Recorder of Deeds
New Jersey Secretary of State
Mississippi Secretary of State
Harrison County, Mssissippi, Chancery Clerk
Texas Secretary of State
Oregon Secretary of State
Rhode Island Secretary of State
Newport, Rhode Island, City Clerk
Lincoln, Rhode Island, Town Clerk
For VLC of Nevada, Inc.
Nevada Secretary f State
Washoe County, Nevada, County Recorder
Clark County, Nevada, County Recorder
Rhode Island Secretary of State
Newport, Rhode Island, City Clerk
Providence, Rhode Island, Town Clerk
Oregon Secretary of State
Montana Secretary of State
Multnomah County, Oregon, County Recorder
For United Wagering Systems, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Maryland Department of Assessments and Taxation
Baltimore County, Maryland, County Clerk of the Circuit Court
For United Tote Company
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
California Secretary of State
San Diego County, California, County Recorder
Indiana Secretary of State
Texas Secretary of State
<PAGE>
2
Marylnd Department of Assessments and Taxation
New Mexico Secretary of State
Kentucky Secretary of State
For Nuevo Sol Turf Club Inc.
New Mexico Secretary of State
Dona Ana County, New Mexico, County Clerk
Texas Secretary of State
El Paso County, Texas, Office of the Clerk of El Paso County
For Piper Lance Inc.
Montana Secretary of State
<PAGE>
3
SCHEDULE 4.19(b)
MORTGAGE FILING JURISDICTIONS
For Powerhouse Technologies, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
For Nuevo Sol Turf Club Inc.
New Mexico Secretary of State
Dona Ana County, New Mexico, County Clerk
Texas Secretary of State
El Paso County, Texas, Office of the Clerk of El Paso County
<PAGE>
4
SCHEDULE 7.2(d)
EXISTING INDEBTEDNESS
<TABLE>
<CAPTION>
Maturity Note June 30,
Co. Lender Description Security Guarantor Date Amount Balance
- --- ------ ----------- -------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
PTI
- ---
IBM Cap Lease Computer none Nov-99 213,300 70,356
Shelhamer Settlement note payable unsecured none Sep-01 6,157,000 4,589,810
AWI
- ---
EDS Term Loan various PTI 1/1/04 27,000,000 25,645,832
VLC
- ---
Prime Leasing Term Loan OR lease PTI Nov-98 9,450,956 1,930,503
UWS
- ---
Sanwa Leasing Cap lease Equipment PTI Sep-97 1,837,632 42,946
Sanwa Leasing Cap lease Equipment PTI Dec-97 303,896 18,735
Wrightmar Industries Purchase debt Canada asset none Mar-01 300,000 109,349
Rio Grande Bank Installment Sunland Trk none Sep-01 113,468 25,884
Elephant Butte Installment Sunland Trk none Aug-99 8,378
Prime Capital Installment Equipment none Apr-02 672,964 517,830
----------
32,959,623
==========
</TABLE>
<PAGE>
5
SCHEDULE 7.3(f)
EXISTING PRIOR LIENS
<TABLE>
<CAPTION>
Debtor Secured Party Jurisdi File No. Description of
- ------ ------------- ction -------- Collateral
----- ----------
<S> <C> <C> <C> <C>
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1788567 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1791670 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1805533 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1795244 Equipment
Automated Wagering Int'l IBM Credit Corporation NJ 1855976 Equipment
Powerhouse Technologies, Inc. U.S. Bank of N.A. GA-DeKalb Co. 44-97000124 Securities Acct (LOC)
Powerhouse Technologies, Inc. U.S. Bank of N.A. Montana 499318 Securities Acct (LOC)
Powerhouse Technologies, Inc. U.S. Bank of N.A. MT-Gallatin Co. 38656 Securities Acct (LOC)
Powerhouse Technologies, Inc., IBM Credit Corporation MT 452613 Equipment
f/k/a Video Lottery Technol,
Inc.
Powerhouse Technologies, Inc., GE Capital MT 454605 Equipment
f/k/a Video Lottery Technol,
Inc.
United Tote Company Sanwa Business Credit Corp. TX 1955781* Service Contracts
United Tote Company Sanwa Business Credit Corp. TX 200994* Equipment
United Tote Company Sanwa Business Credit Corp. TX 100125* Equipment
United Tote Company Sanwa Business Credit Corp. MT 394262* Equipment
United Tote Company Sanwa Business Credit Corp. MT 508924* Equipment
United Tote Company Sanwa General Equipment MT 392840* Service Contracts
Leasing Inc.
United Tote Company Sanwa Business Credit Corp. MT 389774* Equipment
</TABLE>
OTHER
State Tax Lien on United Tote Company by State of California dated July 6, 1998
in the amount of $201.75
State Tax Lien on Nuevo Sol Turf Club Inc. by State of New Mexico filed November
21, 1991 in the amount of $683.14
Lease of Real Property between Nuevo Sol Turf Club Inc. and United Tote Co. and
Bank of the Rio Grand, N.A., recorded October 10, 1996 (for ATM machine)
- ----------
1. Has been satisfied, however, release documentation is not available as
of the date of the closing. Company is in the process of having liens
removed.
<PAGE>
EXHIBIT A
GUARANTEE AND COLLATERAL AGREEMENT
made by
POWERHOUSE TECHNOLOGIES, INC.
and certain of its Subsidiaries
in favor of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
Dated as of October 9, 1998
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS................................................2
1.1 Definitions..................................................2
1.2 Other Definitional Provisions................................6
SECTION 2. GUARANTEE....................................................6
2.1 Guarantee....................................................6
2.2 Right of Contribution........................................7
2.3 No Subrogation...............................................7
2.4 Amendments, etc. with respect to the Borrower Obligations....8
2.5 Guarantee Absolute and Unconditional.........................8
2.6 Reinstatement................................................9
2.7 Payments ....................................................9
SECTION 3. GRANT OF SECURITY INTEREST...................................9
SECTION 4. REPRESENTATIONS AND WARRANTIES..............................10
4.1 Representations in Credit Agreement.........................10
4.2 Title; No Other Liens.......................................10
4.3 Perfected First Priority Liens..............................11
4.4 Chief Executive Office......................................11
4.5 Inventory and Equipment.....................................11
4.6 Farm Products...............................................11
4.7 Pledged Securities..........................................11
4.8 Receivables.................................................12
4.9 Contracts...................................................12
4.10 Intellectual Property.......................................13
4.11 Vehicles ...................................................13
SECTION 5. COVENANTS...................................................13
5.1 Covenants in Credit Agreement...............................13
5.2 Delivery of Instruments and Chattel Paper...................13
5.3 Maintenance of Insurance....................................13
5.4 Payment of Obligations......................................14
5.5 Maintenance of Perfected Security Interest; Further
Documentation.............................................14
5.6 Changes in Locations, Name, etc.............................15
5.7 Notices ...................................................15
5.8 Pledged Securities..........................................15
5.9 Receivables.................................................16
5.10 Contracts...................................................16
5.11 Intellectual Property.......................................17
i
<PAGE>
Page
SECTION 6. REMEDIAL PROVISIONS.........................................18
6.1 Certain Matters Relating to Receivables.....................18
6.2 Communications with Obligors; Grantors Remain Liable........19
6.3 Pledged Stock...............................................19
6.4 Proceeds to be Turned Over To Administrative Agent..........20
6.5 Application of Proceeds.....................................21
6.6 Code and Other Remedies.....................................21
6.7 Registration Rights.........................................22
6.8 Waiver; Deficiency..........................................23
SECTION 7. THE ADMINISTRATIVE AGENT....................................23
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.23
7.2 Duty of Administrative Agent................................25
7.3 Execution of Financing Statements...........................25
7.4 Authority of Administrative Agent...........................25
SECTION 8. MISCELLANEOUS...............................................26
8.1 Amendments in Writing.......................................26
8.2 Notices ...................................................26
8.3 No Waiver by Course of Conduct; Cumulative Remedies.........26
8.4 Enforcement Expenses; Indemnification.......................26
8.5 Successors and Assigns......................................27
8.6 Set-Off ...................................................27
8.7 Counterparts................................................27
8.8 Severability................................................28
8.9 Section Headings............................................28
8.10 Integration.................................................28
8.11 GOVERNING LAW...............................................28
8.12 Submission To Jurisdiction; Waivers.........................28
8.13 Acknowledgements............................................29
8.14 Additional Grantors.........................................29
8.15 Releases ...................................................29
8.16 WAIVER OF JURY TRIAL........................................30
ii
<PAGE>
1
FORM OF
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of October 9, 1998, made
by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, (the "Grantors" ), in favor of LEHMAN
COMMERCIAL PAPER INC., as administrative agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of
October 9 (as supplemented or otherwise modified from time to time, the "Credit
Agreement") among POWERHOUSE TECHNOLOGIES, INC, a Delaware corporation (the
"Borrower"), the several banks and other financial institutions from time to
time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor
and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (in such capacity, the "Administrative Agent"), LEHMAN
COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication
Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE., as Documentation Agent (in
such capacity, the "Documentation Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrower upon the terms and subject
to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
<PAGE>
2
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) to the Administrative Agent or any
Lender (or, in the case of any Hedge Agreement referred to below, any
Affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
this Agreement, the other Loan Documents, any Letter of Credit or any Hedge
Agreement entered into by the Borrower with any Lender (or any Affiliate of
any Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to
the Administrative Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of any of the foregoing agreements).
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
"Contracts": the contracts and agreements listed in Schedule 7, as the
same may be amended, supplemented or otherwise modified from time to time,
including, without limitation, (i) all rights of any Grantor to receive
moneys due and to become due to it thereunder or in connection therewith,
(ii) all rights of any Grantor to damages arising thereunder and (iii) all
rights of any Grantor to perform and to exercise all remedies thereunder,
in each case to the extent the grant by such Grantor of a security interest
pursuant to this Agreement in its right, title and interest in such
contract, agreement, instrument or indenture is not prohibited by such
contract, agreement, instrument or
<PAGE>
3
indenture without the consent of any other party thereto, would not give
any other party to such contract, agreement, instrument or indenture the
right to terminate its obligations thereunder, or is permitted with consent
if all necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that the
foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other amounts
due or to become due under any such contract, agreement, instrument or
indenture to the extent permitted by Section 9-318 of the Uniform
Commercial Code in effect in the applicable jurisdiction or other
applicable law.
"Copyrights": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Excluded Assets": collectively (i) the Capital Stock of Video Lottery
Consultants, Inc., a Montana corporation, (ii) the Capital Stock of VLC
Nevada, Inc., a Nevada corporation (iii) "slot route agreements," "bucket
sale agreements" and other agreements pursuant to which VLC of Nevada, Inc.
receives a share or percentage of the gaming revenues and (iv) assets now
owned or hereafter acquired and used in connection with on-line lottery
systems, in each case to the extent that, and for so long as, the inclusion
of such property in Collateral would violate any Requirement of Law or
Contractual Obligation binding on the Grantor which owns such property.
"General Intangibles": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party
<PAGE>
4
to such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2)
or any other Loan Document to which such Guarantor is a party, in each case
whether on account of guarantee obligations, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Grantor other than the
Borrower.
"Hedge Agreements": as to any Person, all interest rate swaps, caps or
collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to the Parent or any of its Subsidiaries.
"Issuers": the collective reference to each issuer of a Pledged
Security.
"Licenses": any license, franchise or permit granted by any
Governmental Authority.
"New York UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
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5
"Patents": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.
"Pledged Notes": all Intercompany Notes at any time issued to any
Grantor and all other promissory notes issued to or held by any Grantor
(other than promissory notes issued in connection with extensions of trade
credit by any Grantor in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged Notes
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect to the extent the pledge of any such Capital Stock acquired
after the date hereof does not violate any Requirement of Law.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the
date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related
<PAGE>
6
thereto, including, without limitation, any of the foregoing referred to in
Schedule 6, and (ii) the right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in Schedule
6.
"Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any
state and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall
<PAGE>
7
be outstanding and the Commitments shall be terminated, notwithstanding that
from time to time during the term of the Credit Agreement the Borrower may be
free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any Lender from the Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Borrower Obligations are paid in full, no Letter of Credit shall
be outstanding and the Commitments are terminated. If any amount shall be paid
to any Guarantor on account of such subrogation rights at any time when all of
the Borrower Obligations shall not have been paid in full, such amount shall be
held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
<PAGE>
8
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against
any collateral security or
<PAGE>
9
guarantee for the Borrower Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to make any
such demand, to pursue such other rights or remedies or to collect any payments
from the Borrower, any other Guarantor or any other Person or to realize upon
any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any Guarantor.
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Administrative Agent without set-off or counterclaim in
Dollars at the office of the Administrative Agent located at the Payment Office
specified in the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders, a security interest in, all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
<PAGE>
10
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Investment Property;
(l) all deposit accounts and other bank accounts;
(m) all Proceeds of all Licenses;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing;
provided, that (i) notwithstanding the foregoing, the Collateral shall not
include any Excluded Assets and (ii) if at any time after the Closing Date any
property which was previously an Excluded Asset ceases to be an Excluded Asset,
such property shall immediately and automatically constitute Collateral, and the
Grantor which owns such property shall promptly take all actions necessary to
cause the security interest created hereby in such property to be duly
perfected.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed
to be a reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Lenders pursuant to this
Agreement and the
<PAGE>
11
other Liens permitted to exist on the Collateral by the Credit Agreement, such
Grantor owns each item of the Collateral free and clear of any and all Liens or
claims of others. No financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Administrative Agent, for the
ratable benefit of the Lenders, pursuant to this Agreement or as are permitted
by the Credit Agreement.
4.3 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form (other than the blocked account agreements))
will constitute valid perfected security interests in all of the Collateral in
favor of the Administrative Agent, for the ratable benefit of the Lenders, as
collateral security for such Grantor's Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior to all
other Liens on the Collateral in existence on the date hereof except for (i)
unrecorded Liens permitted by the Credit Agreement which have priority over the
Liens on the Collateral by operation of law and (ii) Liens described on Schedule
8.
4.4 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
4.5 Inventory and Equipment. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on Schedule
5.
4.6 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor (other than
Capital Stock constituting Excluded Assets).
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or
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12
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement.
4.8 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) In respect of which any notice, consent filing or other action is
required in order to create or perfect the security interest created hereby in
such Receivables.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
4.9 Contracts. (a) No consent of any party (other than such Grantor)
to any Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid
and legally enforceable obligation of the parties thereto, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's knowledge)
any of the other parties to the Contracts is in default in the performance or
observance of any of the terms thereof in any manner that, in the aggregate,
could reasonably be expected to have a material adverse effect on the value
thereof as Collateral.
(e) The right, title and interest of such Grantor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a material adverse
effect on the value thereof as Collateral.
(f) Such Grantor has delivered to the Administrative Agent a complete
and correct copy of each Contract, including all amendments, supplements and
other modifications thereto.
(g) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent.
<PAGE>
13
4.10 Intellectual Property. (a) Schedule 6 lists all Intellectual
Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and does not
infringe the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
4.11 Vehicles. The aggregate book value of all Vehicles owned by all
Grantors does not exceed $200,000.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each Guarantor, such
Guarantor shall take, or shall refrain from taking, as the case may be, each
action that is necessary to be taken or not taken, as the case may be, so that
no Default or Event of Default is caused by the failure to take such action or
to refrain from taking such action by such Guarantor or any of its Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably
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14
satisfactory to the Administrative Agent and (ii) to the extent requested by the
Administrative Agent, insuring such Grantor, the Administrative Agent and the
Lenders against liability for personal injury and property damage relating to
such Inventory, Equipment and Vehicles, such policies to be in such form and
amounts and having such coverage as may be reasonably satisfactory to the
Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
substantially concurrently with the delivery by the Borrower to the
Administrative Agent of its audited financial statements for each fiscal year
and such supplemental reports with respect thereto as the Administrative Agent
may from time to time reasonably request.
5.4 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.5 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements
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15
under the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not, except
upon 15 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5, provided; however, that United Tote
Company may temporarily move a non-material portion of its assets to a
location not listed on Schedule 5 in the ordinary course of business;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.7 Notices. Such Grantor will advise the Administrative Agent and the
Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 Pledged Securities. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the
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16
Pledged Securities upon the liquidation or dissolution of any Issuer shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Securities or any property shall
be distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Grantor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Pledged Securities issued by it.
5.9 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.10 Contracts. (a) Such Grantor will perform and comply in all
material respects with all its obligations under the Contracts.
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17
(b) Such Grantor will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected to
materially adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right of
termination).
(d) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it relating in any way to
any Contract that questions the validity or enforceability of such Contract.
5.11 Intellectual Property. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) use such Trademark with the appropriate notice of registration and all
other notices and legends required by applicable Requirements of Law, (iv) not
adopt or use any mark which is confusingly similar or a colorable imitation of
such Trademark unless the Administrative Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
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18
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Administrative
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications. At any time and
from time to time, upon the Administrative Agent's request and at the expense of
the relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to collect
such Grantor's Receivables, subject to the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority at
any time after the occurrence and during the continuance of an Event of Default.
If required by the Administrative Agent at any time after the occurrence and
during the continuance of an Event of Default, any payments of Receivables, when
collected by any Grantor, (i) shall be forthwith (and, in any event, within two
Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such
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19
Grantor to the Administrative Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the Lenders
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Administrative Agent and the Lenders, segregated
from other funds of such Grantor. Each such deposit of Proceeds of Receivables
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.
(c) At the Administrative Agent's request, each Grantor shall deliver
to the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables and parties to the Contracts that the
Receivables and the Contracts have been assigned to the Administrative Agent for
the ratable benefit of the Lenders and that payments in respect thereof shall be
made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice and
to exercise all voting and corporate rights with respect to the Pledged
Securities; provided, however, that no vote shall be
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20
cast or corporate right exercised or other action taken which, in the
Administrative Agent's reasonable judgment, would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in the order set forth in Section 6.5, and, subject to the
requirements of applicable law (including without limitation licensing approval
requirements of regulatory authorities) (ii) any or all of the Pledged
Securities shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x)
all voting, corporate and other rights pertaining to such Pledged Securities at
any meeting of shareholders of the relevant Issuer or Issuers or otherwise and
(y) any and all rights of conversion, exchange and subscription and any other
rights, privileges or options pertaining to such Pledged Securities as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by any
Grantor or the Administrative Agent of any right, privilege or option pertaining
to such Pledged Securities, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition to
the rights of the Administrative Agent and the Lenders specified in Section 6.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral
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21
Account (or by such Grantor in trust for the Administrative Agent and the
Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be agreed upon
by the Borrower and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds
constituting Collateral, whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the Obligations
in the following order:
First, to pay incurred and unpaid fees and expenses of the
Administrative Agent under the Loan Documents;
Second, to the Administrative Agent, for application by it towards
payment of amounts then due and owing and remaining unpaid in respect of
the Obligations, pro rata among the Lenders according to the amounts of the
Obligations then due and owing and remaining unpaid to the Lenders;
Third, to the Administrative Agent, for application by it towards
prepayment of the Obligations, pro rata among the Lenders according to the
amounts of the Obligations then held by the Lenders; and
Fourth, any balance of such Proceeds remaining after the Obligations
shall have been paid in full, no Letters of Credit shall be outstanding and
the Commitments shall have terminated shall be paid over to the Borrower or
to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may, subject to
applicable gaming laws, exercise, in addition to all other rights and remedies
granted to them in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the New York UCC or any other applicable law. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith, subject to regulatory approvals and
licensing requirements, sell, lease, assign, give option or options to purchase,
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any
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22
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in any Grantor, which right
or equity is hereby waived and released. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Administrative
Agent may elect, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the New York UCC, need the
Administrative Agent account for the surplus, if any, to any Grantor. To the
extent permitted by applicable law, each Grantor waives all claims, damages and
demands it may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will subject to applicable law, cause the Issuer thereof to (i) execute
and deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii) use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges
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23
and agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay a sale of any of the Pledged Stock for the period
of time necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, subject to applicable regulatory and licensing requirements,
without notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Administrative Agent for the purpose
of
<PAGE>
24
collecting any and all such moneys due under any Receivable or Contract or
with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (2) ask or demand for, collect, and receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (3)
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Administrative Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions,
and in such manner, as the Administrative Agent shall in its sole
discretion determine; and (8) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the Lenders' security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
<PAGE>
25
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Credit Loans that are Base Rate Loans
under the Credit Agreement, from the date of payment by the Administrative Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein
<PAGE>
26
or resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
no Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent in accordance with Section 10.1 of the
Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
to pay or reimburse each Lender and the Administrative Agent for all its costs
and expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in
<PAGE>
27
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrower would be required to do so pursuant to Section 10.5 of the Credit
Agreement.
(d) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time while an
Event of Default shall have occurred and be continuing, without notice to such
Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
<PAGE>
28
8.8 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
<PAGE>
29
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
8.14 Additional Grantors. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Section 6.10 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.15 Releases. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations shall have been paid in full, the
Commitments have been terminated and no Letters of Credit shall be outstanding,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Borrower shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in
<PAGE>
30
connection therewith, together with a certification by the Borrower stating that
such transaction is in compliance with the Credit Agreement and the other Loan
Documents.
8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
31
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
POWERHOUSE TECHNOLOGIES, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
AUTOMATED WAGERING INTERNATIONAL,
INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
AUTOMATIC MUSIC SERVICE OF BILLINGS,
INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
AUTOMATION FIRST, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
NUEVO SOL TURF CLUB INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
<PAGE>
32
PIPER LANCE, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
RAVEN'S D & R MUSIC, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
UNITED TOTE COMPANY, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
UNITED WAGERING SYSTEMS, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
VIDEO LOTTERY CONSULTANTS, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Susan J. Carstensen
Title: Treasurer
<PAGE>
33
VLC OF NEVADA, INC.
By: /S/ Susan J. Carstensen
----------------------------------
Name: Richard M. Haddrill
Title: Treasurer
<PAGE>
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
Automated Wagering International, Inc.
Automatic Music Service of Billings, Inc.
Automation First, Inc.
Nuevo Sol Turf Club Inc.
Raven's D&R Music, Inc.
United Tote Company
United Wagering Systems, Inc.
Video Lottery Consultants, Inc.
VLC of Nevada, Inc.
Piper Lance, Inc.
2311 South 7th Avenue
Bozeman, MT 59715
Attn.: Chief Financial Officer
with a copy to:
115 Perimeter Center Place
Suite 911
Atlanta, GA 30346
Attn: General Counsel
<PAGE>
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Stock of Subsidiaries:
Shares
Subsidiary Incorporation Outstanding
- ---------- ------------- -----------
Automated Wagering International, Inc. Delaware 100
Automatic Music Service of Billings, Inc. Montana 8,760
Automation First, Inc. Montana 1,000
Nuevo Sol Turf Club Inc. New Mexico 10,000
Piper Lance, Inc. Montana 5,000
Raven's D&R Music, Inc. Montana 9,000
United Tote Company Montana 1,000
United Wagering Systems, Inc. Delaware 2,000
Pledged Note of Subsidiaries:
Promissory Note between Video Lottery Consultants, Inc., as maker, and World
Lottery Consultants Corporation as payee in the principal face amount of
$1,868,883.98 dated July 16, 1997, as amended from time to time.
<PAGE>
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
For Powerhouse Technologies, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Georgia Clerks Cooperative Authority
DeKalb County, Georgia Clerk of Superior Court
For Automated Wagering International, Inc.
Delaware Secretary of State
New Jersey Secretary of State
Bergen County, New Jersey, County Clerk
Minnesota Secretary of State
Ramsey County, Minnesota County Recorder
Pennsylvania Secretary of the Commonwealth
Florida Department of State
Georgia Clerks Cooperative Authority
Montana Secretary of State
South Dakota Secretary of State
Maryland State Department of Assessments and Taxation
For Automated Music Service of Billings, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Yellowstone County, Montana, Clerk and Recorder
For Automation First, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Park County, Montana, Clerk and Recorder
For Ravens D & R Music, Inc.
Montana Secretary of State
<PAGE>
Gallatin County, Montana, Clerk and Recorder
For Video Lottery Consultants, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Kent County, Delaware, Recorder of Deeds
New Castle County, Delaware, Recorder of Deeds
New Jersey Secretary of State
Mississippi Secretary of State
Harrison County, Mississippi, Chancery Clerk
Texas Secretary of State
Oregon Secretary of State
Rhode Island Secretary of State
Newport, Rhode Island, City Clerk
Lincoln, Rhode Island, Town Clerk
For VLC of Nevada, Inc.
Nevada Secretary of State
Washoe County, Nevada, County Recorder
Clark County, Nevada, County Recorder
Rhode Island Secretary of State
Newport, Rhode Island, City Clerk
Providence, Rhode Island, Town Clerk
Oregon Secretary of State
Montana Secretary of State
Multnomah County, Oregon, County Recorder
For United Wagering Systems, Inc.
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
Delaware Secretary of State
Maryland Department of Assessments and Taxation
Baltimore County, Maryland, County Clerk of the Circuit Court
For United Tote Company
Montana Secretary of State
Gallatin County, Montana, Clerk and Recorder
California Secretary of State
San Diego County, California, County Recorder
Indiana Secretary of State
Texas Secretary of State
Maryland Department of Assessments and Taxation
<PAGE>
Baltimore County, Maryland, County Clerk of the Circuit Court
New Mexico Secretary of State
Kentucky Secretary of State
For Nuevo Sol Turf Club Inc.
New Mexico Secretary of State
Dona Ana County, New Mexico, County Clerk
Texas Secretary of State
El Paso County, Texas, Office of the Clerk of El Paso County
For Piper Lance Inc.
Montana Secretary of State
Patent and Trademark Filings
U.S. Patent & Trademark Office
Actions with respect to Pledged Stock
Delivery of pledged stock certificates together
with stock powers duly endorsed by the appropriate grantor.
Other Actions
Filing of the Aircraft Mortgage with the Federal Aviation Administration
Office in Oklahoma City, Oklahoma maintained for the purpose of filing mortgages
on aircraft.
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Company Jurisdiction Chief Executive Office
Automated Wagering International, Inc. Delaware 115 Perimeter Center Place
Suite 911
Atlanta, GA 30346
Automatic Music Service of Billings, Montana 2311 South 7th Avenue
Inc. Bozeman, MT 59715
Automation First, Inc. Montana 2311 South 7th Avenue
Bozeman, MT 59715
Nuevo Sol Turf Club Inc. New Mexico 101 Futurity Drive
Sunland Park, NM 88063
Piper Lance, Inc. Montana 2311 South 7th Avenue
Bozeman, MT 59715
Powerhouse Technologies, Inc. Delaware 115 Perimeter Center Place
Suite 911
Atlanta, GA 30346
Raven's D&R Music, Inc. Montana 2311 South 7th Avenue
Bozeman, MT 59715
United Tote Company Montana 9515 Deereco Road, Suite
200
Timonium, MD 21093-2153
United Wagering Systems, Inc. Delaware 9515 Deereco Road, Suite
200
Timonium, MD 21093-2153
Video Lottery Consultants, Inc. Montana 2311 South 7th Avenue
Bozeman, MT 59715
VLC of Nevada, Inc. Nevada 751 Pilot Road, Suite D
Las Vegas, NV 89119
<PAGE>
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
GRANTOR LOCATION OF
INVENTORY OR
EQUIPMENT
POWERHOUSE TECHNOLOGIES, INC.
(Including all wholly-owned subsidiaries) Subsidiary
----------
- -Raw material, Work in Process, & FGI Montana AWI, UT, VLC,
- -Assembly equipment Montana VLN
- -Computers, furniture and fixtures Montana
- -Route operations equipment Montana
- -Lottery operations equipment Montana AFI, AMS, D&R
AWI
- -Lottery operations equipment, furniture and South Dakota AWI
fixtures Minnesota AWI
- -Lottery operations equipment, furniture and Pennsylvania AWI
fixtures Maryland AWI
- -Lottery operations equipment, furniture and Florida AWI
fixtures
- -Lottery operations equipment, furniture and
fixtures
- -Lottery operations equipment, furniture and
fixtures
- -Lottery operations equipment, furniture and Delaware
fixtures Delaware VLC
- -Gaming machines
Gaming machines Oregon VLC
Gaming machines Rhode Island VLC
Gaming machines/equipment, furniture and Nevada VLN
fixtures
Gaming machines/equipment, furniture and Mississippi VLC
fixtures
R&D equipment New Jersey AWI
R&D equipment Minnesota AWI
R&D equipment California UT
<PAGE>
Equipment for racetracks is rotable and held at Alabama, Arizona, Colorado,
any point in time in these states: Delaware
Florida, Idaho, Indiana, Iowa,
Kansas
Kentucky, Louisiana, Maine,
Michigan
Montana, New Hampshire, New
Mexico
New York, Ohio, Oklahoma,
Oregon
Rhode Island, South Dakota,
Texas, Vermont
Washington
Racetrack facility and equipment New Mexico
Legend:
AFI is Automation First Inc., AMS is Automatic Music Service of Billings, Inc.,
AWI is Automated Wagering International, Inc., D&R is Raven's D&R Music, Inc.,
SP is Nuevo Sol Turf Club, UT is United Tote Company, VLC is Video Lottery
Consultants, Inc., VLN is Video Lottery Consultants of Nevada, Inc.
<PAGE>
Schedule 6
<TABLE>
<CAPTION>
REGISTERED and APPLIED FOR TRADEMARKS
AND
REGISTERED PATENT REPORT
A report of all Registered Trademarks and Patents used or
owned by Powerhouse Technologies, Inc. and its subsidiaries.
STATUS: APPLIED FOR
========================== ================= =============== ================== ===================== =========== ================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
========================== ================= =============== ================== ===================== =========== ================
<S> <C> <C> <C> <C> <C> <C>
[INTENTIONALLY DELETED - SENSITIVE INFORMATION]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGISTERED and APPLIED FOR TRADEMARKS
AND
REGISTERED PATENT REPORT
A report of all Registered Trademarks and Patents used or
owned by Powerhouse Technologies, Inc. and its subsidiaries.
STATUS: REGISTERED CR
========================== ================= =============== ================== ===================== =========== ================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
=========================== ================ ============== ==================== ==================== =========== ================
<S> <C> <C> <C> <C> <C> <C>
MASTERLINK INSTANT COPYRIGHT U.S.A. REGISTERED CR 7/24/96 4,425,948
GAMING MODULE
MASTERLINK ONLINE COPYRIGHT U.S.A. REGISTERED CR 7/5/96 TX4332718
GAMING MODULE
MASTERLINK VIDEO COPYRIGHT U.S.A. REGISTERED CR 7/11/96 4,425,082
GAMING MODULE
=========================== ================ ============== ==================== ==================== =========== ================
</TABLE>
<TABLE>
<CAPTION>
STATUS: REGISTERED PATENT
=========================== ================ ============== ==================== ==================== =========== ================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
=========================== ============ =============== ======================= =================== =========== ================
<S> <C> <C> <C> <C> <C> <C>
DEVICE & METHOD PATENT U.S.A. REGISTERED 692,575 6/16/98 5,766,074
FOR DISPLAYING PATENT
FINAL GAMING
RESULT
GRAPHICS PROCESSOR PATENT U.S.A. REGISTERED 9/24/96 5,559,950
ENHANCEMENT PATENT
SYSTEM HAVING A
PROCESSOR
CONNECTED THROUGH
DATA AND LOWER
ADDRESS LINES
METHOD & PATENT U.S.A. REGISTERED 4/30/96 5,511,784
APPARATUS FOR PATENT
DIRECTLY
GENERATING A
RANDOM FINAL
OUTCOME OF A GAME
TRANSACTION PATENT U.S.A. REGISTERED 751,771 5/16/95 5,416,308
DOCUMENT READER PATENT
VIDEO LOTTERY PATENT AUSTRALIA REGISTERED 13379/95 12/13/94 678673
SYSTEM AND PATENT
VALIDATION UNIT
VIDEO LOTTERY PATENT U.S.A. REGISTERED 4/6/96 5,505,449
SYSTEM W/IMPROVE D PATENT
SITE CONTROLLER &
VALIDATION UNIT
VIDEO LOTTERY PATENT U.S.A. REGISTERED 171,117 3/21/95 5,398,932
SYSTEM WITH PATENT
IMPROVED SITE
CONTROLLER &
VALIDATION UNIT
- -------------------------- ----------------- --------------- ------------------ ------------------------- ----------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
========================== ================= =============== ================== ===================== =========== ================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
========================== ================= =============== ================== ==================== =========== =================
<S> <C> <C> <C> <C> <C> <C>
VLC ELECTRONIC PATENT U.S.A. REGISTERED 2/9/93 333,164
GAME HOUSING PATENT
=========================== ============ =============== ======================= ==================== =========== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGISTERED and APPLIED FOR TRADEMARKS
AND
REGISTERED PATENT REPORT
A report of all Registered Trademarks and Patents used or
owned by Powerhouse Technologies, Inc. and its subsidiaries
STATUS: REGISTERED TM
========================= ================= =============== ================== ==================== =========== =================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
========================= ================= =============== ================== ==================== =========== =================
<S> <C> <C> <C> <C> <C> <C>
AGS ADVANCED TRADEMARK AUSTRALIA REGISTERED TM 8/19/97 715320
GAMING SYSTEM &
DESIGN (LOGO)
AGS ADVANCED TRADEMARK AUSTRALIA REGISTERED TM 71530 8/19/97 715320
GAMING SYSTEM &
DESIGN (LOGO)
ALLEY CAT KENO TRADEMARK U.S.A. REGISTERED TM 75/089,586 4/15/97 2,052,536
AWI TRADEMARK EUROPE REGISTERED TM 1558282 U.K. 1/4/94 1558252
AWI TRADEMARK U.S.A. REGISTERED TM 74/469,465 10/24/95 1,929,069
BLACK GOLD TRADEMARK NORWAY REGISTERED TM 965498 7/24/97 183811
BONUS KENO TRADEMARK U.S.A. REGISTERED TM 75/089,587 1/28/97 2,034,657
CATE TRADEMARK U.S.A. REGISTERED TM 73/698,505 12/12/89 1,570,684
HEARTS & TRADEMARK U.S.A. REGISTERED TM 74/534,283 5/12/98 2157089
DIAMONDS
IITAS TRADEMARK U.S.A. REGISTERED TM 74/450/657 8/15/95 1,911,163
JACKPOT FEVER TRADEMARK U.S.A. REGISTERED TM 74/437,320 5/26/98 2160723
KENO WILD TRADEMARK MONTANA REGISTERED TM O18969-T164(40) 6/24/96 018969
MASTERLINK TRADEMARK CANADA REGISTERED TM 760458 8/21/97 481065
MASTERLINK TRADEMARK U.S.A. REGISTERED TM 74/437/318 9/5/95 1,917,202
MICRO TOTE 1000 TRADEMARK U.S.A. REGISTERED TM 73/299,010 2/5/85 1,317,698
OVATION TRADEMARK U.S.A. REGISTERED TM 74/415/249 2/13/96 1,956,729
POKER DUEL TRADEMARK U.S.A. REGISTERED TM 75/090,313 3/11/97 2,043,585
POLLY & ROGER TRADEMARK U.S.A. REGISTERED TM 11/18/97 748888
POWER KENO TRADEMARK MONTANA REGISTERED TM T018853(164-01) 4/22/96 T018853
========================= ================= =============== ================== ==================== =========== =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGISTERED and APPLIED FOR TRADEMARKS
AND
REGISTERED PATENT REPORT
A report of all Registered Trademarks and Patents used or
owned by Powerhouse Technologies, Inc. and its subsidiaries
STATUS: REGISTERED TM
======================== ================ =============== =================== =================== =========== ===================
NAME IP TYPE COUNTRY STATUS APPLICATION # REGISTER REGISTRATION #
DATE
======================== ================ =============== =================== =================== =========== ===================
<S> <C> <C> <C> <C> <C> <C>
POWER KENO TRADEMARK U.S.A. REGISTERED TM 75/089,590 4/22/97 2,054,922
POWER SERIES TRADEMARK U.S.A. REGISTERED TM 75/089,585 1/27/98 2,133,222
UNITED TRADEMARK U.S.A. REGISTERED TM 73-298987 6/28/83 1,263,556
TOTALISATOR
MICRO TOTE 1000
UNITED TOTE TRADEMARK U.S.A. REGISTERED TM 73-698312 4/25/89 1536143
SYSTEM 1000
VIDEO LOTTERY TRADEMARK AUSTRALIA REGISTERED TM 3/13/91 A551964
CONSULTANTS
VIDEO LOTTERY TRADEMARK AUSTRALIA REGISTERED TM 551964 3/31/91 A551964
CONSULTANTS, INC.
VLC TRADEMARK AUSTRALIA REGISTERED TM 551,965 3/13/91 B551965
VLC TRADEMARK U.S.A. REGISTERED TM 74,465,266 12/20/94 1,868,466
VLC & DESIGN TRADEMARK AUSTRALIA REGISTERED TM 551,966 3/13/91 A551966
(LOGO)
VLC & DESIGN TRADEMARK U.S.A. REGISTERED TM 74/489,403 12/20/94 1,868,471
(LOGO)
VLCS TRADEMARK NORWAY REGISTERED TM 5/15/97 182074
WININSTANT TRADEMARK U.S.A. REGISTERED TM 74/246,615 12/3/96 2,020,088
WINNING TOUCH TRADEMARK AUSTRALIA REGISTERED TM 649,489 12/29/94 649,489
WINNING TOUCH TRADEMARK NORWAY REGISTERED TM 962973 6/12/97 182668
WINNING TOUCH TRADEMARK U.S.A. REGISTERED TM 74/432,162 2/7/95 1,877,453
======================== ================ =============== =================== =================== =========== ===================
</TABLE>
<PAGE>
Schedule 7
CONTRACTS
State of Delaware Contract to provide on-line lottery services
Delaware Lottery and video lottery central system
State of Florida Contract to provide on-line lottery services
Florida Lottery
State of Maryland Contract to provide on-line lottery services
Maryland Lottery
State of Minnesota Contract to provide on-line lottery services
Minnesota Lottery
State of Montana Contract to provide on-line lottery services
Montana Lottery
Commonwealth of Pennsylvania Contract to provide on-line lottery services
Pennsylvania Lottery
State of South Dakota Contract to provide on-line lottery services
South Dakota Lottery
<PAGE>
Schedule 8
<TABLE>
<CAPTION>
EXISTING PRIOR LIENS
Debtor Secured Party Jurisdiction File No. Description of Collateral
- ------ ------------- ------------ -------- -------------------------
<S> <C> <C> <C> <C>
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1788567 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1791670 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1805533 Equipment
Automated Wagering Int'l Canon Financial Services, Inc. NJ 1795244 Equipment
Automated Wagering Int'l IBM Credit Corporation NJ 1855976 Equipment
Powerhouse Technologies, Inc. U.S. Bank of N.A. GA-DeKalb Co. 44-97000124 Securities Acct (LOC)
Powerhouse Technologies, Inc. U.S. Bank of N.A. Montana 499318 Securities Acct (LOC)
Powerhouse Technologies, Inc. U.S. Bank of N.A. MT-Gallatin Co. 38656 Securities Acct (LOC)
Powerhouse Technologies, Inc. IBM Credit Corporation MT 452613 Equipment
f/k/a Video Lottery Technologies, Inc.
Powerhouse Technologies, Inc. GE Capital MT 454605 Equipment
f/k/a Video Lottery Technologies, Inc.
United Tote Company Sanwa Business Credit Corp. TX 195578* Service Contracts
United Tote Company Sanwa Business Credit Corp. TX 200994* Equipment
United Tote Company Sanwa Business Credit Corp. TX 100125* Equipment
United Tote Company Sanwa Business Credit Corp. MT 394262* Equipment
United Tote Company Sanwa Business Credit Corp. MT 508924* Equipment
United Tote Company Sanwa General Equipment Leasing Inc. MT 392840* Service Contracts
</TABLE>
- ----------
* Has been satisfied, however, release documentation is not available as
of the date of the closing. Company is in the process of having liens
removed.
<PAGE>
<TABLE>
<CAPTION>
Debtor Secured Party Jurisdiction File No. Description of Collateral
- ------ ------------- ------------ -------- -------------------------
<S> <C> <C> <C> <C>
United Tote Company Sanwa Business Credit Corp. MT 389774* Equipment
</TABLE>
OTHER
State Tax Lien on United Tote Company by State of California dated July 6, 1998
in the amount of $201.75
State Tax Lien on Nuevo Sol Turf, Inc. by State of New Mexico filed November 21,
1991 in the amount of $683.14
Lease of Real Property between Nuevo Sol Turf Club Inc. and United Tote Co. and
Bank of the Rio Grand, N.A., recorded October 10, 1996 (for ATM machine)
<PAGE>
ACKNOWLEDGEMENT AND CONSENT**
The undersigned hereby acknowledges receipt of a copy of the Guarantee and
Collateral Agreement dated as of October 9, 1998 (the "Agreement"), made by the
Grantors parties thereto for the benefit of Lehman Commercial Paper Inc., as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in writing
of the occurrence of any of the events described in Section 5.8(a) of the
Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
[NAME OF ISSUER]
By -----------------------------------------------
Title -------------------------------------------
Address for Notices:
--------------------------------------------------
--------------------------------------------------
Fax: ---------------------------------------------
- ----------
** This consent is necessary only with respect to any Issuer which is not
also a Grantor.
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of Lehman Commercial Paper Inc., as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Powerhouse Technologies, Inc. (the "Borrower"), the Lenders
and the Administrative Agent have entered into a Credit Agreement, dated as of
October 9, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower and
certain of its Affiliates (other than the Additional Grantor) have entered into
the Guarantee and Collateral Agreement, dated as of October 9, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
Collateral Agreement") in favor of the Administrative Agent for the benefit of
the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
this Assumption Agreement, the Additional Grantor, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules ____________***
to the Guarantee and Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 4 of the Guarantee and Collateral Agreement
- --------
*** Refer to each Schedule which needs to be supplemented.
<PAGE>
2
is true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered to you pursuant to Section
6.2 of the Credit Agreement, dated as of October 9, 1998, as amended,
supplemented or modified from time to time (the "Credit Agreement"), among
POWERHOUSE TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in
such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication
agent (in such capacity, the "Syndication Agent"), LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (in such capacity, the "Administrative Agent") and
CANADIAN IMPERIAL BANK OF COMMERCE., as Documentation Agent (in such capacity,
the "Documentation Agent"). Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so defined.
1. I am the duly elected, qualified and acting [Chief Financial
Officer] [Vice President - Finance] of the Borrower.
2. I have reviewed and are familiar with the contents of this
Certificate.
3. I have reviewed the terms of the Credit Agreement and the Loan
Documents and have made or caused to be made under my supervision, a review in
reasonable detail of the transactions and condition of the Borrower during the
accounting period covered by the financial statements attached hereto as
Attachment 1 (the "Financial Statements"). Such review did not disclose the
existence during or at the end of the accounting period covered by the Financial
Statements, and I have no knowledge of the existence, as of the date of this
Certificate, of any condition or event which constitutes a Default or Event of
Default [, except as set forth below].
4. Attached hereto as Attachment 2 are the computations showing
compliance with the covenants set forth in Section 7.1, 7.2, 7.5 7.6, 7.7, 7.8
and 7.15 of the Credit Agreement.
IN WITNESS WHEREOF, I execute this Certificate this
--------------
day of ,
--------- ------.
POWERHOUSE TECHNOLOGIES, INC.
By: _______________________________________
Title:
<PAGE>
Attachment 2
to Exhibit B
The information described herein is as of , 199_, and pertains to the
period from , 19_ to ________________ __, 19__.
[Set forth Covenant Calculations]
<PAGE>
EXHIBIT C
CLOSING CERTIFICATE
Pursuant to subsection 5.1(__) of the Credit Agreement dated as of October
9, 1998 (the "Credit Agreement"; terms defined therein being used herein as
therein defined), among POWERHOUSE TECHNOLOGIES, INC., a Delaware corporation
(the "Borrower"), the several banks and other financial institutions from time
to time parties to the Credit Agreement (the "Lenders"), LEHMAN BROTHERS INC.,
as advisor and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL
PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"),
LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the
"Administrative Agent") and CANADIAN IMPERIAL BANK OF COMMERCE., as
Documentation Agent (in such capacity, the "Documentation Agent"), the
undersigned CEO/President of AUTOMATED WAGERING INTERNATIONAL, INC. (the
"Company") hereby certifies as follows:
1. The representations and warranties of the Company set forth in each of
the Loan Documents to which it is a party or which are contained in any
certificate furnished by or on behalf of the Company pursuant to any of the Loan
Documents to which it is a party are true and correct in all material respects
on and as of the date hereof with the same effect as if made on the date hereof,
except for representations and warranties expressly stated to relate to a
specific earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date.
2. Susan J. Carstensen is the duly elected and qualified Treasurer of the
Company and the signature set forth for such officer below is such officer's
true and genuine signature.
3. No Default or Event of Default has occurred and is continuing as of the
date hereof or after giving effect to the Loans to be made on the date hereof.
[Borrower only]
4. The conditions precedent set forth in Section 5.1 of the Credit
Agreement were satisfied as of the Closing Date except as set forth on Schedule
I hereto.
5. No Default or Event of Default has occurred and is continuing as of the
date hereof or after giving effect to the Loans to be made on the date hereof.
[Borrower only]
6. The conditions precedent set forth in Section 5.1 of the Credit
Agreement were satisfied as of the Closing Date except as set forth on Schedule
I hereto.
The undersigned Corporate Treasurer of the Company certifies as follows:
7. There are no liquidation or dissolution proceedings pending or to my
knowledge threatened against the Company, nor has any other event occurred
adversely affecting or threatening the continued corporate existence of the
Company.
8. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its organization.
9. Attached hereto as Annex 1 is a true and complete copy of resolutions
duly
<PAGE>
adopted by the Board of Directors of the Company on October 9, 1998, such
resolutions have not in any way been amended, modified, revoked or rescinded,
have been in full force and effect since their adoption to an including the date
hereof and are now in full force and effect (and are the only corporate
proceedings of the Company now in force relating to or affecting the matters
referred to therein.)
10. Attached hereto as Annex 2 is a true and complete copy of the By-Laws
of the Company as in effect on the date hereof.
11. Attached hereto as Annex 3 is a true and complete copy of the
Certificate of Incorporation of the Company as in effect on the date hereof, and
such certificate has not been amended, repealed, modified or restated.
11. The following persons are now duly elected and qualified officers of
the Company holding the offices indicated next to their respective names below,
and such
<PAGE>
officers have held such offices with the Company at all times since the date
indicated next to their respective titles to and including the date hereof, and
the signatures appearing opposite their respective names below are the true and
genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of the Company each of the Loan
Documents to which it is a party and any certificate or other document to be
delivered by the Company pursuant to the Loan Documents to which it is a party:
Name Office Date Signature
---- ------ ---- ---------
Richard M. Haddrill CEO/President 10/01/98 /S/ Richard M. Haddrill
-----------------------
Susan J. Carstensen CFO/Treasurer 9/30/98 /S/ Susan J. Carstensen
-----------------------
IN WITNESS WHEREOF, the undersigned have hereunto set our names as of the
date set forth below.
/S/ Richard M. Haddrill /S/ Susan J. Carstensen
- ---------------------------------- ------------------------------------
Richard M. Haddrill, CEO/President Susan J. Carstensen, CFO/Treasurer
Date: _______________, 199__
<PAGE>
Schedule D-1
[Montana]
DEED OF TRUST
from
POWERHOUSE TECHNOLOGIES, INC.,
formerly known as Video Lottery Technologies, Inc., Grantor
to
SECURITY TITLE COMPANY OF GALLATIN COUNTY, Trustee
for the use and benefit of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent and Syndication Agent, Beneficiary
DATED AS OF OCTOBER __, 1998
After recording, please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
ATTN: Daniel E. Karp, Esq.
<PAGE>
DEED OF TRUST
-------------
THIS DEED OF TRUST, dated as of October __, 1998, is made by
POWERHOUSE TECHNOLOGIES, INC., a Delaware corporation formerly known as Video
Lottery Technologies, Inc. ("Grantor"), whose address is 2311 South Seventh
Avenue, Bozeman, Montana 59715, to SECURITY TITLE COMPANY OF GALLATIN COUNTY, a
Montana Corporation ("Trustee"), whose address is 600 South 19th Avenue,
Bozeman, Montana 59771, for the use and benefit of LEHMAN COMMERCIAL PAPER INC.
("Beneficiary"), whose address is 3 World Financial Center, New York, New York
10285. References to this "Deed of Trust" shall mean this instrument and any and
all renewals, modifications, amendments, supplements, extensions,
consolidations, substitutions, spreaders and replacements of this instrument.
Background
----------
A. Grantor is the owner of the real property described in Schedule A
attached hereto (such real property, together with all the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements") being collectively referred to as the "Real Estate").
B. Pursuant to that certain Credit Agreement dated as of October __,
1998 (as the same may be amended, restated, replaced, substituted or otherwise
modified from time to time, the "Credit Agreement") among Mortgagor, as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman Brothers Inc., as arranger, Beneficiary, as administrative agent and
syndication agent, and Canadian Imperial Bank of Commerce, as documentation
agent, the Lenders have agreed to make certain loans to Borrower as more
particularly described therein. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned thereto in the Credit Agreement.
References in this Deed of Trust to the "Default Rate" shall mean the interest
rate provided for in Section 2.13(c) of the Credit Agreement.
C. Borrower, the administrative agent and the Lenders are willing to
effectuate the Credit Agreement, if, among other things, Grantor grants a first
lien on and security interest in the Real Estate and the Trust Property to
secure Grantor's obligations under the Credit Agreement and the other
obligations secured thereby.
Granting Clauses
<PAGE>
2
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees that to secure:
(a) (i) the repayment of principal in the maximum amount of
$100,000,000, which amount is the total indebtedness that may be
outstanding and secured hereby at any given time the indebtedness evidenced
by the Notes, and (ii) all interest and fees payable thereon (the items set
forth in clauses (i) and (ii) being referred to collectively as the
"Indebtedness"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Grantor (the "Obligations") under or pursuant to the
provisions of the Notes, this Deed of Trust, the Credit Agreement, any
other document securing payment of the Indebtedness (the "Security
Documents") and any amendments, supplements, extensions, renewals,
restatements, replacements or modifications of any of the foregoing (the
Notes, the Credit Agreement, the Security Documents and all other documents
and instruments from time to time evidencing, securing or guaranteeing the
payment of the Indebtedness or the performance of the Obligations, as any
of the same may be amended, supplemented, extended, renewed, restated,
replaced or modified from time to time, are collectively referred to as the
"Loan Documents");
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS
OVER TO TRUSTEE, IN TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF
BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Grantor, in possession or expectancy, in and to the Real Estate or any part
thereof, whether now owned or hereafter acquired;
(C) all right, title and interest of Grantor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights, sand, gravel and aggregate, and all
estates, rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to the
Real Estate, and any reversions, remainders, rents, issues, profits and
revenue thereof and all land lying in the bed of any street, road or
avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Grantor and now or subsequently attached
to, or contained in or used or usable in any way in connection with any
operation or
<PAGE>
3
letting of the Real Estate, including but without limiting the generality
of the foregoing, all screens, awnings, shades, blinds, curtains,
draperies, artwork, carpets, rugs, storm doors and windows, furniture and
furnishings, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, stoves, ranges,
laundry equipment, cleaning systems (including window cleaning apparatus),
telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Grantor in and to all substitutes
and replacements of, and all additions and improvements to, the Real Estate
and the Equipment, subsequently acquired by or released to Grantor or
constructed, assembled or placed by Grantor on the Real Estate, immediately
upon such acquisition, release, construction, assembling or placement,
including, without limitation, any and all building materials whether
stored at the Real Estate or offsite, and, in each such case, without any
further mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Grantor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the ("Leases"), and all rights of Grantor in respect of cash and securities
deposited thereunder and the right to receive and collect the revenues,
income, rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits arising from
the use and enjoyment of the Trust Property (as defined below)
(collectively, the "Leases");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records owned or held by Grantor relating to or used in
connection with the operation of the Real Estate or the Equipment or any
part thereof; all general intangibles related to the operation of the
Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Grantor relating to the Real Estate or Equipment and Grantor's
interest in and to all proceeds of any such insurance policies (including
title insurance policies) including the right to collect and receive such
proceeds, subject to the provisions relating to insurance generally set
forth below; and all awards and other compensation, including the interest
payable thereon and the right to collect and receive the same, made to the
present or any subsequent owner of the Real Estate or Equipment for the
taking by
<PAGE>
4
eminent domain, condemnation or otherwise, of all or any part of the Real
Estate or any easement or other right therein;
(I) all right, title and interest of Grantor in and to (i) all
contracts from time to time executed by Grantor or any manager or agent on
its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
to the extent permitted under applicable law, all consents, licenses,
building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation
of the Real Estate or any part thereof (collectively, the "Permits") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Beneficiary as provided in
this Deed of Trust; all capital, operating, reserve or similar accounts
held by or on behalf of Grantor and related to the operation of the Trust
Property, whether now existing or hereafter arising and all monies held in
any of the foregoing accounts and any certificates or instruments related
to or evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements including, without limitation, any right to payment now
existing or hereafter arising for rental of space or for goods sold or
leased or for services rendered, whether or not yet earned by performance,
arising from the operation of the Improvements or any other facility on the
Trust Property; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Grantor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "Premises", and those
described in the foregoing clauses (A) through (L) are collectively referred to
as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto Trustee, its successors and assigns for the uses and
purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed.
Terms and Conditions
--------------------
Grantor further represents, warrants, covenants and agrees with
Trustee and Beneficiary as follows:
<PAGE>
5
1. Warranty of Title. Grantor warrants that Grantor has good title to
the Real Estate in fee simple and good title to the rest of the Trust Property,
subject only to the matters that are set forth in the title insurance policy or
policies being issued to Beneficiary to insure the lien of this Deed of Trust
(the "Permitted Exceptions") and Grantor shall warrant, defend and preserve such
title and the rights granted by this Deed of Trust thereon against all claims of
all persons and entities. Grantor further warrants that it has the right to
grant the Trust Property.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness at the
times and places and in the manner specified in the Notes and the Credit
Agreement and shall perform all the Obligations.
3. Requirements.
(a) Grantor shall promptly comply with, or cause to be complied with,
and conform to all present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements (including, without
limitation, the Americans with Disabilities Act or similar local regulation (the
"ADA"), and irrespective of the nature of the work to be done, of each of the
United States of America, any State and any municipality, local government or
other political subdivision thereof and any agency, department, bureau, board,
commission or other instrumentality of any of them, now existing or subsequently
created (collectively, "Governmental Authority") which has jurisdiction over the
Trust Property and all covenants, restrictions and conditions now or later of
record which may be applicable to any of the Trust Property, or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, repair
or reconstruction of any of the Trust Property. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Grantor or to any of
the Trust Property and all covenants, restrictions, and conditions which now or
later may be applicable to any of the Trust Property are collectively referred
to as the "Legal Requirements".
(b) From and after the date of this Deed of Trust, Grantor shall not
by act or omission permit any building or other improvement on any premises not
subject to the lien of this Deed of Trust to rely on the Premises or any part
thereof or any interest therein to fulfill any Legal Requirement, and Grantor
hereby assigns to Beneficiary any and all rights to give consent for all or any
portion of the Premises or any interest therein to be so used. Grantor shall not
by act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Grantor represents that
each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all applicable subdivision laws and similar Legal Requirements.
Any act or omission by Grantor which would result in a violation of any of the
provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as permitted by
subsection 6.3 of the Credit Agreement, promptly when due, Grantor shall pay and
discharge all taxes of every kind and nature (including, without limitation, all
real and personal property, income, franchise, withholding, transfer, gains,
profits and gross receipts taxes), all charges for any easement or agreement
maintained for the benefit of any of the Trust Property, all general and special
assessments, levies, permits, inspection and license fees, all water and sewer
rents
<PAGE>
6
and charges and all other public charges even if unforeseen or extraordinary,
imposed upon or assessed against or which may become a lien on any of the Trust
Property, or arising in respect of the occupancy, use or possession thereof,
together with any penalties or interest on any of the foregoing (all of the
foregoing are collectively referred to as the "Impositions"). Grantor shall
within 30 days after each due date deliver to Beneficiary (i) original or copies
of receipted bills and cancelled checks evidencing payment of such Imposition if
it is a real estate tax or other public charge and (ii) evidence acceptable to
Beneficiary showing the payment of any other such Imposition. If by law any
Imposition, at Grantor's option, may be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Grantor may
elect to pay such Imposition in such installments and shall be responsible for
the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee or
Beneficiary under this Deed of Trust or otherwise, without notice or demand to
Grantor, to pay any Imposition after the date such Imposition shall have become
due, and to add to the Indebtedness the amount so paid, together with interest
from the time of payment at the Default Rate. Any sums paid by Trustee or
Beneficiary in discharge of any Impositions shall be (i) a lien on the Premises
secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) After an Event of Default (as defined below), Beneficiary shall be
entitled to require Grantor to pay monthly in advance to Beneficiary the
equivalent of 1/12th of the estimated annual Impositions. Beneficiary may
commingle such funds with its own funds and Grantor shall not be entitled to
interest thereon.
(e) Grantor shall have the right to contest or object in good faith to
the amount or validity of any Imposition by appropriate legal proceedings, but
such right shall not be deemed or construed in any way as relieving or modifying
Grantor's covenant to pay any such Imposition in the manner provided in this
Section unless (i) Grantor has given prior written notice to Beneficiary of
Grantor's intent so to contest or object to an Imposition, (ii) Grantor shall
demonstrate to Beneficiary's satisfaction that the legal proceedings shall
operate conclusively to prevent the sale of the Trust Property, or any part
thereof, to satisfy such Imposition prior to final determination of such
proceedings, (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Grantor is
subject and shall not constitute a default thereunder and (iv) Grantor shall
have set aside adequate reserves for the payment of the Impositions together
with all interest and penalties thereon.
5. Insurance. (a) Grantor shall maintain or cause to be maintained on
all of the Premises the insurance required by the Credit Agreement and in any
event shall also maintain or cause to be maintained
<PAGE>
7
(i) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The policy
shall provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways, such insurance to afford immediate minimum
protection to a limit of not less than that required by Beneficiary with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(ii) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts as are reasonably satisfactory to
Beneficiary, but in no event less than the limits established by law;
(iii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Beneficiary, in
nonreporting form, covering the total value of work performed and
equipment, supplies and materials furnished (with an appropriate limit for
soft costs in the case of construction);
(iv) if any portion of the Premises is located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount satisfactory to
Beneficiary, but in no event less than the maximum limit of coverage
available under the National Flood Insurance Act of 1968, as amended;
(v) such other insurance in such amounts as Grantor may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Beneficiary, and (ii) with
respect to all property insurance, provide for loss payable solely to
Beneficiary as its interest may appear. Liability insurance policies shall name
Beneficiary as (and Trustee, if Trustee shall so request) an additional insured
and contain a waiver of subrogation against Beneficiary (and Trustee, if Trustee
shall so request); all such policies shall indemnify and hold Beneficiary (and
Trustee, if Trusee shall so request) harmless from all liability claims
occurring on, in or about the Premises and the adjoining streets, sidewalks and
passageways. The amounts of each insurance policy and the form of each such
policy shall at all
<PAGE>
8
times be satisfactory to Beneficiary. Each policy shall expressly provide that
any proceeds which are payable to Beneficiary shall be paid by check payable to
the order of Beneficiary only and requiring the endorsement of Beneficiary only.
If any required insurance shall expire, be withdrawn, become void by breach of
any condition thereof by Grantor or by any lessee of any part of the Trust
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, or if for any other reason whatsoever such insurance
shall become unsatisfactory to Beneficiary, Beneficiary shall immediately obtain
new or additional insurance satisfactory to Beneficiary. Grantor shall not take
out any separate or additional insurance which is contributing in the event of
loss unless it is properly endorsed and otherwise satisfactory to Beneficiary in
all respects.
(b) Grantor shall deliver to Beneficiary an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Beneficiary, together with a copy of the declaration page for each such
policy. Grantor shall (i) pay as they become due all premiums for such
insurance, (ii) not later than 15 days prior to the expiration of each policy to
be furnished pursuant to the provisions of this Section, deliver a renewed
policy or policies, or duplicate original or originals thereof, marked "premium
paid," or accompanied by such other evidence of payment satisfactory to
Beneficiary with standard non-contributory mortgage clauses in favor of and
acceptable to Beneficiary. Upon request of Beneficiary, Grantor shall cause its
insurance underwriter or broker to certify to Beneficiary in writing that all
the requirements of this Deed of Trust governing insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Grantor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Deed of Trust
and shall be collectible in the same manner as the Indebtedness secured by this
Deed of Trust.
(d) Grantor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each renewal of each policy (but not later than 12 months from the date
of this Deed of Trust and each successive 12 month period to occur thereafter)
by using the F.W. Dodge Building Index to determine whether there shall have
been an increase in the replacement value since the most recent adjustment and,
if there shall have been such an increase, the amount of insurance required
shall be adjusted accordingly.
(e) Grantor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Grantor or to any of the Trust Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Trust Property. Grantor shall not use or permit the use of
the Trust Property in any manner which would permit any insurer to cancel any
insurance policy or void coverage required to be maintained by this Deed of
Trust.
<PAGE>
9
(f) If the Trust Property, or any part thereof, shall be destroyed or
damaged by fire or any other casualty, whether insured or uninsured, or in the
event any claim is made against Grantor for any personal injury, bodily injury
or property damage incurred on or about the Premises, Grantor shall give
immediate notice thereof to Beneficiary. If the Trust Property is damaged by
fire or other casualty and the cost to repair such damage is less than the
lesser of (i) 25% of the replacement cost of the Improvements at the affected
Real Estate site and (ii) $500,000, then provided that no Event of Default shall
have occurred and be continuing, Grantor shall have the right to adjust such
loss, and the insurance proceeds relating to such loss may be paid over to
Grantor; provided that Grantor shall, promptly after any such damage, repair all
such damage regardless of whether any insurance proceeds have been received or
whether such proceeds, if received, are sufficient to pay for the costs of
repair. If the Trust Property is damaged by fire or other casualty, and the cost
to repair such damage exceeds the above limit, or if an Event of Default shall
have occurred and be continuing, then Grantor authorizes and empowers
Beneficiary, at Beneficiary's option and in Beneficiary's sole discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and compromise
any claim under any insurance policy, to appear in and prosecute any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom Beneficiary's expenses incurred in the collection process. Each
insurance company concerned is hereby authorized and directed to make payment
for such loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property, in which event, if no
Event of Default has occurred and is continuing, Beneficiary will apply the
insurance proceeds (after deducting the costs of collecting such proceeds) to
the reimbursement of the costs of such repair or restoration, and Grantor hereby
designates Beneficiary as its attorney-in-fact for the purpose of making any
election required or permitted under any insurance policy relating to repair or
restoration. The insurance proceeds or any part thereof received by Beneficiary
may be applied by Beneficiary toward reimbursement of all costs and expenses of
Beneficiary in collecting such proceeds, and the balance, at Beneficiary's
option in its sole and absolute discretion, to the principal (to the
installments in inverse order of maturity, if payable in installments) and
interest due or to become due under the Notes, to fulfill any other Obligation
of Grantor. Application by Beneficiary of any insurance proceeds toward the last
maturing installments of principal and interest due or to become due under the
Notes shall not excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of such
payments.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force shall pass to the purchaser or grantee and Grantor hereby appoints
Beneficiary its attorney-in-fact, in Grantor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
6. Restrictions on Liens and Encumbrances. Except for the lien of this
Deed of Trust and the Permitted Exceptions, and except as permitted by the
Credit Agreement, Grantor shall not further mortgage, nor otherwise encumber the
Trust Property nor create or suffer to exist any lien, charge or encumbrance on
the Trust Property, or any part thereof superior to the lien of this Deed of
Trust, whether recourse or non-recourse.
<PAGE>
10
7. Sale and Other Transfer Restrictions. Grantor shall not sell,
transfer, convey or assign all or any portion of, or any interest in, the Trust
Property except as permitted by the Credit Agreement.
8. Limitation on Fundamental Changes. Except as permitted by the
Credit Agreement, Grantor agrees that:
(i) Grantor shall not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation
or dissolution), or acquire by purchase or otherwise all or substantially
all the business or assets of, or any stock or other evidence of beneficial
ownership of, any entity; and
(ii) Grantor shall not engage in any business on the Premises other
than the business in which it is presently engaged.
9. Maintenance; No Alteration; Inspection; Utilities. (a) Grantor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. Grantor
shall repair, restore, replace or rebuild promptly, in each case in accordance
with the Credit Agreement, any part of the Premises which may be damaged or
destroyed by any casualty whatsoever. The Improvements shall not be demolished
or, except in compliance with the Credit Agreement, materially altered, nor,
except in compliance with the Credit Agreement, any material additions built,
without the prior written consent of Beneficiary, which consent shall not be
unreasonably withheld or delayed.
(b) Beneficiary and any persons authorized by Beneficiary shall have
the right to enter and inspect the Premises and the right to inspect all work
done, labor performed and materials furnished in and about the Improvements and
the right to inspect and make copies of all books, contracts and records of
Grantor relating to the Trust Property.
(c) Grantor shall pay or cause to be paid when due all utility charges
which are incurred for gas, electricity, water or sewer services furnished to
the Premises and all other assessments or charges of a similar nature, whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.
10. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Trust
Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's sole discretion, as attorney-in-fact for Grantor, to
commence, appear in and prosecute, in Beneficiary's or Grantor's name, any
action or proceeding relating to any condemnation of the Trust Property, or any
portion thereof, and to settle or compromise any claim in connection with such
condemnation. If Beneficiary elects not to participate in such condemnation
proceeding, then Grantor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Beneficiary, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Beneficiary to be applied in the
same manner as insurance
<PAGE>
11
proceeds, as provided above, and Grantor agrees to execute any such assignments
of all such awards as Beneficiary may request.
11. Restoration. If Beneficiary elects to release funds to Grantor for
restoration of any of the Trust Property, then such restoration shall be
performed only in accordance with the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted for approval by Beneficiary, which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds, Beneficiary
shall be satisfied that the remaining restoration funds are sufficient to
complete the restoration and to pay all related expenses, including
interest on the Indebtedness and real estate taxes on the Premises, during
restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default (as defined below) shall then exist, (B) no mechanics' or
materialmen's liens shall have been filed and remain undischarged, except
those discharged by the disbursement of the requested restoration funds and
(C) a satisfactory bring-down or continuation of title insurance on the
Premises shall be delivered to Beneficiary, upon reasonable request by
Beneficiary therefor;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of satisfactory evidence of the stage of completion and of
performance of the work in a good and workmanlike manner and in accordance
with the contracts, plans and specifications acceptable to Beneficiary;
(v) with respect to each advance of restoration funds, Beneficiary may
retain 10% of the amount of such advance as a holdback until the
restoration is fully completed;
(vi) the restoration funds shall bear no interest and may be
commingled with Beneficiary's other funds;
(vii) Beneficiary may impose such other conditions as are customarily
imposed by construction lenders; and
(viii) any restoration funds remaining shall be retained by
Beneficiary and may be applied by Beneficiary, in its sole discretion, to
the Indebtedness in the inverse order of maturity.
12. Leases. (a) Grantor shall not (i) execute an assignment or pledge
of any Lease relating to all or any portion of the Trust Property other than in
favor of Beneficiary, or (ii) without the prior written consent of Beneficiary,
which consent shall not unreasonably be withheld or delayed, execute or permit
to exist any Lease of any of the Trust Property.
<PAGE>
12
(b) As to any Lease consented to by Beneficiary, Grantor shall:
(i) promptly perform all of the provisions of the Lease on the part of
the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the part
of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Grantor as
lessor or of the lessee thereunder;
(iv) exercise, within five (5) days after a request by Beneficiary,
any right to request from the lessee a certificate with respect to the
status thereof;
(v) simultaneously deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed counterpart of
the Lease;
(vii) promptly, upon request of Beneficiary, record the Lease or a
memorandum thereof, as provided by applicable law; and
(viii) promptly deliver to Beneficiary, upon Beneficiary's request, an
assignment of the Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within ten (10) days after a
request by Beneficiary, a written statement, certified by Grantor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Trust Property, the terms of all Leases and the spaces occupied and rentals
payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by credit information with respect to the lessees and such other
information as Beneficiary may request.
(d) All Leases entered into by Grantor after the date hereof, if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and provisions of this Deed of Trust unless Beneficiary
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Beneficiary, Grantor shall not accept a surrender or terminate, cancel, rescind,
supplement, alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Grantor accept the payment of rent more than thirty (30)
days in advance of its due date.
(f) If any act or omission of Grantor would give any lessee under any
Lease the right, immediately or after lapse of a period of time, to cancel or
terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee shall
<PAGE>
13
not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a 10-day period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected.
(g) In the event of the enforcement by Beneficiary of any remedy under
this Deed of Trust, the lessee under each Lease shall, if requested by
Beneficiary or any other person succeeding to the interest of Beneficiary as a
result of such enforcement, attorn to Beneficiary or to such person and shall
recognize Beneficiary or such successor in interest as lessor under the Lease
without change in the provisions thereof; provided however, that Beneficiary or
such successor in interest shall not be: (i) bound by any payment of an
installment of rent or additional rent which may have been made more than 30
days before the due date of such installment; (ii) bound by any amendment or
modification to the Lease made without the consent of Beneficiary or such
successor in interest, which consent shall not be unreasonably withheld or
delayed; (iii) liable for any previous act or omission of Grantor (or its
predecessors in interest); (iv) responsible for any monies owing by Grantor to
the credit of such lessee or subject to any credits, offsets, claims,
counterclaims, demands or defenses which the lessee may have against Grantor (or
its predecessors in interest); (v) bound by any covenant to undertake or
complete any construction of the Premises or any portion thereof; or (vi)
obligated to make any payment to such lessee other than any security deposit
actually delivered to Beneficiary or such successor in interest. Each lessee or
other occupant, upon request by Beneficiary or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment. In
addition, Grantor agrees that each Lease entered into after the date of this
Deed of Trust shall include language to the effect of subsections (d)-(g) of
this Section; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
13. Further Assurances/Estoppel Certificates. To further assure
Beneficiary's and Trustee's rights under this Deed of Trust, Grantor agrees upon
demand of Beneficiary or Trustee to do any act or execute any additional
documents (including, but not limited to, security agreements on any personalty
included or to be included in the Trust Property and a separate assignment of
each Lease in recordable form) as may be required by Beneficiary to confirm the
lien of this Deed of Trust and all other rights or benefits conferred on
Beneficiary. Within ten (10) days after Beneficiary has made a request therefor,
Grantor shall deliver, in form and substance satisfactory to Beneficiary, a
written statement, duly acknowledged, setting forth the amount of the
Indebtedness, and whether any offsets, claims, counterclaims or defenses exist
against the Indebtedness and certifying as to such other matters as Beneficiary
shall reasonably request.
14. Beneficiary's Right to Perform. If Grantor fails to perform any of
the covenants or agreements of Grantor, then, after any required notice and cure
periods, Beneficiary or Trustee, without waiving or releasing Grantor from any
obligation or default under this Deed of Trust, may, at any time (but shall be
under no obligation to) pay or perform the same, and the amount or cost thereof,
with interest at the Default Rate, shall immediately be due from Grantor to
Beneficiary or Trusee (as the case may be) and the same shall be secured by this
Deed of Trust and shall be an encumbrance on the Trust Property prior to any
right, title to, interest in or claim upon the Trust Property attaching
subsequent to the lien of this Deed of Trust.
<PAGE>
14
No payment or advance of money by Beneficiary or Trustee under this Section
shall be deemed or construed to cure Grantor's default or waive any right or
remedy of Beneficiary or Trustee.
15. Grantor's Existence, etc. Grantor shall do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges under the laws of the state in which it was formed and its right to
own property and transact business in each state in which the Real Estate is
located. Grantor represents and warrants that this Deed of Trust has been
executed by a duly authorized officer thereof. This Deed of Trust constitutes
the legal, valid and binding obligation of Grantor, enforceable against Grantor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
16. Financial Statements; Certificates; Other Information. Grantor
shall deliver to Beneficiary the financial statements required under the Credit
Agreement.
17. Hazardous Material. (a) Grantor shall comply with the provisions
of Sections 4.17 and 6.8 of the Credit Agreement in respect of Materials of
Environmental Concern (as defined in the Credit Agreement). In the event Grantor
fails to do so, after five (5) days' notice to Grantor and the expiration of the
cure period permitted under the applicable Legal Requirement, Beneficiary may
declare such failure an Event of Default or cause the Premises to be freed from
the Hazardous Material and the cost of the removal with interest at the Default
Rate shall immediately be due from Grantor to Beneficiary and the same shall be
added to the Indebtedness and be secured by this Deed of Trust. Grantor shall
give Beneficiary and its agents and employees access to the Premises to remove
Hazardous Material. Grantor agrees to defend, indemnify and hold Beneficiary and
Trustee free and harmless from and against all loss, costs, damage and expense
(including attorneys' fees and costs and consequential damages) Beneficiary may
sustain by reason of (i) the imposition or recording of a lien by any
Governmental Authority pursuant to any Legal Requirement relating to hazardous
or toxic wastes or substances or the removal thereof ("Hazardous Material
Laws"); (ii) claims of any private parties regarding violations of Hazardous
Material Laws; (iii) costs and expenses (including, without limitation,
attorneys' fees and fees incidental to the securing of repayment of such costs
and expenses) incurred by Grantor, Beneficiary or Trustee in connection with the
removal of any such lien or in connection with Grantor's or Beneficiary's or
Trustee's compliance with any Hazardous Material Laws; and (iv) the assertion
against Beneficiary or Trustee by any party of any claim in connection with
Hazardous Material. It is intended that the foregoing agreement of Grantor to
indemnify Beneficiary include, without limitation, indemnification for loss,
costs, damage and expense Beneficiary may sustain as a result of Beneficiary's
own negligence.
(b) The foregoing indemnification shall be a recourse obligation of
Grantor and shall survive repayment of the Notes, notwithstanding any
limitations on recourse which may be contained herein or in any Loan Documents
or the delivery of any satisfaction, release or release deed, discharge or deed
of reconveyance, or the assignment of this Deed of Trust by Beneficiary or the
replacement of Trustee by a substitute trustee.
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15
(c) For the purposes of this Deed of Trust, "Hazardous Material" means
and includes any hazardous, nuclear, toxic or dangerous waste, substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
18. Asbestos. Grantor shall not install or permit to be installed in
the Premises friable asbestos or any substance containing asbestos and deemed
hazardous by any Legal Requirement respecting such material, or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Grantor shall give Beneficiary and its agents and employees access
to the Premises to remove such asbestos or substances. Grantor shall defend,
indemnify, and save Beneficiary and Trustee harmless from all loss, costs,
damages and expense (including attorneys' fees and costs and consequential
damages) asserted or proven against Beneficiary or Trustee by any party, as a
result of the presence of such substances or any removal or compliance with such
Legal Requirements. It is intended that the foregoing agreement of Grantor to
indemnify Beneficiary include, without limitation, indemnification for loss,
costs, damage and expense Beneficiary may sustain as a result of Beneficiary's
own negligence. Furthermore, the indemnification shall be a recourse obligation
of Grantor and shall survive repayment of the Notes, notwithstanding any
limitation on recourse which may be contained herein or in any of the Loan
Documents or the delivery of any satisfaction, release or release deed,
discharge or deed of reconveyance, or the assignment of this Deed of Trust by
Beneficiary or the replacement of Trustee with a substitute trustee..
19. Event of Default. The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.
20. Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Beneficiary may have pursuant to the Loan Documents,
or as provided by law, and without limitation, (x) if such event is an Event of
Default under Section 8 of the Credit Agreement, automatically the Indebtedness
and all other amounts owing under the Notes, this Deed of Trust and the other
Security Documents immediately shall become due and payable, and (y) if such
event is any other Event of Default, by notice to Grantor, Beneficiary may
declare the Indebtedness (together with accrued interest thereon) and all other
amounts payable under the Notes, this Deed of Trust and the other Security
Documents to be immediately due and payable. Except as expressly provided above
in this Section or in the Credit Agreement, presentment, demand, protest and all
other notices of any kind are hereby expressly waived. In addition, upon the
occurrence of any Event of Default, Beneficiary may immediately take such
action, without notice or demand, as it deems advisable to protect and enforce
its rights against Grantor and in and to the Trust Property, including, but not
limited to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such manner as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
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16
(i) Beneficiary may, to the extent permitted by applicable law, (A)
institute and maintain an action of foreclosure against all or any part of
the Trust Property, (B) institute and maintain an action on the Notes, (C)
sell all or part of the Trust Property (Grantor expressly granting to
Beneficiary the power of sale) pursuant to MCA ss.ss. 71-1-111, 71-1- 223
and 71-1-224, as it may be amended or modified from time to time, or (D)
take such other action at law or in equity for the enforcement of this Deed
of Trust or any of the Loan Documents as the law may allow. Beneficiary may
proceed in any such action to final judgment and execution thereon for all
sums due hereunder, together with interest thereon at the Default Rate and
all costs of suit, including, without limitation, reasonable attorneys'
fees and disbursements. Interest at the Default Rate shall be due on any
judgment obtained by Beneficiary from the date of judgment until actual
payment is made of the full amount of the judgment.
(ii) Beneficiary may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Trust Property and each and every part
thereof and exclude Grantor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to Beneficiary upon demand at
any such time) and use, operate, manage, maintain and control the Trust
Property and every part thereof. Following such entry and taking of
possession, Beneficiary shall be entitled, without limitation, (x) to lease
all or any part or parts of the Trust Property for such periods of time and
upon such conditions as Beneficiary may, in its discretion, deem proper,
(y) to enforce, cancel or modify any Lease and (z) generally to execute, do
and perform any other act, deed, matter or thing concerning the Trust
Property as Beneficiary shall deem appropriate as fully as Grantor might
do.
(b) Beneficiary, in any action to foreclose this Deed of Trust in a
judicial procedure or in connection with the exercise of any non-judicial power
of sale by Trustee, shall be entitled to the appointment of a receiver. In case
of a foreclosure sale, the Real Estate may be sold, at Beneficiary's election,
in one parcel or in more than one parcel and Beneficiary is specifically
empowered, (without being required to do so, and in its sole and absolute
discretion) to cause successive sales of portions of the Trust Property to be
held.
(c) In the event of any breach, beyond any applicable grace period, of
any of the covenants, agreements, terms or conditions contained in this , and
notwithstanding to the contrary any exculpatory or non-recourse language which
may be contained herein, Beneficiary shall be entitled to enjoin such breach and
obtain specific performance of any covenant, agreement, term or condition and
Beneficiary and Trustee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Deed of Trust.
21. Right of Beneficiary to Credit Sale. Upon the occurrence of any
sale made under this Deed of Trust, whether made under the power of sale or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured
<PAGE>
17
by this Deed of Trust the net sales price after deducting therefrom the expenses
of sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and documents evidencing expenditures secured hereby may be
presented to the person or persons conducting the sale in order that the amount
so used or applied may be credited upon the Indebtedness as having been paid.
22. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, and
Grantor hereby irrevocably consents to such appointment and waives notice of any
application therefor (except as may be required by law). Any such receiver or
receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Beneficiary in case of entry as
provided in this Deed of Trust, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the Trust
Property, and shall continue as such and exercise all such powers until the date
of confirmation of sale of the Trust Property unless such receivership is sooner
terminated.
23. Extension, Release, etc. (a) Without affecting the lien or charge
of this Deed of Trust upon any portion of the Trust Property not then or
theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Deed of Trust until the lien amount shall
equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect the lien of this Deed of Trust or any liens, rights,
powers or remedies of Beneficiary hereunder, and such liens, rights, powers and
remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed of
Trust (or direct the Trustee to sell the Trust Property, as the case may be),
Grantor authorizes Beneficiary at its option to foreclose the lien of this Deed
of Trust subject to the rights of any tenants of the Trust Property. The failure
to make any such tenants parties defendant to any such foreclosure proceeding
and to foreclose their rights will not be asserted by Grantor as a defense to
any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose the lien of this Deed of Trust.
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18
(d) Unless expressly provided otherwise, in the event that ownership
of this Deed of Trust and title to the Trust Property or any estate therein
shall become vested in the same person or entity, this Deed of Trust shall not
merge in such title but shall continue as a valid lien on the Trust Property for
the amount secured hereby.
24. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Deed of Trust shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code (the
"Code") of the State in which the Trust Property is located. If an Event of
Default shall occur under this Deed of Trust, then in addition to having any
other right or remedy available at law or in equity, Beneficiary shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then 8 days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, attorneys' fees and legal
expenses. At Beneficiary's request, Grantor shall assemble the personal property
and make it available to Beneficiary at a place designated by Beneficiary which
is reasonably convenient to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate; and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time, shall
execute, acknowledge and deliver to Beneficiary one or more separate security
agreements, in form satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Beneficiary may
request in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Deed of Trust and such security
instrument. Grantor further agrees to pay to Beneficiary on demand all costs and
expenses incurred by Beneficiary in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Beneficiary shall
reasonably require. Grantor shall from time to time, on request of Beneficiary,
deliver to Beneficiary an inventory in reasonable detail of any of the Trust
Property which constitutes personal property. If Grantor shall fail to furnish
any financing or continuation statement within ten (10) days after request by
Beneficiary, then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, to execute and file
any such financing and
<PAGE>
19
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Beneficiary to proceed against any personal
property encumbered by this Deed of Trust as real property, as set forth above.
25. Assignment of Rents. Grantor hereby assigns to Trustee, for the
benefit of Beneficiary, the Rents as further security for the payment of the
Indebtedness and performance of the Obligations, and Grantor grants to
Beneficiary the right to enter the Trust Property for the purpose of collecting
the same and to let the Trust Property or any part thereof, and to apply the
Rents on account of the Indebtedness. The foregoing assignment and grant is
present and absolute and shall continue in effect until the Indebtedness is paid
in full, but Beneficiary hereby waives the right to enter the Trust Property for
the purpose of collecting the Rents and Grantor shall be entitled to collect,
receive, use and retain the Rents until the occurrence of an Event of Default
under this Deed of Trust; such right of Grantor to collect, receive, use and
retain the Rents may be revoked by Beneficiary upon the occurrence of any Event
of Default under this Deed of Trust by giving not less than five (5) days'
written notice of such revocation to Grantor; in the event such notice is given,
Grantor shall pay over to Beneficiary, or to any receiver appointed to collect
the Rents, any lease security deposits, and shall pay monthly in advance to
Beneficiary, or to any such receiver, the fair and reasonable rental value as
determined by Beneficiary for the use and occupancy of the Trust Property or of
such part thereof as may be in the possession of Grantor or any affiliate of
Grantor, and upon default in any such payment Grantor and any such affiliate
will vacate and surrender the possession of the Trust Property to Beneficiary or
to such receiver, and in default thereof may be evicted by summary proceedings
or otherwise. Grantor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
26. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of Grantor.
Within ten (10) days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary, which statement shall be
certified by Grantor.
27. Additional Rights. The holder of any subordinate lien on the Trust
Property shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Deed of Trust nor shall any holder of any subordinate lien
join any tenant under any Lease in any action to foreclose the lien or modify,
interfere with, disturb or terminate the rights of any tenant under any Lease.
By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this provision shall be null and void. Upon the occurrence of any Event of
Default, Beneficiary may, in its sole discretion and without regard to the
adequacy of its security under this Deed of Trust, apply all or any part of any
amounts on deposit with Beneficiary under this Deed of Trust against all or any
part of the Indebtedness. Any such application shall not be construed to cure or
waive any Default or Event
<PAGE>
20
of Default or invalidate any act taken by Beneficiary on account of such Default
or Event of Default.
28. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of deeds of trust or debts secured thereby
for federal, state or local purposes, or the manner of collection of any such
taxes, and imposing a tax, either directly or indirectly, on mortgages or deeds
of trust or debts secured thereby, the holder of this Deed of Trust shall have
the right to declare the Indebtedness due on a date to be specified by not less
than 30 days' written notice to be given to Grantor unless within such 30-day
period Grantor shall assume as an Obligation hereunder the payment of any tax so
imposed until full payment of the Indebtedness and such assumption shall be
permitted by law.
29. Notices. All notices, requests, demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Grantor and to Beneficiary as specified thereunder.
30. No Oral Modification. This Deed of Trust may not be changed or
terminated orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate lien or encumbrance.
Trustee's execution of any written agreement between Grantor and Beneficiary
shall not be required for the effectiveness thereof as between Grantor and
Beneficiary.
31. Partial Invalidity. In the event any one or more of the provisions
contained in this Deed of Trust shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Beneficiary.
32. Grantor's Waiver of Rights. To the fullest extent permitted by
law, Grantor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for
<PAGE>
21
Grantor and its successors and assigns, and for any and all persons ever
claiming any interest in the Trust Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement,
stay of execution, notice of election to mature or declare due the whole of the
secured indebtedness and marshalling in the event of exercise by Trustee or
Beneficiary of the power of sale or other rights hereby created.
33. Remedies Not Exclusive. Beneficiary and Trustee shall be entitled
to enforce payment of the Indebtedness and performance of the Obligations and to
exercise all rights and powers under this Deed of Trust or under any of the
other Loan Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Deed of Trust nor its enforcement, shall prejudice or in any manner affect
Beneficiary's or Trustee's right to realize upon or enforce any other security
now or hereafter held by Beneficiary or Trustee, it being agreed that
Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Beneficiary or Trustee is intended to be exclusive
of any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Loan Documents to Beneficiary or Trustee or to which it may
otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Beneficiary or Trustee,
as the case may be. In no event shall Beneficiary or Trustee, in the exercise of
the remedies provided in this Deed of Trust (including, without limitation, in
connection with the assignment of Rents to Beneficiary, or the appointment of a
receiver and the entry of such receiver on to all or any part of the Trust
Property), be deemed a "mortgagee in possession," and neither Beneficiary nor
Trustee shall in any way be made liable for any act, either of commission or
omission, in connection with the exercise of such remedies.
34. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of any county in which any of such collateral is located. Grantor
acknowledges that the right to maintain a consolidated trustee's sale or
foreclosure action is a specific inducement to Beneficiary to extend the
Indebtedness, and Grantor expressly and irrevocably waives any objections to the
commencement or consolidation of the foreclosure proceedings in a single action
and any objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Grantor further agrees that if
Trustee or Beneficiary shall be prosecuting
<PAGE>
22
one or more foreclosure or other proceedings against a portion of the Trust
Property or against any collateral other than the Trust Property, which
collateral directly or indirectly secures the Indebtedness, or if Beneficiary
shall have obtained a judgment of foreclosure and sale or similar judgment
against such collateral (or, in the case of a trustee's sale, shall have met the
statutory requirements therefor with respect to such collateral), then, whether
or not such proceedings are being maintained or judgments were obtained in or
outside the State in which the Premises are located, Beneficiary may commence or
continue foreclosure proceedings and exercise its other remedies granted in this
Deed of Trust against all or any part of the Trust Property and Grantor waives
any objections to the commencement or continuation of a foreclosure of this Deed
of Trust or exercise of any other remedies hereunder based on such other
proceedings or judgments, and waives any right to seek to dismiss, stay, remove,
transfer or consolidate either any action under this Deed of Trust or such other
proceedings on such basis. The commencement nor continuation of proceedings to
sell the Trust Property in a trustee's sale, to foreclose this Deed of Trust or
the exercise of any other rights hereunder nor the recovery of any judgment by
Beneficiary or the occurrence of any sale by the Trustee in any such proceedings
shall not prejudice, limit or preclude Beneficiary's right to commence or
continue one or more trustee's sale, foreclosure or other proceedings or obtain
a judgment against (or, in the case of a trustee's sale, to meet the statutory
requirements for, any such sale of) any other collateral (either in or outside
the State in which the Premises are located) which directly or indirectly
secures the Indebtedness, and Grantor expressly waives any objections to the
commencement of, continuation of, or entry of a judgment in such other
proceedings or exercise of any remedies in such proceedings based upon any
action or judgment connected to this Deed of Trust, and Grantor also waives any
right to seek to dismiss, stay, remove, transfer or consolidate either such
other proceedings or any action under this Deed of Trust on such basis. It is
expressly understood and agreed that to the fullest extent permitted by law,
Beneficiary may, at its election, or foreclosure action at either a single sale
or at multiple sales conducted simultaneously and take such other measures as
are appropriate in order to effect the agreement of the parties to dispose of
and administer all collateral securing the Indebtedness (directly or indirectly)
in the most economical and least time-consuming manner.
35. Expenses; Indemnification. (a) Grantor shall pay or reimburse
Trustee and Beneficiary for all expenses incurred by Beneficiary or Trustee
before and after the date of this Deed of Trust with respect to any and all
transactions contemplated by this Deed of Trust including without limitation,
the preparation of any document reasonably required hereunder or any amendment,
modification, restatement or supplement to this Deed of Trust, the delivery of
any consent, non-disturbance agreement or similar document in connection with
this Deed of Trust or the enforcement of any of Beneficiary's or Trustee's
rights. Such expenses shall include, without limitation, all title and
conveyancing charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums), title search and title
rundown charges, brokerage commissions, finders' fees, placement fees, court
costs, surveyors', photographers', appraisers', architects', engineers',
consulting professional's, accountants' and attorneys' fees and disbursements.
Grantor acknowledges that from time to time Grantor may receive statements for
such expenses, including without limitation attorneys' fees and disbursements.
Grantor shall pay such statements promptly upon receipt.
<PAGE>
23
(b) If (i) any sale (or any prerequisite to a sale), action or
proceeding shall be commenced by Beneficiary or Trustee (including but not
limited to any action to any sale of the Trust Property, or any foreclose this
Deed of Trust or to collect the Indebtedness), or any action or proceeding is
commenced to which Beneficiary or Trustee is made a party, or in which it
becomes necessary to defend or uphold the lien of this Deed of Trust, or in
which Beneficiary or Trustee is served with any legal process, discovery notice
or subpoena and (ii) in each of the foregoing instances such action or
proceeding in any manner relates to or arises out of this Deed of Trust or
Beneficiary's lending to Grantor, then Grantor will immediately reimburse or pay
to Beneficiary and Trustee all of the expenses which have been or may be
incurred by Beneficiary and Trustee, respectively, with respect to the foregoing
(including reasonable counsel fees and disbursements), together with interest
thereon at the Default Rate, and any such sum and the interest thereon shall be
a lien on the Trust Property, prior to any right, or title to, interest in or
claim upon the Trust Property attaching or accruing subsequent to the lien of
this Deed of Trust, and shall be deemed to be secured by this Deed of Trust. In
any action or proceeding to sell the Trust Property, to foreclose this Deed of
Trust, or to recover or collect the Indebtedness, the provisions of law
respecting the recovering of costs, disbursements and allowances shall prevail
unaffected by this covenant.
(c) Grantor shall indemnify and hold harmless each of Beneficiary and
Trustee and each of their respective affiliates, and the respective directors,
officers, agents and employees of each of Beneficiary and Trustee and each of
their respective affiliates (all of the foregoing indemnified parties
collectively, the "Obligees") from and against all claims, damages, losses and
liabilities (including, without limitation, reasonable attorneys' fees and
expenses) arising out of or based upon any matter related to this Deed of Trust,
the Trust Property or the occupancy, ownership, maintenance or management of the
Trust Property by Grantor, including, without limitation, any claims based on
the alleged acts or omissions of any employee or agent of Grantor. It is
intended that the foregoing agreement of Grantor to indemnify the Obligees
include, without limitation, indemnification for claims, damages, losses and
liabilities the Obligees may sustain as a result of the Obligees' own negligence
and this indemnification shall be in addition to any other liability which
Grantor may otherwise have to Beneficiary or Trustee.
36. Successors and Assigns. All covenants of Grantor contained in this
Deed of Trust are imposed solely and exclusively for the benefit of Beneficiary
and Trustee and their respective successors and assigns, and no other person or
entity shall have standing to require compliance with such covenants or be
deemed, under any circumstances, to be a beneficiary of such covenants, any or
all of which may be freely waived in whole or in part by Beneficiary or Trustee
at any time if in its sole discretion it deems such waiver advisable. All such
covenants of Grantor shall run with the land and bind Grantor, the successors
and assigns of Grantor (and each of them) and all subsequent owners,
encumbrancers and tenants of the Trust Property, and shall inure to the benefit
of Beneficiary, its successors and assigns. The word "Grantor" shall be
construed as if it read "Grantors" whenever the sense of this Deed of Trust so
requires and if there shall be more than one Grantor, the obligations of the
Grantors shall be joint and several.
37. No Waivers, etc. Any failure by Beneficiary to insist upon the
strict performance by Grantor of any of the terms and provisions of this Deed of
Trust shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Beneficiary or Trustee,
<PAGE>
24
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Grantor of any and all of the terms and provisions of
this Deed of Trust to be performed by Grantor. Beneficiary may release,
regardless of consideration and without the necessity for any notice to or
consent by the beneficiary of any subordinate deed of trust or the holder of any
subordinate lien on the Trust Property, any part of the security held for the
obligations secured by this Deed of Trust without, as to the remainder of the
security, in any way impairing or affecting the lien of this Deed of Trust or
the priority of such lien over any subordinate lien.
38. Governing Law, etc. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of Montana, except that
Grantor expressly acknowledges that by its terms the Notes shall be governed and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of law, and for purposes of consistency, Grantor
agrees that in any in personam proceeding related to this Deed of Trust the
rights of the parties to this Deed of Trust shall also be governed by and
construed in accordance with the laws of the State of New York governing
contracts made and to be performed in that State, without regard to principles
of conflict of law.
39. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or proceeding relating to this Deed of Trust and for any counterclaim
brought therein. Grantor hereby waives all rights to interpose any counterclaim
in any suit brought by Beneficiary hereunder and all rights to have any such
suit consolidated with any separate suit, action or proceeding.
40. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any subsequent holder of the Notes,"
the word "Notes" shall mean "the Notes or any other evidence of indebtedness
secured by this Deed of Trust," the word "person" shall include any individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, or other entity, and the words "Trust Property" shall
include any portion of the Trust Property or interest therein. Whenever the
context may require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa. The captions in this Deed of Trust are
for convenience or reference only and in no way limit or amplify the provisions
hereof.
41. Revolving Credit; Future Advances. The Loans secured hereby
include revolving lines of credit extended by the Banks to Grantor pursuant to
the Credit Agreement. The outstanding balance of such revolving lines of credit
may increase and decrease from time to time, and sums may be advanced, repaid
and readvanced thereunder until the final maturity of the Loans. This Deed of
Trust is intended to secure all indebtedness of Grantor under the Loans so long
as the Credit Agreement continues in effect, regardless of such repayments and
readvances of the proceeds of the Loans, and regardless of whether the balance
of such obligations may be reduced, from time to time, to zero. In addition to
all other indebtedness secured by this Deed of
<PAGE>
25
Trust, this Deed of Trust shall secure also and constitute a first lien subject
only to the Permitted Exceptions on the Trust Property for all future advances
made by the Banks to Grantor for any purpose within six (6) years from the date
of this Deed of Trust to the same extent as if such advances were made on the
date of the execution of this Deed of Trust. The total amount of the
indebtedness, including future advances, that is secured by this Deed of Trust,
may increase or decrease from time to time, but shall not exceed the maximum
principal amount of the Loans as set forth in the Credit Agreement at any one
time, together with interest thereon at the rates provided in the Credit
Agreement, and plus any disbursement made by Beneficiary or any of the Banks to
protect the security of this Deed of Trust, with interest on such disbursement
at the Default Rate.
42. Last Dollars Secured; Priority. This Deed of Trust secures only a
portion of the Indebtedness owing or which may become owing by the Grantor to
the Banks. The parties agree that any payments or repayments of such
Indebtedness shall be and be deemed to be applied first to the portion of the
Indebtedness that is not secured hereby, it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.
43. Receipt of Copy. Grantor acknowledges that it has received a true
copy of this Deed of Trust.
<PAGE>
26
This Deed of Trust has been duly executed by Grantor as of the date
first above written.
POWERHOUSE TECHNOLOGIES, INC.,
formerly known as Video Lottery Technologies,
Inc.
By: /S/ Susan J. Carstensen
-----------------------------------------
Name: Susan J. Carstensen
Title: Treasurer and CFO
<PAGE>
27
STATE OF MONTANA )
) ss.
COUNTY OF GALLATIN )
On this 8th day of October, 1998, before me, the undersigned, a Notary
Public for the State of Montana, personally appeared Susan J. Carstensen, known
to me to be the Treasurer and CFO of the corporation that executed the within
instrument and acknowledged to me that such corporation executed the same.
/S/ Vicki L. Consoli
--------------------------------------
Notary Public for the State of Montana
Residing at Bozeman, MT
My Commission Expires 2/12/02
[SEAL]
<PAGE>
SCHEDULE A
PARCEL I:
Tract 1B of Certificate of Survey No. 1393A, said survey located in the NE1/4 of
Section 24, Township 2 South, Range 5 East, P.M.M., City of Bozeman, Gallatin
County, Montana, according to the official plat thereof on file and of record in
the office of the County Clerk and Recorder, Gallatin County, Montana.
PARCEL II:
Tract 2B of Certificate of Survey No. 1393A, said survey located in the NE1/4 of
Section 24, Township 2 South, Range 5 East, P.M.M., City of Bozeman, Gallatin
County, Montana, according to the official plat thereof on file and of record in
the office of the County Clerk and Recorder, Gallatin County, Montana.
PARCEL III:
Easement as granted to use the existing Museum of the Rockies entry drive
immediately South of the intersection of Kagy Avenue and South 7th Avenue (the
"7th Avenue Access Drive") in Grant of Conditional Easement recorded January 22,
1993 in Film 129, Page 1504 and rerecorded February 25, 1993 in Film 130, Page
452, Records of Gallatin County, Montana.
<PAGE>
[New Mexico]
LINE OF CREDIT MORTGAGE
from
NUEVO SOL TURF CLUB, INC., Mortgagor
to
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent and Syndication Agent, Mortgagee
DATED AS OF OCTOBER __, 1998
After recording, please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
ATTN: Daniel E. Karp, Esq.
<PAGE>
LINE OF CREDIT MORTGAGE
-----------------------
THIS MORTGAGE, dated as of October __, 1998, is made by NUEVO SOL TURF
CLUB INC., a New Mexico corporation ("Mortgagor") whose address is 2311 South
Seventh Avenue, Bozeman, Montana 59715 to LEHMAN COMMERCIAL PAPER INC.
("Mortgagee"), whose address is 3 World Financial Center, New York, New York
10285. References to this "Mortgage" shall mean this instrument and any and all
renewals, modifications, amendments, supplements, extensions, consolidations,
substitutions and replacements of this instrument.
Background
----------
A. Mortgagor is the owner of the real property described in Schedule A
attached hereto (such real property, together with all the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements") being collectively referred to as the "Real Estate").
B. Mortgagor is a wholly-owned subsidiary of Powerhouse Technologies,
Inc., a Delaware corporation ("Powerhouse").
C. Pursuant to that certain Credit Agreement dated as of October __,
1998 (as the same may be amended, restated, replaced, substituted or otherwise
modified from time to time, the "Credit Agreement") among Powerhouse, as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman Brothers Inc., as arranger, Mortgagee, as administrative agent and
syndication agent, and Canadian Imperial Bank of Commerce, as documentation
agent, the Lenders have agreed to make certain loans to Powerhouse all as more
particularly described therein. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned thereto in the Credit Agreement.
References in this Mortgage to the "Default Rate" shall mean the interest rate
provided for in Section 2.13(c) of the Credit Agreement.
D. Powerhouse, the administrative agent and the Lenders are willing to
effectuate the Credit Agreement, if, among other things, Mortgagor grants a
first mortgage lien on and security interest in the Real Estate and the
Mortgaged Property to secure Mortgagor's obligations under the Credit Agreement
and the other obligations secured thereby.
<PAGE>
2
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) (i) the repayment of the indebtedness evidenced by the Notes, and
(ii) all interest and fees payable thereon (the items set forth in clauses
(i) and (ii) being referred to collectively as the "Indebtedness"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "Obligations") under or pursuant to the
provisions of the Notes, this Mortgage, the Credit Agreement, any other
document securing payment of the Indebtedness (the "Security Documents")
and any amendments, supplements, extensions, renewals, restatements,
replacements or modifications of any of the foregoing (the Notes, the
Credit Agreement, the Security Documents and all other documents and
instruments from time to time evidencing, securing or guaranteeing the
payment of the Indebtedness or the performance of the Obligations, as any
of the same may be amended, supplemented, extended, renewed, restated,
replaced or modified from time to time, are collectively referred to as the
"Loan Documents");
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof, whether now owned or hereafter acquired;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water rights including, without limitation, those
referred to in the documents identified on Schedule B attached hererto,
water courses, riparian rights (if any), development rights, air rights,
mineral rights, sand, gravel and aggregate, and all estates, rights,
titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and
any reversions, remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation
<PAGE>
3
or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Real Estate or offsite, and, in
each such case, without any further mortgage, conveyance, assignment or
other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the ("Leases"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Mortgaged Property (as defined
below) (collectively, the "Leases");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records owned or held by Mortgagor relating to or used in
connection with the operation of the Real Estate or the Equipment or any
part thereof; all general intangibles related to the operation of the
Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Mortgagor relating to the Real Estate or Equipment and
Mortgagor's interest in and to all proceeds of any such insurance policies
(including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance
generally set forth below; and all awards and other compensation, including
the interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or Equipment
for the taking by
<PAGE>
4
eminent domain, condemnation or otherwise, of all or any part of the Real
Estate or any easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
to the extent permitted under applicable law, all consents, licenses,
building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation
of the Real Estate or any part thereof (collectively, the "Permits") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Mortgagee as provided in
this Mortgage; all capital, operating, reserve or similar accounts held by
or on behalf of Mortgagor and related to the operation of the Mortgaged
Property, whether now existing or hereafter arising and all monies held in
any of the foregoing accounts and any certificates or instruments related
to or evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements including, without limitation, any right to payment now
existing or hereafter arising for rental of space or for goods sold or
leased or for services rendered, whether or not yet earned by performance,
arising from the operation of the Improvements or any other facility on the
Mortgaged Property; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "Mortgaged Property").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed.
Terms and Conditions
--------------------
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
<PAGE>
5
1. Warranty of Title. Mortgagor warrants that Mortgagor has good title
to the Real Estate in fee simple and good title to the rest of the Mortgaged
Property, subject only to the matters that are set forth in the title insurance
policy or policies being issued to Mortgagee to insure the lien of this Mortgage
(the "Permitted Exceptions") and Mortgagor shall warrant, defend and preserve
such title and the lien of the Mortgage thereon against all claims of all
persons and entities. Mortgagor further warrants that it has the right to
mortgage the Mortgaged Property.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the Notes and the Credit
Agreement and shall perform all the Obligations.
3. Requirements.
(a) Mortgagor shall promptly comply with, or cause to be complied
with, and conform to all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements (including,
without limitation, the Americans with Disabilities Act or similar local
regulation (the "ADA"), and irrespective of the nature of the work to be done,
of each of the United States of America, any State and any municipality, local
government or other political subdivision thereof and any agency, department,
bureau, board, commission or other instrumentality of any of them, now existing
or subsequently created (collectively, "Governmental Authority") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property. All present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements of every
Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents that
each parcel of the Real Estate is not in violation of any applicable subdivision
law or similar Legal Requirement. Any act or omission by Mortgagor which would
result in a violation of any of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as permitted by
subsection 6.3 of the Credit Agreement, promptly when due, Mortgagor shall pay
and discharge all taxes of every kind and nature (including, without limitation,
all real and personal property, income, franchise, withholding, transfer, gains,
profits and gross receipts taxes), all charges for
<PAGE>
6
any easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Mortgaged Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions"). Mortgagor shall within 30 days after each due date deliver to
Mortgagee (i) original or copies of receipted bills and cancelled checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence acceptable to Mortgagee showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee under
this Mortgage or otherwise, without notice or demand to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due, and to add to
the Indebtedness the amount so paid, together with interest from the time of
payment at the Default Rate. Any sums paid by Mortgagee in discharge of any
Impositions shall be (i) a lien on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) After an Event of Default (as defined below), Mortgagee shall be
entitled to require Mortgagor to pay monthly in advance to Mortgagee the
equivalent of 1/12th of the estimated annual Impositions. Mortgagee may
commingle such funds with its own funds and Mortgagor shall not be entitled to
interest thereon.
(e) Mortgagor shall have the right to contest or object in good faith
to the amount or validity of any Imposition by appropriate legal proceedings,
but such right shall not be deemed or construed in any way as relieving or
modifying Mortgagor's covenant to pay any such Imposition in the manner provided
in this Section unless (i) Mortgagor has given prior written notice to Mortgagee
of Mortgagor's intent so to contest or object to an Imposition, (ii) Mortgagor
shall demonstrate to Mortgagee's satisfaction that the legal proceedings shall
operate conclusively to prevent the sale of the Mortgaged Property, or any part
thereof, to satisfy such Imposition prior to final determination of such
proceedings, (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Mortgagor is
subject and shall not constitute a default thereunder and (iv) Mortgagor shall
have set aside adequate reserves for the payment of the Impositions together
with all interest and penalties thereon.
<PAGE>
7
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained
on all of the Premises the insurance required by the Credit Agreement and in any
event shall also maintain or cause to be maintained
(i) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The policy
shall provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways, such insurance to afford immediate minimum
protection to a limit of not less than that required by Mortgagee with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(ii) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts as are reasonably satisfactory to
Mortgagee, but in no event less than the limits established by law;
(iii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Mortgagee, in nonreporting
form, covering the total value of work performed and equipment, supplies
and materials furnished (with an appropriate limit for soft costs in the
case of construction);
(iv) if any portion of the Premises is located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, in amounts not less than the maximum limit of
coverage available under the National Flood Insurance Act of 1968, as
amended;
(v) such other insurance in such amounts as Mortgagor may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Mortgagee, and (ii) with
respect to all property insurance, provide for loss payable solely to Mortgagee
as its interest may appear. Liability insurance policies shall name Mortgagee as
an additional insured and contain a waiver of subrogation against Mortgagee; all
such policies shall indemnify and hold Mortgagee harmless from all liability
claims occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways. The amounts of each insurance
<PAGE>
8
policy and the form of each such policy shall at all times be satisfactory to
Mortgagee. Each policy shall expressly provide that any proceeds which are
payable to Mortgagee shall be paid by check payable to the order of Mortgagee
only and requiring the endorsement of Mortgagee only. If any required insurance
shall expire, be withdrawn, become void by breach of any condition thereof by
Mortgagor or by any lessee of any part of the Mortgaged Property or become void
or unsafe by reason of the failure or impairment of the capital of any insurer,
or if for any other reason whatsoever such insurance shall become unsatisfactory
to Mortgagee, Mortgagee shall immediately obtain new or additional insurance
satisfactory to Mortgagee. Mortgagor shall not take out any separate or
additional insurance which is contributing in the event of loss unless it is
properly endorsed and otherwise satisfactory to Mortgagee in all respects.
(b) Mortgagor shall deliver to Mortgagee an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Mortgagee, together with a copy of the declaration page for each such policy.
Mortgagor shall (i) pay as they become due all premiums for such insurance, (ii)
not later than 15 days prior to the expiration of each policy to be furnished
pursuant to the provisions of this Section, deliver a renewed policy or
policies, or duplicate original or originals thereof, marked "premium paid," or
accompanied by such other evidence of payment satisfactory to Mortgagee with
standard non-contributory mortgage clauses in favor of and acceptable to
Mortgagee. Upon request of Mortgagee, Mortgagor shall cause its insurance
underwriter or broker to certify to Mortgagee in writing that all the
requirements of this Mortgage governing insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Mortgagor shall pay to Mortgagee on demand such premium
or premiums so paid by Mortgagee with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Mortgage and
shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each renewal of each policy (but not later than 12 months from the date
of this Mortgage and each successive 12 month period to occur thereafter) by
using the F.W. Dodge Building Index to determine whether there shall have been
an increase in the replacement value since the most recent adjustment and, if
there shall have been such an increase, the amount of insurance required shall
be adjusted accordingly.
(e) Mortgagor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use or permit the
use of the Mortgaged Property in any manner which would permit any insurer to
cancel any insurance policy or void coverage required to be maintained by this
Mortgage.
<PAGE>
9
(f) If the Mortgaged Property, or any part thereof, shall be destroyed
or damaged by fire or any other casualty, whether insured or uninsured, or in
the event any claim is made against Mortgagor for any personal injury, bodily
injury or property damage incurred on or about the Premises, Mortgagor shall
give immediate notice thereof to Mortgagee. If the Mortgaged Property is damaged
by fire or other casualty and the cost to repair such damage is less than the
lesser of (i) 25% of the replacement cost of the Improvements at the affected
Real Estate site and (ii) $500,000, then provided that no Event of Default shall
have occurred and be continuing, Mortgagor shall have the right to adjust such
loss, and the insurance proceeds relating to such loss may be paid over to
Mortgagor; provided that Mortgagor shall, promptly after any such damage, repair
all such damage regardless of whether any insurance proceeds have been received
or whether such proceeds, if received, are sufficient to pay for the costs of
repair. If the Mortgaged Property is damaged by fire or other casualty, and the
cost to repair such damage exceeds the above limit, or if an Event of Default
shall have occurred and be continuing, then Mortgagor authorizes and empowers
Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and compromise
any claim under any insurance policy, to appear in and prosecute any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom Mortgagee's expenses incurred in the collection process. Each
insurance company concerned is hereby authorized and directed to make payment
for such loss directly to Mortgagee. Mortgagee shall have the right to require
Mortgagor to repair or restore the Mortgaged Property, in which event, if no
Event of Default has occurred and is continuing, Mortgagee will apply the
insurance proceeds (after deducting the costs of collecting such proceeds) to
the reimbursement of the costs of such repair or restoration, and Mortgagor
hereby designates Mortgagee as its attorney-in-fact for the purpose of making
any election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by Mortgagee
may be applied by Mortgagee toward reimbursement of all costs and expenses of
Mortgagee in collecting such proceeds, and the balance, at Mortgagee's option in
its sole and absolute discretion, to the principal (to the installments in
inverse order of maturity, if payable in installments) and interest due or to
become due under the Notes, to fulfill any other Obligation of Mortgagor.
Application by Mortgagee of any insurance proceeds toward the last maturing
installments of principal and interest due or to become due under the Notes
shall not excuse Mortgagor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of such
payments.
(g) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
6. Restrictions on Liens and Encumbrances. Except for the lien of this
Mortgage and the Permitted Exceptions, and except as permitted by the Credit
Agreement, Mortgagor shall not further mortgage, nor otherwise encumber the
Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance
on the Mortgaged Property, or any part thereof superior to the lien of this
Mortgage, whether recourse or non-recourse.
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10
7. Sale and Other Transfer Restrictions. Mortgagor shall not sell,
transfer, convey or assign all or any portion of, or any interest in, the
Mortgaged Property except as permitted by the Credit Agreement.
8. Limitation on Fundamental Changes. Except as permitted by the
Credit Agreement, Mortgagor agrees that:
(i) Mortgagor shall not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation
or dissolution), or acquire by purchase or otherwise all or substantially
all the business or assets of, or any stock or other evidence of beneficial
ownership of, any entity; and
(ii) Mortgagor shall not engage in any business on the Premises other
than the business in which it is presently engaged.
9. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements.
Mortgagor shall repair, restore, replace or rebuild promptly, in each case in
accordance with the Credit Agreement, any part of the Premises which may be
damaged or destroyed by any casualty whatsoever. The Improvements shall not be
demolished or, except in compliance with the Credit Agreement, materially
altered, nor, except in compliance with the Credit Agreement, any material
additions built, without the prior written consent of Mortgagee, which consent
shall not be unreasonably withheld or delayed.
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Premises and the right to inspect all work done,
labor performed and materials furnished in and about the Improvements and the
right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Mortgagor shall pay or cause to be paid when due all utility
charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
10. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
commence, appear in and prosecute, in Mortgagee's or Mortgagor's name, any
action or proceeding relating to any condemnation of the Mortgaged Property, or
any portion thereof, and to settle or compromise any claim in connection with
such condemnation. If Mortgagee elects not to participate in such condemnation
proceeding, then Mortgagor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Mortgagee, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Mortgagee to be
<PAGE>
11
applied in the same manner as insurance proceeds, as provided above, and
Mortgagor agrees to execute any such assignments of all such awards as Mortgagee
may request.
11. Restoration. If Mortgagee elects to release funds to Mortgagor for
restoration of any of the Mortgaged Property, then such restoration shall be
performed only in accordance with the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted for approval by Mortgagee, which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds, Mortgagee shall
be satisfied that the remaining restoration funds are sufficient to
complete the restoration and to pay all related expenses, including
interest on the Indebtedness and real estate taxes on the Premises, during
restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default (as defined below) shall then exist, (B) no mechanics' or
materialmen's liens shall have been filed and remain undischarged, except
those discharged by the disbursement of the requested restoration funds and
(C) a satisfactory bring-down or continuation of title insurance on the
Premises shall be delivered to Mortgagee, upon reasonable request by
Mortgagee therefor;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of satisfactory evidence of the stage of completion and of
performance of the work in a good and workmanlike manner and in accordance
with the contracts, plans and specifications acceptable to Mortgagee;
(v) with respect to each advance of restoration funds, Mortgagee may
retain 10% of the amount of such advance as a holdback until the
restoration is fully completed;
(vi) the restoration funds shall bear no interest and may be
commingled with Mortgagee's other funds;
(vii) Mortgagee may impose such other conditions as are customarily
imposed by construction lenders; and
(viii) any restoration funds remaining shall be retained by Mortgagee
and may be applied by Mortgagee, in its sole discretion, to the
Indebtedness in the inverse order of maturity.
12. Leases. (a) Mortgagor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, which consent shall not unreasonably be withheld or delayed, execute
or permit to exist any Lease of any of the Mortgaged Property.
<PAGE>
12
(b) As to any Lease consented to by Mortgagee, Mortgagor shall:
(i) promptly perform all of the provisions of the Lease on the part of
the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the part
of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
(iv) exercise, within five (5) days after a request by Mortgagee, any
right to request from the lessee a certificate with respect to the status
thereof;
(v) simultaneously deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of the
Lease;
(vii) promptly, upon request of Mortgagee, record the Lease or a
memorandum thereof, as provided by applicable law; and
(viii) promptly deliver to Mortgagee, upon Mortgagee's request, an
assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within ten (10) days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged Property, the terms of all Leases and the spaces occupied and
rentals payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by credit information with respect to the lessees and such other
information as Mortgagee may request.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Mortgagee, Mortgagor shall not accept a surrender or terminate, cancel, rescind,
supplement, alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Mortgagor accept the payment of rent more than thirty (30)
days in advance of its due date.
(f) If any act or omission of Mortgagor would give any lessee under
any Lease the right, immediately or after lapse of a period of time, to cancel
or terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee
<PAGE>
13
shall not exercise such right until it has given written notice of such act or
omission to Mortgagee and until a 10-day period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected.
(g) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, attorn to Mortgagee or to such person and shall recognize Mortgagee
or such successor in interest as lessor under the Lease without change in the
provisions thereof; provided however, that Mortgagee or such successor in
interest shall not be: (i) bound by any payment of an installment of rent or
additional rent which may have been made more than 30 days before the due date
of such installment; (ii) bound by any amendment or modification to the Lease
made without the consent of Mortgagee or such successor in interest, which
consent shall not be unreasonably withheld or delayed; (iii) liable for any
previous act or omission of Mortgagor (or its predecessors in interest); (iv)
responsible for any monies owing by Mortgagor to the credit of such lessee or
subject to any credits, offsets, claims, counterclaims, demands or defenses
which the lessee may have against Mortgagor (or its predecessors in interest);
(v) bound by any covenant to undertake or complete any construction of the
Premises or any portion thereof; or (vi) obligated to make any payment to such
lessee other than any security deposit actually delivered to Mortgagee or such
successor in interest. Each lessee or other occupant, upon request by Mortgagee
or such successor in interest, shall execute and deliver an instrument or
instruments confirming such attornment. In addition, Mortgagor agrees that each
Lease entered into after the date of this Mortgage shall include language to the
effect of subsections (d)-(g) of this Section; provided that the provisions of
such subsections shall be self-operative and any failure of any Lease to include
such language shall not impair the binding effect of such provisions on any
lessee under such Lease.
13. Further Assurances/Estoppel Certificates. To further assure
Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be required by Mortgagee to confirm the lien of this Mortgage and
all other rights or benefits conferred on Mortgagee.
14. Mortgagee's Right to Perform. If Mortgagor fails to perform any of
the covenants or agreements of Mortgagor, then, after any required notice and
cure periods, Mortgagee, without waiving or releasing Mortgagor from any
obligation or default under this Mortgage, may, at any time (but shall be under
no obligation to) pay or perform the same, and the amount or cost thereof, with
interest at the Default Rate, shall immediately be due from Mortgagor to
Mortgagee and the same shall be secured by this Mortgage and shall be a lien on
the Mortgaged Property prior to any right, title to, interest in or claim upon
the Mortgaged Property attaching subsequent to the lien of this Mortgage. No
payment or advance of money by Mortgagee under this Section shall be deemed or
construed to cure Mortgagor's default or waive any right or remedy of Mortgagee.
15. Mortgagor's Existence, etc. Mortgagor shall do all things
necessary to preserve and keep in full force and effect its existence,
franchises, rights and privileges under the
<PAGE>
14
laws of the state in which it was formed and its right to own property and
transact business in each state in which the Real Estate is located. Mortgagor
represents and warrants that this Mortgage has been executed by a duly
authorized officer thereof. This Mortgage constitutes the legal, valid and
binding obligation of Mortgagor, enforceable against Mortgagor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
16. Financial Statements; Certificates; Other Information. Mortgagor
shall deliver to Mortgagee the financial statements required under the Credit
Agreement.
17. Hazardous Material. (a) Mortgagor shall comply with the provisions
of Sections 4.17 and 6.8 of the Credit Agreement in respect of Materials of
Environmental Concern (as defined in the Credit Agreement). In the event
Mortgagor fails to do so, after five (5) days' notice to Mortgagor and the
expiration of the cure period permitted under the applicable Legal Requirement,
Mortgagee may declare such failure an Event of Default or cause the Premises to
be freed from the Hazardous Material and the cost of the removal with interest
at the Default Rate shall immediately be due from Mortgagor to Mortgagee and the
same shall be added to the Indebtedness and be secured by this Mortgage.
Mortgagor shall give Mortgagee and its agents and employees access to the
Premises to remove Hazardous Material. Mortgagor agrees to defend, indemnify and
hold Mortgagee free and harmless from and against all loss, costs, damage and
expense (including attorneys' fees and costs and consequential damages)
Mortgagee may sustain by reason of (i) the imposition or recording of a lien by
any Governmental Authority pursuant to any Legal Requirement relating to
hazardous or toxic wastes or substances or the removal thereof ("Hazardous
Material Laws"); (ii) claims of any private parties regarding violations of
Hazardous Material Laws; (iii) costs and expenses (including, without
limitation, attorneys' fees and fees incidental to the securing of repayment of
such costs and expenses) incurred by Mortgagor or Mortgagee in connection with
the removal of any such lien or in connection with Mortgagor's or Mortgagee's
compliance with any Hazardous Material Laws; and (iv) the assertion against
Mortgagee by any party of any claim in connection with Hazardous Material. It is
intended that the foregoing agreement of Mortgagor to indemnify Mortgagee
include, without limitation, indemnification for loss, costs, damage and expense
Mortgagee may sustain as a result of Mortgagee's own negligence.
(b) The foregoing indemnification shall be a recourse obligation of
Mortgagor and shall survive repayment of the Notes, notwithstanding any
limitations on recourse which may be contained herein or in any Loan Documents
or the delivery of any satisfaction, release or release deed, discharge or deed
of reconveyance, or the assignment of this Mortgage by Mortgagee.
(c) For the purposes of this Mortgage, "Hazardous Material" means and
includes any hazardous, nuclear, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
<PAGE>
15
18. Asbestos. Mortgagor shall not install or permit to be installed in
the Premises friable asbestos or any substance containing asbestos and deemed
hazardous by any Legal Requirement respecting such material, or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Mortgagor shall give Mortgagee and its agents and employees access
to the Premises to remove such asbestos or substances. Mortgagor shall defend,
indemnify, and save Mortgagee harmless from all loss, costs, damages and expense
(including attorneys' fees and costs and consequential damages) asserted or
proven against Mortgagee by any party, as a result of the presence of such
substances or any removal or compliance with such Legal Requirements. It is
intended that the foregoing agreement of Mortgagor to indemnify Mortgagee
include, without limitation, indemnification for loss, costs, damage and expense
Mortgagee may sustain as a result of Mortgagee's own negligence. Furthermore,
the indemnification shall be a recourse obligation of Mortgagor and shall
survive repayment of the Notes, notwithstanding any limitation on recourse which
may be contained herein or in any of the Loan Documents or the delivery of any
satisfaction, release or release deed, discharge or deed of reconveyance, or the
assignment of this Mortgage by Mortgagee.
19. Event of Default. The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.
20. Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Mortgagee may have pursuant to the Loan Documents, or
as provided by law, and without limitation, (x) if such event is an Event of
Default under Section 8 of the Credit Agreement, automatically the Indebtedness
and all other amounts owing under the Notes, this Mortgage and the other
Security Documents immediately shall become due and payable, and (y) if such
event is any other Event of Default, by notice to Mortgagor, Mortgagee may
declare the Indebtedness (together with accrued interest thereon) and all other
amounts payable under the Notes, this Mortgage and the other Security Documents
to be immediately due and payable. Except as expressly provided above in this
Section or in the Credit Agreement, presentment, demand, protest and all other
notices of any kind are hereby expressly waived. In addition, upon the
occurrence of any Event of Default, Mortgagee may immediately take such action,
without notice or demand, as it deems advisable to protect and enforce its
rights against Mortgagor and in and to the Mortgaged Property, including, but
not limited to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property, (B) institute and maintain an action on the
Notes, or (C) take such other action at law or in equity for the
enforcement of this Mortgage or any of the Loan Documents as the law may
allow. Mortgagee may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest
thereon at the Default Rate and all costs of suit, including, without
limitation, reasonable attorneys' fees and
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16
disbursements. Interest at the Default Rate shall be due on any judgment
obtained by Mortgagee from the date of judgment until actual payment is
made of the full amount of the judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Mortgaged
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby
agreeing to surrender possession of the Mortgaged Property to Mortgagee
upon demand at any such time) and use, operate, manage, maintain and
control the Mortgaged Property and every part thereof. Following such entry
and taking of possession, Mortgagee shall be entitled, without limitation,
(x) to lease all or any part or parts of the Mortgaged Property for such
periods of time and upon such conditions as Mortgagee may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Mortgaged Property as Mortgagee shall deem appropriate as
fully as Mortgagor might do.
(b) The holder of this Mortgage, in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale, the
Real Estate may be sold, at Mortgagee's election, in one parcel or in more than
one parcel and Mortgagee is specifically empowered, (without being required to
do so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held.
(c) In the event of any breach, beyond any applicable grace period, of
any of the covenants, agreements, terms or conditions contained in this
Mortgage, and notwithstanding to the contrary any exculpatory or non-recourse
language which may be contained herein, Mortgagee shall be entitled to enjoin
such breach and obtain specific performance of any covenant, agreement, term or
condition and Mortgagee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Mortgage.
21. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale
made under this Mortgage, whether made by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Mortgagee may bid for and acquire
the Mortgaged Property or any part thereof. In lieu of paying cash therefor,
Mortgagee may make settlement for the purchase price by crediting upon the
Indebtedness or other sums secured by this Mortgage the net sales price after
deducting therefrom the expenses of sale and the cost of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage. In such
event, this Mortgage, the Notes and documents evidencing expenditures secured
hereby may be presented to the person or persons conducting the sale in order
that the amount so used or applied may be credited upon the Indebtedness as
having been paid.
22. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations or the interest of
<PAGE>
17
Mortgagor therein, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers or other manager of the
Mortgaged Property, and Mortgagor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except as may be
required by law). Any such receiver or receivers shall have all the usual powers
and duties of receivers in like or similar cases and all the powers and duties
of Mortgagee in case of entry as provided in this Mortgage, including, without
limitation and to the extent permitted by law, the right to enter into leases of
all or any part of the Mortgaged Property, and shall continue as such and
exercise all such powers until the date of confirmation of sale of the Mortgaged
Property unless such receivership is sooner terminated.
23. Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal amount of the Indebtedness, it is expressly agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the amount of the lien of this Mortgage until the lien amount shall equal the
principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of Mortgagee hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
24. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code") of the
State in which the Mortgaged Property is located. If an Event of Default shall
occur under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a
<PAGE>
18
secured party by the Code with respect to all or any portion of the Mortgaged
Property which is personal property (including, without limitation, taking
possession of and selling such property) or (ii) treating such property as real
property and proceeding with respect to both the real and personal property
constituting the Mortgaged Property in accordance with Mortgagee's rights,
powers and remedies with respect to the real property (in which event the
default provisions of the Code shall not apply). If Mortgagee shall elect to
proceed under the Code, then 8 days' notice of sale of the personal property
shall be deemed reasonable notice and the reasonable expenses of retaking,
holding, preparing for sale, selling and the like incurred by Mortgagee shall
include, but not be limited to, attorneys' fees and legal expenses. At
Mortgagee's request, Mortgagor shall assemble the personal property and make it
available to Mortgagee at a place designated by Mortgagee which is reasonably
convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; and (iv) the addresses of Mortgagor and Mortgagee are
as set forth on the first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee, covering all or any part of the
Mortgaged Property and will further execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may request
in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all costs and expenses
incurred by Mortgagee in connection with the preparation, execution, recording,
filing and re-filing of any such document and all reasonable costs and expenses
of any record searches for financing statements Mortgagee shall reasonably
require. Mortgagor shall from time to time, on request of Mortgagee, deliver to
Mortgagee an inventory in reasonable detail of any of the Mortgaged Property
which constitutes personal property. If Mortgagor shall fail to furnish any
financing or continuation statement within ten (10) days after request by
Mortgagee, then pursuant to the provisions of the Code, Mortgagor hereby
authorizes Mortgagee, without the signature of Mortgagor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Mortgagee to proceed
against any personal property encumbered by this Mortgage as real property, as
set forth above.
25. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the
<PAGE>
19
right to enter the Mortgaged Property for the purpose of collecting the Rents
and Mortgagor shall be entitled to collect, receive, use and retain the Rents
until the occurrence of an Event of Default under this Mortgage; such right of
Mortgagor to collect, receive, use and retain the Rents may be revoked by
Mortgagee upon the occurrence of any Event of Default under this Mortgage by
giving not less than five (5) days' written notice of such revocation to
Mortgagor; in the event such notice is given, Mortgagor shall pay over to
Mortgagee, or to any receiver appointed to collect the Rents, any lease security
deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to Mortgagee or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Mortgagor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
26. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within ten (10) days after request by Mortgagee, Mortgagor shall
furnish Mortgagee satisfactory evidence of compliance with this subsection,
together with a statement of all lease security deposits by lessees and copies
of all Leases not previously delivered to Mortgagee, which statement shall be
certified by Mortgagor.
27. Additional Rights. The holder of any subordinate lien on the
Mortgaged Property shall have no right to terminate any Lease whether or not
such Lease is subordinate to this Mortgage nor shall any holder of any
subordinate lien join any tenant under any Lease in any action to foreclose the
lien or modify, interfere with, disturb or terminate the rights of any tenant
under any Lease. By recordation of this Mortgage all subordinate lienholders are
subject to and notified of this provision, and any action taken by any such
lienholder contrary to this provision shall be null and void. Upon the
occurrence of any Event of Default, Mortgagee may, in its sole discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with Mortgagee under this Mortgage against
all or any part of the Indebtedness. Any such application shall not be construed
to cure or waive any Default or Event of Default or invalidate any act taken by
Mortgagee on account of such Default or Event of Default.
28. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts secured thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby, the holder of this Mortgage shall have the right to declare the
Indebtedness due on a date to be specified by not less than 30 days' written
notice to be given to Mortgagor unless within such 30-day period Mortgagor shall
assume as an Obligation hereunder the payment of any tax so imposed until full
payment of the Indebtedness and such assumption shall be permitted by law.
<PAGE>
20
29. Notices. All notices, requests, demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Mortgagor and to Mortgagee as specified thereunder.
30. No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
31. Partial Invalidity. In the event any one or more of the provisions
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of the Indebtedness or Loan Documents, the obligations of Mortgagor
and of any other obligor under the Indebtedness or Loan Documents shall be
subject to the limitation that Mortgagee shall not charge, take or receive, nor
shall Mortgagor or any other obligor be obligated to pay to Mortgagee, any
amounts constituting interest in excess of the maximum rate permitted by law to
be charged by Mortgagee.
32. Mortgagor's Waiver of Rights. To the fullest extent permitted by
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created.
33. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Loan
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by mortgage, security agreement, pledge,
lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its
enforcement, shall prejudice or in any manner affect Mortgagee's right to
realize upon or enforce any other security now or hereafter held by Mortgagee,
it being agreed that Mortgagee shall be entitled to enforce this Mortgage and
any other security now or hereafter held by Mortgagee in such order and manner
as Mortgagee may determine in its absolute discretion. No remedy herein
conferred
<PAGE>
21
upon or reserved to Mortgagee is intended to be exclusive of any other remedy
herein or by law provided or permitted, but each shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given by any
of the Loan Documents to Mortgagee or to which it may otherwise be entitled, may
be exercised, concurrently or independently, from time to time and as often as
may be deemed expedient by Mortgagee. In no event shall Mortgagee, in the
exercise of the remedies provided in this Mortgage (including, without
limitation, in connection with the assignment of Rents to Mortgagee, or the
appointment of a receiver and the entry of such receiver on to all or any part
of the Mortgaged Property), be deemed a "mortgagee in possession," and Mortgagee
shall not in any way be made liable for any act, either of commission or
omission, in connection with the exercise of such remedies.
34. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Indebtedness upon other property in the State
in which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Indebtedness
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Indebtedness, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Mortgagor further agrees that if
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly secures the
Indebtedness, or if Mortgagee shall have obtained a judgment of foreclosure and
sale or similar judgment against such collateral, then, whether or not such
proceedings are being maintained or judgments were obtained in or outside the
State in which the Premises are located, Mortgagee may commence or continue
foreclosure proceedings and exercise its other remedies granted in this Mortgage
against all or any part of the Mortgaged Property and Mortgagor waives any
objections to the commencement or continuation of a foreclosure of this Mortgage
or exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Mortgage or such other proceedings on
such basis. Neither the commencement nor continuation of proceedings to
foreclose this Mortgage nor the exercise of any other rights hereunder nor the
recovery of any judgment by Mortgagee in any such proceedings shall prejudice,
limit or preclude Mortgagee's right to commence or continue one or more
foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to
<PAGE>
22
seek to dismiss, stay, remove, transfer or consolidate either such other
proceedings or any action under this Mortgage on such basis. It is expressly
understood and agreed that to the fullest extent permitted by law, Mortgagee
may, at its election, cause the sale of all collateral which is the subject of a
single foreclosure action at either a single sale or at multiple sales conducted
simultaneously and take such other measures as are appropriate in order to
effect the agreement of the parties to dispose of and administer all collateral
securing the Indebtedness (directly or indirectly) in the most economical and
least time-consuming manner.
35. Expenses; Indemnification. (a) Mortgagor shall pay or reimburse
Mortgagee for all expenses incurred by Mortgagee before and after the date of
this Mortgage with respect to any and all transactions contemplated by this
Mortgage including without limitation, the preparation of any document
reasonably required hereunder or any amendment, modification, restatement or
supplement to this Mortgage, the delivery of any consent, non-disturbance
agreement or similar document in connection with this Mortgage or the
enforcement of any of Mortgagee's rights. Such expenses shall include, without
limitation, all title and conveyancing charges, recording and filing fees and
taxes, mortgage taxes, intangible personal property taxes, escrow fees, revenue
and tax stamp expenses, insurance premiums (including title insurance premiums),
title search and title rundown charges, brokerage commissions, finders' fees,
placement fees, court costs, surveyors', photographers', appraisers',
architects', engineers', consulting professional's, accountants' and attorneys'
fees and disbursements. Mortgagor acknowledges that from time to time Mortgagor
may receive statements for such expenses, including without limitation
attorneys' fees and disbursements. Mortgagor shall pay such statements promptly
upon receipt.
(b) If (i) any action or proceeding shall be commenced by Mortgagee
(including but not limited to any action to foreclose this Mortgage or to
collect the Indebtedness), or any action or proceeding is commenced to which
Mortgagee is made a party, or in which it becomes necessary to defend or uphold
the lien of this Mortgage, or in which Mortgagee is served with any legal
process, discovery notice or subpoena and (ii) in each of the foregoing
instances such action or proceeding in any manner relates to or arises out of
this Mortgage or Mortgagee's lending to Mortgagor, then Mortgagor will
immediately reimburse or pay to Mortgagee all of the expenses which have been or
may be incurred by Mortgagee with respect to the foregoing (including reasonable
counsel fees and disbursements), together with interest thereon at the Default
Rate, and any such sum and the interest thereon shall be a lien on the Mortgaged
Property, prior to any right, or title to, interest in or claim upon the
Mortgaged Property attaching or accruing subsequent to the lien of this
Mortgage, and shall be deemed to be secured by this Mortgage. In any action or
proceeding to foreclose this Mortgage, or to recover or collect the
Indebtedness, the provisions of law respecting the recovering of costs,
disbursements and allowances shall prevail unaffected by this covenant.
(c) Mortgagor shall indemnify and hold harmless Mortgagee and
Mortgagee's affiliates, and the respective directors, officers, agents and
employees of Mortgagee and its affiliates (all of the foregoing indemnified
parties collectively, the "Obligees" from and against all claims, damages,
losses and liabilities (including, without limitation, reasonable attorneys'
fees and expenses) arising out of or based upon any matter related to this
Mortgage, the Mortgaged Property or the occupancy, ownership, maintenance or
management of the Mortgaged
<PAGE>
23
Property by Mortgagor, including, without limitation, any claims based on the
alleged acts or omissions of any employee or agent of Mortgagor. It is intended
that the foregoing agreement of Mortgagor to indemnify the Obligees include,
without limitation, indemnification for claims, damages, losses and liabilities
the Obligees may sustain as a result of the Obligees' own negligence and this
indemnification shall be in addition to any other liability which Mortgagor may
otherwise have to Mortgagee.
36. Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor shall
run with the land and bind Mortgagor, the successors and assigns of Mortgagor
(and each of them) and all subsequent owners, encumbrancers and tenants of the
Mortgaged Property, and shall inure to the benefit of Mortgagee, its successors
and assigns. The word "Mortgagor" shall be construed as if it read "Mortgagors"
whenever the sense of this Mortgage so requires and if there shall be more than
one Mortgagor, the obligations of the Mortgagors shall be joint and several.
37. No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the security held for the obligations secured by this
Mortgage without, as to the remainder of the security, in any way impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien.
38. Governing Law, etc. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New Mexico, except that
Mortgagor expressly acknowledges that by its terms the Notes shall be governed
and construed in accordance with the laws of the State of New York, without
regard to principles of conflict of law, and for purposes of consistency,
Mortgagor agrees that in any in personam proceeding related to this Mortgage the
rights of the parties to this Mortgage shall also be governed by and construed
in accordance with the laws of the State of New York governing contracts made
and to be performed in that State, without regard to principles of conflict of
law.
39. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in any
suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.
<PAGE>
24
40. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any subsequent holder of the Notes," the
word "Notes" shall mean "the Notes or any other evidence of indebtedness secured
by this Mortgage," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
41. Revolving Credit; Future Advances. The Loans secured hereby
include revolving lines of credit extended by the Banks to Mortgagor pursuant to
the Credit Agreement. The outstanding balance of such revolving lines of credit
may increase and decrease from time to time, and sums may be advanced, repaid
and readvanced thereunder until the final maturity of the Loans. This Mortgage
is intended to secure all indebtedness of Mortgagor under the Loans in the
maximum principal amount of $100,000,000 so long as the Credit Agreement
continues in effect, regardless of such repayments and readvances of the
proceeds of the Loans, and regardless of whether the balance of such obligations
may be reduced, from time to time, to zero. In addition to all other
indebtedness secured by this Mortgage, this Mortgage shall secure also and
constitute a first lien subject only to the Permitted Exceptions on the
Mortgaged Property for all future advances made by the Banks to Mortgagor for
any purpose within six (6) years from the date of this Mortgage to the same
extent as if such advances were made on the date of the execution of this
Mortgage. The total amount of the indebtedness, including future advances, that
is secured by this Mortgage, may increase or decrease from time to time, but
shall not exceed $100,000,000 at any one time, together with interest thereon at
the rates provided in the Credit Agreement, and plus any disbursement made by
Mortgagee or any of the Banks to protect the security of this Mortgage, with
interest on such disbursement at the Default Rate.
42. Last Dollars Secured; Priority. This Mortgage secures only a
portion of the Indebtedness owing or which may become owing by the Mortgagor to
the Banks. The parties agree that any payments or repayments of such
Indebtedness shall be and be deemed to be applied first to the portion of the
Indebtedness that is not secured hereby, it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.
<PAGE>
25
This Mortgage has been duly executed by Mortgagor as of the date first
above written.
NUEVO SOL TURF CLUB INC.
By: /S/ Susan J. Carstensen
----------------------------------------
Name: Susan J. Carstensen
Title: Treasurer
<PAGE>
26
STATE OF MONTANA )
) ss.:
COUNTY OF GALLATIN )
This instrument was acknowledged before me this 8th day of October,
1998 by Susan J. Carstensen.
/S/ Vicki L. Consoli
--------------------------------------
Notary Public for the State of Montana
Residing at: Bozeman, MT
My Commission Expires: 2/12/02
<PAGE>
27
Schedule A
[Attach legal description]
<PAGE>
28
Schedule B
Water Rights
1. Declaration of Owner of Underground Water Right dated December 26, 1989
(Declaration No. LRG-7358-S)
2. Declaration of Owner of Underground Water Right dated December 26, 1989
(Declaration No. LRG-7358)
3. Warranty Deed and Transfer of Water Rights dated December 11, 1986 from
Ruidoso-Sunland, Inc. ("RDI") to Grantor
4. Assignment of Easement dated as of December 12, 1986 from RDI to Grantor
5. Undated letter from Elephant Butte Irrigation District of New Mexico to
Grantor regarding fees for purchase of water in excess of acreage allotment
<PAGE>
[Texas]
DEED OF TRUST
from
NUEVO SOL TURF CLUB, INC., Grantor
to
HUGHES BUTTERWORTH, Trustee
for the use and benefit of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent and Syndication Agent, Beneficiary
DATED AS OF OCTOBER 14, 1998
After recording, please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
ATTN: Daniel E. Karp, Esq.
<PAGE>
[Texas]
DEED OF TRUST
-------------
THIS DEED OF TRUST, dated as of October 14, 1998, is made by NUEVO SOL
TURF CLUB INC., a Delaware corporation ("Grantor"), whose address is 2311 South
Seventh Avenue, Bozeman, Montana 59715, to Hughes Butterworth, a Texas resident
("Trustee"), whose address is 301 East Yandell, El Paso, Texas 79902, for the
use and benefit of LEHMAN COMMERCIAL PAPER INC. ("Beneficiary"), whose address
is 3 World Financial Center, New York, New York 10285. References to this "Deed
of Trust" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument.
Background
----------
A. Grantor is the owner of the real property described in Schedule A
attached hereto (such real property, together with all the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements") being collectively referred to as the "Real Estate").
B. Grantor is a wholly-owned subsidiary of Powerhouse Technologies,
Inc., a Delaware corporation ("Powerhouse").
C. Pursuant to that certain Credit Agreement dated as of October __,
1998 (as the same may be amended, restated, replaced, substituted or otherwise
modified from time to time, the "Credit Agreement") among Powerhouse, as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman Brothers Inc., as arranger, Beneficiary, as administrative agent and
syndication agent, and Canadian Imperial Bank of Commerce, as documentation
agent, the Lenders have agreed to make certain loans to Powerhouse as more
particularly described therein. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned thereto in the Credit Agreement.
References in this Deed of Trust to the "Default Rate" shall mean the interest
rate provided for in Section 2.13(c) of the Credit Agreement.
D. Borrower, the administrative agent and the Lenders are willing to
effectuate the Credit Agreement, if, among other things, Grantor grants a first
lien on and security interest in the Real Estate and the Trust Property to
secure Grantor's obligations under the Credit Agreement and the other
obligations secured thereby.
<PAGE>
2
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees that to secure:
(a) (i) the repayment of principal in the maximum amount of
$100,000,000, which amount is the total indebtedness that may be outstanding and
secured hereby at any given time the indebtedness evidenced by the Credit
Agreement, and (ii) all interest and fees payable thereon (the items set forth
in clauses (i) and (ii) being referred to collectively as the "Indebtedness");
and
(b) the performance of all covenants, agreements, obligations and
liabilities of Grantor (the "Obligations") under or pursuant to the provisions
of the Credit Agreement, this Deed of Trust, the Credit Agreement, any other
document securing payment of the Indebtedness (the "Security Documents") and any
amendments, supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Credit Agreement, the Security
Documents and all other documents and instruments from time to time evidencing,
securing or guaranteeing the payment of the Indebtedness or the performance of
the Obligations, as any of the same may be amended, supplemented, extended,
renewed, restated, replaced or modified from time to time, are collectively
referred to as the "Loan Documents");
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS
OVER TO TRUSTEE, IN TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF
BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Grantor, in possession or expectancy, in and to the Real Estate or any part
thereof, whether now owned or hereafter acquired;
(C) all right, title and interest of Grantor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights, sand, gravel and aggregate, and all
estates, rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to the
Real Estate, and any reversions, remainders, rents, issues, profits and
revenue thereof and all land lying in the bed of any street, road or
avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories)
<PAGE>
3
currently owned or subsequently acquired by Grantor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air conditioning
and air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Grantor in and to all substitutes
and replacements of, and all additions and improvements to, the Real Estate
and the Equipment, subsequently acquired by or released to Grantor or
constructed, assembled or placed by Grantor on the Real Estate, immediately
upon such acquisition, release, construction, assembling or placement,
including, without limitation, any and all building materials whether
stored at the Real Estate or offsite, and, in each such case, without any
further mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Grantor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the ("Leases"), and all rights of Grantor in respect of cash and securities
deposited thereunder and the right to receive and collect the revenues,
income, rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits arising from
the use and enjoyment of the Trust Property (as defined below)
(collectively, the "Leases");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records owned or held by Grantor relating to or used in
connection with the operation of the Real Estate or the Equipment or any
part thereof; all general intangibles related to the operation of the
Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Grantor relating to the Real Estate or Equipment and Grantor's
interest in and to all proceeds of any such insurance policies (including
title insurance policies) including the right to collect and receive such
proceeds, subject to the provisions relating to insurance generally set
forth below; and all awards and other compensation, including the interest
payable thereon and the right to collect and receive the same, made to the
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4
present or any subsequent owner of the Real Estate or Equipment for the
taking by eminent domain, condemnation or otherwise, of all or any part of
the Real Estate or any easement or other right therein;
(I) all right, title and interest of Grantor in and to (i) all
contracts from time to time executed by Grantor or any manager or agent on
its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
to the extent permitted under applicable law, all consents, licenses,
building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation
of the Real Estate or any part thereof (collectively, the "Permits") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Beneficiary as provided in
this Deed of Trust; all capital, operating, reserve or similar accounts
held by or on behalf of Grantor and related to the operation of the Trust
Property, whether now existing or hereafter arising and all monies held in
any of the foregoing accounts and any certificates or instruments related
to or evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements including, without limitation, any right to payment now
existing or hereafter arising for rental of space or for goods sold or
leased or for services rendered, whether or not yet earned by performance,
arising from the operation of the Improvements or any other facility on the
Trust Property; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Grantor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "Premises", and those
described in the foregoing clauses (A) through (L) are collectively referred to
as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto Trustee, its successors and assigns for the uses and
purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed.
Terms and Conditions
--------------------
<PAGE>
5
Grantor further represents, warrants, covenants and agrees with
Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good title to
the Real Estate in fee simple and good title to the rest of the Trust Property,
subject only to the matters that are set forth in the title insurance policy or
policies being issued to Beneficiary to insure the lien of this Deed of Trust
(the "Permitted Exceptions") and Grantor shall warrant, defend and preserve such
title and the rights granted by this Deed of Trust thereon against all claims of
all persons and entities. Grantor further warrants that it has the right to
grant the Trust Property.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness at the
times and places and in the manner specified in the Credit Agreement and shall
perform all the Obligations.
3. Requirements.
(a) Grantor shall promptly comply with, or cause to be complied with,
and conform to all present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements (including, without
limitation, the Americans with Disabilities Act or similar local regulation (the
"ADA"), and irrespective of the nature of the work to be done, of each of the
United States of America, any State and any municipality, local government or
other political subdivision thereof and any agency, department, bureau, board,
commission or other instrumentality of any of them, now existing or subsequently
created (collectively, "Governmental Authority") which has jurisdiction over the
Trust Property and all covenants, restrictions and conditions now or later of
record which may be applicable to any of the Trust Property, or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, repair
or reconstruction of any of the Trust Property. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Grantor or to any of
the Trust Property and all covenants, restrictions, and conditions which now or
later may be applicable to any of the Trust Property are collectively referred
to as the "Legal Requirements".
(b) From and after the date of this Deed of Trust, Grantor shall not
by act or omission permit any building or other improvement on any premises not
subject to the lien of this Deed of Trust to rely on the Premises or any part
thereof or any interest therein to fulfill any Legal Requirement, and Grantor
hereby assigns to Beneficiary any and all rights to give consent for all or any
portion of the Premises or any interest therein to be so used. Grantor shall not
by act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Grantor represents that
each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all applicable subdivision laws and similar Legal Requirements.
Any act or omission by Grantor which would result in a violation of any of the
provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as permitted by
subsection 6.3 of the Credit Agreement, promptly when due, Grantor shall pay and
discharge all taxes of every kind and nature (including, without limitation, all
real and personal property, income, franchise, withholding, transfer, gains,
profits and gross receipts taxes), all charges for
<PAGE>
6
any easement or agreement maintained for the benefit of any of the Trust
Property, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Trust Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions"). Grantor shall within 30 days after each due date deliver to
Beneficiary (i) original or copies of receipted bills and cancelled checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence acceptable to Beneficiary showing the payment of any
other such Imposition. If by law any Imposition, at Grantor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Grantor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee or
Beneficiary under this Deed of Trust or otherwise, without notice or demand to
Grantor, to pay any Imposition after the date such Imposition shall have become
due, and to add to the Indebtedness the amount so paid, together with interest
from the time of payment at the Default Rate. Any sums paid by Trustee or
Beneficiary in discharge of any Impositions shall be (i) a lien on the Premises
secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) After an Event of Default (as defined below), Beneficiary shall be
entitled to require Grantor to pay monthly in advance to Beneficiary the
equivalent of 1/12th of the estimated annual Impositions. Beneficiary may
commingle such funds with its own funds and Grantor shall not be entitled to
interest thereon.
(e) Grantor shall have the right to contest or object in good faith to
the amount or validity of any Imposition by appropriate legal proceedings, but
such right shall not be deemed or construed in any way as relieving or modifying
Grantor's covenant to pay any such Imposition in the manner provided in this
Section unless (i) Grantor has given prior written notice to Beneficiary of
Grantor's intent so to contest or object to an Imposition, (ii) Grantor shall
demonstrate to Beneficiary's satisfaction that the legal proceedings shall
operate conclusively to prevent the sale of the Trust Property, or any part
thereof, to satisfy such Imposition prior to final determination of such
proceedings, (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Grantor is
subject and shall not constitute a default thereunder and (iv) Grantor shall
have set aside adequate reserves for the payment of the Impositions together
with all interest and penalties thereon.
<PAGE>
7
5. Insurance. (a) Grantor shall maintain or cause to be maintained on
all of the Premises the insurance required by the Credit Agreement and in any
event shall also maintain or cause to be maintained
(i) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The policy
shall provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways, such insurance to afford immediate minimum
protection to a limit of not less than that required by Beneficiary with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(ii) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts as are reasonably satisfactory to
Beneficiary, but in no event less than the limits established by law;
(iii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Beneficiary, in
nonreporting form, covering the total value of work performed and
equipment, supplies and materials furnished (with an appropriate limit for
soft costs in the case of construction);
(iv) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount satisfactory to
Beneficiary, but in no event less than the maximum limit of coverage
available under the National Flood Insurance Act of 1968, as amended;
(v) such other insurance in such amounts as Grantor may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Beneficiary, and (ii) with
respect to all property insurance, provide for loss payable solely to
Beneficiary as its interest may appear. Liability insurance policies shall name
Beneficiary as (and Trustee, if Trustee shall so request) an additional insured
and contain a waiver of subrogation against Beneficiary (and Trustee, if Trustee
shall so request); all such policies shall
<PAGE>
8
indemnify and hold Beneficiary (and Trustee, if Trusee shall so request)
harmless from all liability claims occurring on, in or about the Premises and
the adjoining streets, sidewalks and passageways. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Beneficiary. Each policy shall expressly provide that any proceeds which are
payable to Beneficiary shall be paid by check payable to the order of
Beneficiary only and requiring the endorsement of Beneficiary only. If any
required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Grantor or by any lessee of any part of the Trust Property
or become void or unsafe by reason of the failure or impairment of the capital
of any insurer, or if for any other reason whatsoever such insurance shall
become unsatisfactory to Beneficiary, Beneficiary shall immediately obtain new
or additional insurance satisfactory to Beneficiary. Grantor shall not take out
any separate or additional insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise satisfactory to Beneficiary in all
respects.
(b) Grantor shall deliver to Beneficiary an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Beneficiary, together with a copy of the declaration page for each such
policy. Grantor shall (i) pay as they become due all premiums for such
insurance, (ii) not later than 15 days prior to the expiration of each policy to
be furnished pursuant to the provisions of this Section, deliver a renewed
policy or policies, or duplicate original or originals thereof, marked "premium
paid," or accompanied by such other evidence of payment satisfactory to
Beneficiary with standard non-contributory mortgage clauses in favor of and
acceptable to Beneficiary. Upon request of Beneficiary, Grantor shall cause its
insurance underwriter or broker to certify to Beneficiary in writing that all
the requirements of this Deed of Trust governing insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Grantor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Deed of Trust
and shall be collectible in the same manner as the Indebtedness secured by this
Deed of Trust.
(d) Grantor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each renewal of each policy (but not later than 12 months from the date
of this Deed of Trust and each successive 12 month period to occur thereafter)
by using the F.W. Dodge Building Index to determine whether there shall have
been an increase in the replacement value since the most recent adjustment and,
if there shall have been such an increase, the amount of insurance required
shall be adjusted accordingly.
(e) Grantor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Grantor or to any of the Trust Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Trust Property. Grantor shall not use or permit the use of
the
<PAGE>
9
Trust Property in any manner which would permit any insurer to cancel any
insurance policy or void coverage required to be maintained by this Deed of
Trust.
(f) If the Trust Property, or any part thereof, shall be destroyed or
damaged by fire or any other casualty, whether insured or uninsured, or in the
event any claim is made against Grantor for any personal injury, bodily injury
or property damage incurred on or about the Premises, Grantor shall give
immediate notice thereof to Beneficiary. If the Trust Property is damaged by
fire or other casualty and the cost to repair such damage is less than the
lesser of (i) [25%] of the replacement cost of the Improvements at the affected
Real Estate site and (ii) [$500,000,] then provided that no Event of Default
shall have occurred and be continuing, Grantor shall have the right to adjust
such loss, and the insurance proceeds relating to such loss may be paid over to
Grantor; provided that Grantor shall, promptly after any such damage, repair all
such damage regardless of whether any insurance proceeds have been received or
whether such proceeds, if received, are sufficient to pay for the costs of
repair. If the Trust Property is damaged by fire or other casualty, and the cost
to repair such damage exceeds the above limit, or if an Event of Default shall
have occurred and be continuing, then Grantor authorizes and empowers
Beneficiary, at Beneficiary's option and in Beneficiary's sole discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and compromise
any claim under any insurance policy, to appear in and prosecute any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom Beneficiary's expenses incurred in the collection process. Each
insurance company concerned is hereby authorized and directed to make payment
for such loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property, in which event, if no
Event of Default has occurred and is continuing, Beneficiary will apply the
insurance proceeds (after deducting the costs of collecting such proceeds) to
the reimbursement of the costs of such repair or restoration, and Grantor hereby
designates Beneficiary as its attorney-in-fact for the purpose of making any
election required or permitted under any insurance policy relating to repair or
restoration. The insurance proceeds or any part thereof received by Beneficiary
may be applied by Beneficiary toward reimbursement of all costs and expenses of
Beneficiary in collecting such proceeds, and the balance, at Beneficiary's
option in its sole and absolute discretion, to the principal (to the
installments in inverse order of maturity, if payable in installments) and
interest due or to become due under the Credit Agreement, to fulfill any other
Obligation of Grantor. Application by Beneficiary of any insurance proceeds
toward the last maturing installments of principal and interest due or to become
due under the Credit Agreement shall not excuse Grantor from making any
regularly scheduled payments due thereunder, nor shall such application extend
or reduce the amount of such payments.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force shall pass to the purchaser or grantee and Grantor hereby appoints
Beneficiary its attorney-in-fact, in Grantor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
6. Restrictions on Liens and Encumbrances. Except for the lien of this
Deed of Trust and the Permitted Exceptions, and except as permitted by the
Credit Agreement, Grantor shall not further mortgage, nor otherwise encumber the
Trust Property nor create or suffer to
<PAGE>
10
exist any lien, charge or encumbrance on the Trust Property, or any part thereof
superior to the lien of this Deed of Trust, whether recourse or non-recourse.
7. Sale and Other Transfer Restrictions. Grantor shall not sell,
transfer, convey or assign all or any portion of, or any interest in, the Trust
Property except as permitted by the Credit Agreement.
8. Limitation on Fundamental Changes. Except as permitted by the
Credit Agreement, Grantor agrees that:
(i) Grantor shall not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation
or dissolution), or acquire by purchase or otherwise all or substantially
all the business or assets of, or any stock or other evidence of beneficial
ownership of, any entity; and
(ii) Grantor shall not engage in any business on the Premises other
than the business in which it is presently engaged.
9. Maintenance; No Alteration; Inspection; Utilities. (a) Grantor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. Grantor
shall repair, restore, replace or rebuild promptly, in each case in accordance
with the Credit Agreement, any part of the Premises which may be damaged or
destroyed by any casualty whatsoever. The Improvements shall not be demolished
or, except in compliance with the Credit Agreement, materially altered, nor,
except in compliance with the Credit Agreement, any material additions built,
without the prior written consent of Beneficiary, which consent shall not be
unreasonably withheld or delayed.
(b) Beneficiary and any persons authorized by Beneficiary shall have
the right to enter and inspect the Premises and the right to inspect all work
done, labor performed and materials furnished in and about the Improvements and
the right to inspect and make copies of all books, contracts and records of
Grantor relating to the Trust Property.
(c) Grantor shall pay or cause to be paid when due all utility charges
which are incurred for gas, electricity, water or sewer services furnished to
the Premises and all other assessments or charges of a similar nature, whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.
10. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Trust
Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's sole discretion, as attorney-in-fact for Grantor, to
commence, appear in and prosecute, in Beneficiary's or Grantor's name, any
action or proceeding relating to any condemnation of the Trust Property, or any
portion thereof, and to settle or compromise any claim in connection with such
condemnation. If Beneficiary elects not to participate in such condemnation
proceeding, then Grantor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Beneficiary, its attorneys and experts and
<PAGE>
11
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Beneficiary to be applied in the
same manner as insurance proceeds, as provided above, and Grantor agrees to
execute any such assignments of all such awards as Beneficiary may request.
11. Restoration. If Beneficiary elects to release funds to Grantor for
restoration of any of the Trust Property, then such restoration shall be
performed only in accordance with the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted for approval by Beneficiary, which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds, Beneficiary
shall be satisfied that the remaining restoration funds are sufficient to
complete the restoration and to pay all related expenses, including
interest on the Indebtedness and real estate taxes on the Premises, during
restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default (as defined below) shall then exist, (B) no mechanics' or
materialmen's liens shall have been filed and remain undischarged, except
those discharged by the disbursement of the requested restoration funds and
(C) a satisfactory bring-down or continuation of title insurance on the
Premises shall be delivered to Beneficiary, upon reasonable request by
Beneficiary therefor;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of satisfactory evidence of the stage of completion and of
performance of the work in a good and workmanlike manner and in accordance
with the contracts, plans and specifications acceptable to Beneficiary;
(v) with respect to each advance of restoration funds, Beneficiary may
retain 10% of the amount of such advance as a holdback until the
restoration is fully completed;
(vi) the restoration funds shall bear no interest and may be
commingled with Beneficiary's other funds;
(vii) Beneficiary may impose such other conditions as are customarily
imposed by construction lenders; and
(viii) any restoration funds remaining shall be retained by
Beneficiary and may be applied by Beneficiary, in its sole discretion, to
the Indebtedness in the inverse order of maturity.
12. Leases. (a) Grantor shall not (i) execute an assignment or pledge
of any Lease relating to all or any portion of the Trust Property other than in
favor of Beneficiary, or (ii)
<PAGE>
12
without the prior written consent of Beneficiary, which consent shall not
unreasonably be withheld or delayed, execute or permit to exist any Lease of any
of the Trust Property.
(b) As to any Lease consented to by Beneficiary, Grantor shall:
(i) promptly perform all of the provisions of the Lease on the part of
the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the part
of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Grantor as
lessor or of the lessee thereunder;
(iv) exercise, within five (5) days after a request by Beneficiary,
any right to request from the lessee a certificate with respect to the
status thereof;
(v) simultaneously deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed counterpart of
the Lease;
(vii) promptly, upon request of Beneficiary, record the Lease or a
memorandum thereof, as provided by applicable law; and
(viii) promptly deliver to Beneficiary, upon Beneficiary's request, an
assignment of the Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within ten (10) days after a
request by Beneficiary, a written statement, certified by Grantor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Trust Property, the terms of all Leases and the spaces occupied and rentals
payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by credit information with respect to the lessees and such other
information as Beneficiary may request.
(d) All Leases entered into by Grantor after the date hereof, if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and provisions of this Deed of Trust unless Beneficiary
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Beneficiary, Grantor shall not accept a surrender or terminate, cancel, rescind,
supplement, alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Grantor accept the payment of rent more than thirty (30)
days in advance of its due date.
<PAGE>
13
(f) If any act or omission of Grantor would give any lessee under any
Lease the right, immediately or after lapse of a period of time, to cancel or
terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee shall not exercise such right
until it has given written notice of such act or omission to Beneficiary and
until a 10-day period for remedying such act or omission shall have elapsed
following the giving of such notice without a remedy being effected.
(g) In the event of the enforcement by Beneficiary of any remedy under
this Deed of Trust, the lessee under each Lease shall, if requested by
Beneficiary or any other person succeeding to the interest of Beneficiary as a
result of such enforcement, attorn to Beneficiary or to such person and shall
recognize Beneficiary or such successor in interest as lessor under the Lease
without change in the provisions thereof; provided however, that Beneficiary or
such successor in interest shall not be: (i) bound by any payment of an
installment of rent or additional rent which may have been made more than 30
days before the due date of such installment; (ii) bound by any amendment or
modification to the Lease made without the consent of Beneficiary or such
successor in interest, which consent shall not be unreasonably withheld or
delayed; (iii) liable for any previous act or omission of Grantor (or its
predecessors in interest); (iv) responsible for any monies owing by Grantor to
the credit of such lessee or subject to any credits, offsets, claims,
counterclaims, demands or defenses which the lessee may have against Grantor (or
its predecessors in interest); (v) bound by any covenant to undertake or
complete any construction of the Premises or any portion thereof; or (vi)
obligated to make any payment to such lessee other than any security deposit
actually delivered to Beneficiary or such successor in interest. Each lessee or
other occupant, upon request by Beneficiary or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment. In
addition, Grantor agrees that each Lease entered into after the date of this
Deed of Trust shall include language to the effect of subsections (d)-(g) of
this Section; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
13. Further Assurances/Estoppel Certificates. To further assure
Beneficiary's and Trustee's rights under this Deed of Trust, Grantor agrees upon
demand of Beneficiary or Trustee to do any act or execute any additional
documents (including, but not limited to, security agreements on any personalty
included or to be included in the Trust Property and a separate assignment of
each Lease in recordable form) as may be required by Beneficiary to confirm the
lien of this Deed of Trust and all other rights or benefits conferred on
Beneficiary. Within ten (10) days after Beneficiary has made a request therefor,
Grantor shall deliver, in form and substance satisfactory to Beneficiary, a
written statement, duly acknowledged, setting forth the amount of the
Indebtedness, and whether any offsets, claims, counterclaims or defenses exist
against the Indebtedness and certifying as to such other matters as Beneficiary
shall reasonably request.
14. Beneficiary's Right to Perform. If Grantor fails to perform any of
the covenants or agreements of Grantor, Beneficiary or Trustee, without waiving
or releasing Grantor from any obligation or default under this Deed of Trust,
may, at any time (but shall be under no obligation to) pay or perform the same,
and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Grantor to Beneficiary or Trusee (as the case
<PAGE>
14
may be) and the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to, interest in or
claim upon the Trust Property attaching subsequent to the lien of this Deed of
Trust. No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor's default or waive any
right or remedy of Beneficiary or Trustee.
15. Grantor's Existence, etc. Grantor shall do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges under the laws of the state in which it was formed and its right to
own property and transact business in each state in which the Real Estate is
located. Grantor represents and warrants that this Deed of Trust has been
executed by a duly authorized officer thereof. This Deed of Trust constitutes
the legal, valid and binding obligation of Grantor, enforceable against Grantor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
16. Financial Statements; Certificates; Other Information. Grantor
shall deliver to Beneficiary the financial statements required under the Credit
Agreement.
17. Hazardous Material. (a) Grantor shall comply with the provisions
of Sections 4.17 and 6.8 of the Credit Agreement in respect of Materials of
Environmental Concern (as defined in the Credit Agreement). In the event Grantor
fails to do so, after five (5) days' notice to Grantor and the expiration of the
cure period permitted under the applicable Legal Requirement, Beneficiary may
declare such failure an Event of Default or cause the Premises to be freed from
the Hazardous Material and the cost of the removal with interest at the Default
Rate shall immediately be due from Grantor to Beneficiary and the same shall be
added to the Indebtedness and be secured by this Deed of Trust. Grantor shall
give Beneficiary and its agents and employees access to the Premises to remove
Hazardous Material. Grantor agrees to defend, indemnify and hold Beneficiary and
Trustee free and harmless from and against all loss, costs, damage and expense
(including attorneys' fees and costs and consequential damages) Beneficiary may
sustain by reason of (i) the imposition or recording of a lien by any
Governmental Authority pursuant to any Legal Requirement relating to hazardous
or toxic wastes or substances or the removal thereof ("Hazardous Material
Laws"); (ii) claims of any private parties regarding violations of Hazardous
Material Laws; (iii) costs and expenses (including, without limitation,
attorneys' fees and fees incidental to the securing of repayment of such costs
and expenses) incurred by Grantor, Beneficiary or Trustee in connection with the
removal of any such lien or in connection with Grantor's or Beneficiary's or
Trustee's compliance with any Hazardous Material Laws; and (iv) the assertion
against Beneficiary or Trustee by any party of any claim in connection with
Hazardous Material. It is intended that the foregoing agreement of Grantor to
indemnify Beneficiary include, without limitation, indemnification for loss,
costs, damage and expense Beneficiary may sustain as a result of Beneficiary's
own negligence.
(b) The foregoing indemnification shall be a recourse
obligation of Grantor and shall survive repayment of the loans under the Credit
Agreement, notwithstanding any limitations on recourse which may be contained
herein or in any Loan Documents or the delivery
<PAGE>
15
of any satisfaction, release or release deed, discharge or deed of reconveyance,
or the assignment of this Deed of Trust by Beneficiary or the replacement of
Trustee by a substitute trustee.
(c) For the purposes of this Deed of Trust, "Hazardous Material" means
and includes any hazardous, nuclear, toxic or dangerous waste, substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
18. Asbestos. Grantor shall not install or permit to be installed in
the Premises friable asbestos or any substance containing asbestos and deemed
hazardous by any Legal Requirement respecting such material, or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Grantor shall give Beneficiary and its agents and employees access
to the Premises to remove such asbestos or substances. Grantor shall defend,
indemnify, and save Beneficiary and Trustee harmless from all loss, costs,
damages and expense (including attorneys' fees and costs and consequential
damages) asserted or proven against Beneficiary or Trustee by any party, as a
result of the presence of such substances or any removal or compliance with such
Legal Requirements. It is intended that the foregoing agreement of Grantor to
indemnify Beneficiary include, without limitation, indemnification for loss,
costs, damage and expense Beneficiary may sustain as a result of Beneficiary's
own negligence. Furthermore, the indemnification shall be a recourse obligation
of Grantor and shall survive repayment of the loans under the Credit Agreeement,
notwithstanding any limitation on recourse which may be contained herein or in
any of the Loan Documents or the delivery of any satisfaction, release or
release deed, discharge or deed of reconveyance, or the assignment of this Deed
of Trust by Beneficiary or the replacement of Trustee with a substitute
trustee..
19. Event of Default. The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.
20. Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Beneficiary may have pursuant to the Loan Documents,
or as provided by law, and without limitation, (x) if such event is an Event of
Default under Section 8 of the Credit Agreement, automatically the Indebtedness
and all other amounts owing under the Credit Agreement, this Deed of Trust and
the other Security Documents immediately shall become due and payable, and (y)
if such event is any other Event of Default, by notice to Grantor, Beneficiary
may declare the Indebtedness (together with accrued interest thereon) and all
other amounts payable under the Credit Agreement, this Deed of Trust and the
other Security Documents to be immediately due and payable. Except as expressly
provided above in this Section or in the Credit Agreement, presentment, demand,
protest and all other notices of any kind are hereby expressly waived. In
addition, upon the occurrence of any Event of Default, Beneficiary may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Grantor and in and to the Trust Property,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at
<PAGE>
16
such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Beneficiary may direct Trustee to sell or offer for sale the Trust
Property in such portions, order and parcels as Beneficiary may determine,
with or without having first taken possession of the same, to the highest
bidder for cash at public auction. Such sale shall be made at the
courthouse door of the County wherein the Real Estate (or any of that
portion thereof to be sold) is situated (whether the parts or parcels
thereof, if any, in different counties are contiguous or not, and without
the necessity of having any personal property hereby mortgaged present at
such sale) on the first Tuesday of any month between the hours of 10:00
a.m. and 4:00 p.m. after posting a written or printed notice or notices of
the place, time and terms of the sale of the Trust Property for twenty-one
(21) days prior to the date of the sale at the courthouse door of the
county in which the sale is to be made and at the courthouse door of any
other county in which a portion of the Trust Property may be situated and
filing a copy of such notice(s) in the office of the county clerk in each
of such counties, and by serving written notice of the proposed sale at
least twenty-one (21) days preceding the date of sale by certified mail on
Grantor and on each debtor obligated to pay the Indebtedness according to
the records of the Beneficiary. It is agreed that the posting and
transmittal of notices may be performed by the Trustee, Beneficiary, or by
any person acting for them. The sale shall be accomplished by following the
procedures permitted or required by Tex. Prop. Code Ann. 51.002 (Vernon
1984), as same may be amended from time to time, relating to the sale of
real estate and/or by Chapter 9 of the Texas Uniform Commercial Code
relating to the sale of personal property collateral after default by a
debtor (as said Section and Chapter may now exist or may hereafter be
amended or succeeded), or by any other present or subsequent articles or
enactments relating to the same. Nothing contained in this subsection (d)
shall be construed to limit in any way Trustee's rights to sell the Trust
Property by private sale if, and to the extent, that such private sale is
permitted under the laws of the State of Texas or by public or private sale
after entry of judgment by any court of competent jurisdiction ordering the
same. At any such sale (i) whether made under power herein contained, the
aforesaid 51.002, the Texas Uniform Commercial Code, any other legal
requirement or by virtue of any judicial procedure or any other legal
right, remedy or recourse, it shall not be necessary for Trustee to have
physically present, or to have constructive possession of, the Trust
Property (Grantor hereby covenanting and agreeing to deliver to Trustee any
portion of the Trust Property not actually or constructively possessed by
Trustee immediately upon demand by Trustee), and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to
purchaser at such sale, (ii) each instrument of conveyance executed by
Trustee shall contain a special warranty of title, subject to Permitted
Encumbrances, binding upon Grantor, (iii) each and every recital contained
in any instrument of conveyance made by Trustee shall be prima facie proof
of the truth and accuracy of the matters recited therein, including,
without limitation, nonpayment of the Indebtedness, advertisement and
conduct of such sale in the manner provided herein and otherwise by law and
appointment of any
<PAGE>
17
successor Trustee hereunder, (iv) there shall be a prima facie presumption
that any and all prerequisites to the validity thereof shall have been
performed, (v) the receipt of Trustee or of such other party or officer
making the sale shall be a sufficient discharge to the purchaser or
purchasers for his or their purchase money and no such purchaser or
purchasers, or his or their assigns or personal representatives, shall
thereafter be obligated to see to the application of such purchase money or
be in any way answerable for any loss, misapplication or nonapplication
thereof, (vi) to the fullest extent permitted by law, Grantor shall be
completely and irrevocably divested of all of its right, title, interest,
claim and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar, both at law and in
equity, against Grantor, and against any and all other persons claiming or
to claim the property sold or any part thereof, by, through or under
Grantor, and (vii) to the extent and under such circumstances as are
permitted by law, Beneficiary may be a purchaser at any such sale;
(ii) Beneficiary may, to the extent permitted by applicable law, (A)
institute and maintain an action of foreclosure against all or any part of
the Trust Property, (B) institute and maintain an action on the Credit
Agreement, or (C) take such other action at law or in equity for the
enforcement of this Deed of Trust or any of the Loan Documents as the law
may allow. Beneficiary may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest
thereon at the Default Rate and all costs of suit, including, without
limitation, reasonable attorneys' fees and disbursements. Interest at the
Default Rate shall be due on any judgment obtained by Beneficiary from the
date of judgment until actual payment is made of the full amount of the
judgment.
(ii) Beneficiary may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Trust Property and each and every part
thereof and exclude Grantor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to Beneficiary upon demand at
any such time) and use, operate, manage, maintain and control the Trust
Property and every part thereof. Following such entry and taking of
possession, Beneficiary shall be entitled, without limitation, (x) to lease
all or any part or parts of the Trust Property for such periods of time and
upon such conditions as Beneficiary may, in its discretion, deem proper,
(y) to enforce, cancel or modify any Lease and (z) generally to execute, do
and perform any other act, deed, matter or thing concerning the Trust
Property as Beneficiary shall deem appropriate as fully as Grantor might
do.
(b) Beneficiary, in any action to foreclose this Deed of Trust in a
judicial procedure or in connection with the exercise of any non-judicial power
of sale by Trustee, shall be entitled to the appointment of a receiver. In case
of a foreclosure sale, the Real Estate may be sold, at Beneficiary's election,
in one parcel or in more than one parcel and Beneficiary is specifically
empowered, (without being required to do so, and in its sole and absolute
discretion) to cause successive sales of portions of the Trust Property to be
held.
<PAGE>
18
(c) In the event of any breach, beyond any applicable grace period, of
any of the covenants, agreements, terms or conditions contained in this , and
notwithstanding to the contrary any exculpatory or non-recourse language which
may be contained herein, Beneficiary shall be entitled to enjoin such breach and
obtain specific performance of any covenant, agreement, term or condition and
Beneficiary and Trustee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Deed of Trust.
(d) Following any sale of the Trust Property, or any part hereof,
under the provisions of this instrument, all persons and parties in possession
of the property sold shall be divested of any and all interest in and claim to
the Trust Property, and shall be obligated to immediately vacate the premises,
and prior to such vacation shall be tenants at sufferance of the purchaser of
the property sold and shall be subject to eviction in an action of forcible
detainer; provided, the provisions of this subparagraph shall be subject to any
agreements made in writing by Beneficiary with reference to any existing and/or
future leases; provided, further, the purchaser at any foreclosure sale shall
have the option but not the obligation to affirm any then existing leases or
tenancies or otherwise succeed to the rights of Grantor thereunder.
21. Right of Beneficiary to Credit Sale. Upon the occurrence of any
sale made under this Deed of Trust, whether made under the power of sale or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Credit Agreement and documents evidencing expenditures secured hereby
may be presented to the person or persons conducting the sale in order that the
amount so used or applied may be credited upon the Indebtedness as having been
paid.
22. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, and
Grantor hereby irrevocably consents to such appointment and waives notice of any
application therefor (except as may be required by law). Any such receiver or
receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Beneficiary in case of entry as
provided in this Deed of Trust, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the Trust
Property, and shall continue as such and exercise all such powers until the date
of confirmation of sale of the Trust Property unless such receivership is sooner
terminated.
23. Extension, Release, etc. (a) Without affecting the lien or charge
of this Deed of Trust upon any portion of the Trust Property not then or
theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to
<PAGE>
19
(i) release any person liable for the Indebtedness, (ii) extend the maturity or
alter any of the terms of the Indebtedness or any guaranty thereof, (iii) grant
other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Beneficiary's option any parcel, portion or all of the
Trust Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Deed of Trust until the lien amount shall
equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect the lien of this Deed of Trust or any liens, rights,
powers or remedies of Beneficiary hereunder, and such liens, rights, powers and
remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed of
Trust (or direct the Trustee to sell the Trust Property, as the case may be),
Grantor authorizes Beneficiary at its option to foreclose the lien of this Deed
of Trust subject to the rights of any tenants of the Trust Property. The failure
to make any such tenants parties defendant to any such foreclosure proceeding
and to foreclose their rights will not be asserted by Grantor as a defense to
any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose the lien of this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that ownership
of this Deed of Trust and title to the Trust Property or any estate therein
shall become vested in the same person or entity, this Deed of Trust shall not
merge in such title but shall continue as a valid lien on the Trust Property for
the amount secured hereby.
24. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Deed of Trust shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code (the
"Code") of the State in which the Trust Property is located. If an Event of
Default shall occur under this Deed of Trust, then in addition to having any
other right or remedy available at law or in equity, Beneficiary shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then 8 days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, attorneys' fees and legal
expenses. At Beneficiary's request, Grantor shall assemble the personal property
and make it available to Beneficiary at a place designated by Beneficiary which
is reasonably convenient to both parties.
<PAGE>
20
(b) Grantor and Beneficiary agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate; and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time, shall
execute, acknowledge and deliver to Beneficiary one or more separate security
agreements, in form satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Beneficiary may
request in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Deed of Trust and such security
instrument. Grantor further agrees to pay to Beneficiary on demand all costs and
expenses incurred by Beneficiary in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Beneficiary shall
reasonably require. Grantor shall from time to time, on request of Beneficiary,
deliver to Beneficiary an inventory in reasonable detail of any of the Trust
Property which constitutes personal property. If Grantor shall fail to furnish
any financing or continuation statement within ten (10) days after request by
Beneficiary, then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Beneficiary to
proceed against any personal property encumbered by this Deed of Trust as real
property, as set forth above.
25. Assignment of Rents. Grantor hereby assigns to Trustee, for the
benefit of Beneficiary, the Rents as further security for the payment of the
Indebtedness and performance of the Obligations, and Grantor grants to
Beneficiary the right to enter the Trust Property for the purpose of collecting
the same and to let the Trust Property or any part thereof, and to apply the
Rents on account of the Indebtedness. The foregoing assignment and grant is
present and absolute and shall continue in effect until the Indebtedness is paid
in full, but Beneficiary hereby waives the right to enter the Trust Property for
the purpose of collecting the Rents and Grantor shall be entitled to collect,
receive, use and retain the Rents until the occurrence of an Event of Default
under this Deed of Trust; such right of Grantor to collect, receive, use and
retain the Rents may be revoked by Beneficiary upon the occurrence of any Event
of Default under this Deed of Trust by giving not less than five (5) days'
written notice of such revocation to Grantor; in the event such notice is given,
Grantor shall pay over to Beneficiary, or to any receiver appointed to collect
the Rents, any lease security deposits, and shall pay monthly in advance to
Beneficiary, or to any such receiver, the fair and reasonable rental value as
determined by Beneficiary for the use and occupancy of the Trust Property or of
such part thereof as may be in the possession of Grantor or any affiliate of
Grantor, and upon default in any such payment Grantor and any such affiliate
will vacate and surrender the possession of the Trust Property to Beneficiary or
to such receiver, and in default thereof may be evicted by summary proceedings
<PAGE>
21
or otherwise. Grantor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
26. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of Grantor.
Within ten (10) days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary, which statement shall be
certified by Grantor.
27. Additional Rights. The holder of any subordinate lien on the Trust
Property shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Deed of Trust nor shall any holder of any subordinate lien
join any tenant under any Lease in any action to foreclose the lien or modify,
interfere with, disturb or terminate the rights of any tenant under any Lease.
By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this provision shall be null and void. Upon the occurrence of any Event of
Default, Beneficiary may, in its sole discretion and without regard to the
adequacy of its security under this Deed of Trust, apply all or any part of any
amounts on deposit with Beneficiary under this Deed of Trust against all or any
part of the Indebtedness. Any such application shall not be construed to cure or
waive any Default or Event of Default or invalidate any act taken by Beneficiary
on account of such Default or Event of Default.
28. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of deeds of trust or debts secured thereby
for federal, state or local purposes, or the manner of collection of any such
taxes, and imposing a tax, either directly or indirectly, on mortgages or deeds
of trust or debts secured thereby, the holder of this Deed of Trust shall have
the right to declare the Indebtedness due on a date to be specified by not less
than 30 days' written notice to be given to Grantor unless within such 30-day
period Grantor shall assume as an Obligation hereunder the payment of any tax so
imposed until full payment of the Indebtedness and such assumption shall be
permitted by law.
29. Notices. All notices, requests, demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Grantor and to Beneficiary as specified thereunder.
30. No Oral Modification. This Deed of Trust may not be changed or
terminated orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate lien or encumbrance.
Trustee's execution of any written agreement between Grantor and Beneficiary
shall not be required for the effectiveness thereof as between Grantor and
Beneficiary.
<PAGE>
22
31. Partial Invalidity. In the event any one or more of the provisions
contained in this Deed of Trust shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Beneficiary.
32. Grantor's Waiver of Rights. To the fullest extent permitted by
law, Grantor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
33. Remedies Not Exclusive. Beneficiary and Trustee shall be entitled
to enforce payment of the Indebtedness and performance of the Obligations and to
exercise all rights and powers under this Deed of Trust or under any of the
other Loan Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Deed of Trust nor its enforcement, shall prejudice or in any manner affect
Beneficiary's or Trustee's right to realize upon or enforce any other security
now or hereafter held by Beneficiary or Trustee, it being agreed that
Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Beneficiary or Trustee is intended to be exclusive
of any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Loan Documents to Beneficiary or Trustee or to which it may
otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Beneficiary or Trustee,
as the case may be. In no event shall Beneficiary or Trustee, in the exercise of
the remedies provided in this Deed of Trust (including, without limitation, in
connection with the assignment of Rents to Beneficiary, or the
<PAGE>
23
appointment of a receiver and the entry of such receiver on to all or any part
of the Trust Property), be deemed a "mortgagee in possession," and neither
Beneficiary nor Trustee shall in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
34. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of any county in which any of such collateral is located. Grantor
acknowledges that the right to maintain a consolidated trustee's sale or
foreclosure action is a specific inducement to Beneficiary to extend the
Indebtedness, and Grantor expressly and irrevocably waives any objections to the
commencement or consolidation of the foreclosure proceedings in a single action
and any objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Grantor further agrees that if
Trustee or Beneficiary shall be prosecuting one or more foreclosure or other
proceedings against a portion of the Trust Property or against any collateral
other than the Trust Property, which collateral directly or indirectly secures
the Indebtedness, or if Beneficiary shall have obtained a judgment of
foreclosure and sale or similar judgment against such collateral (or, in the
case of a trustee's sale, shall have met the statutory requirements therefor
with respect to such collateral), then, whether or not such proceedings are
being maintained or judgments were obtained in or outside the State in which the
Premises are located, Beneficiary may commence or continue foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and Grantor waives any objections
to the commencement or continuation of a foreclosure of this Deed of Trust or
exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Deed of Trust or such other proceedings
on such basis. The commencement nor continuation of proceedings to sell the
Trust Property in a trustee's sale, to foreclose this Deed of Trust or the
exercise of any other rights hereunder nor the recovery of any judgment by
Beneficiary or the occurrence of any sale by the Trustee in any such proceedings
shall not prejudice, limit or preclude Beneficiary's right to commence or
continue one or more trustee's sale, foreclosure or other proceedings or obtain
a judgment against (or, in the case of a trustee's sale, to meet the statutory
requirements for, any such sale of) any other collateral (either in or outside
the State in which the Premises are located) which directly or indirectly
secures the Indebtedness, and Grantor expressly waives any objections to the
commencement of, continuation of, or entry of a judgment in such other
proceedings or exercise of any remedies in such proceedings based upon any
action or judgment connected to this Deed of Trust, and Grantor also waives any
right to seek to dismiss, stay, remove, transfer or consolidate either such
other proceedings or any action under this Deed of Trust on such basis. It is
expressly understood and agreed that to the fullest extent permitted by law,
Beneficiary may, at its election,
<PAGE>
24
cause the sale of all collateral which is the subject of a single trustee's sale
or foreclosure action at either a single sale or at multiple sales conducted
simultaneously and take such other measures as are appropriate in order to
effect the agreement of the parties to dispose of and administer all collateral
securing the Indebtedness (directly or indirectly) in the most economical and
least time-consuming manner.
35. Expenses; Indemnification. (a) Grantor shall pay or reimburse
Trustee and Beneficiary for all expenses incurred by Beneficiary or Trustee
before and after the date of this Deed of Trust with respect to any and all
transactions contemplated by this Deed of Trust including without limitation,
the preparation of any document reasonably required hereunder or any amendment,
modification, restatement or supplement to this Deed of Trust, the delivery of
any consent, non-disturbance agreement or similar document in connection with
this Deed of Trust or the enforcement of any of Beneficiary's or Trustee's
rights. Such expenses shall include, without limitation, all title and
conveyancing charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums), title search and title
rundown charges, brokerage commissions, finders' fees, placement fees, court
costs, surveyors', photographers', appraisers', architects', engineers',
consulting professional's, accountants' and attorneys' fees and disbursements.
Grantor acknowledges that from time to time Grantor may receive statements for
such expenses, including without limitation attorneys' fees and disbursements.
Grantor shall pay such statements promptly upon receipt.
(b) If (i) any sale (or any prerequisite to a sale), action or
proceeding shall be commenced by Beneficiary or Trustee (including but not
limited to any action to any sale of the Trust Property, or any foreclose this
Deed of Trust or to collect the Indebtedness), or any action
or proceeding is commenced to which Beneficiary or Trustee is made a party, or
in which it becomes necessary to defend or uphold the lien of this Deed of
Trust, or in which Beneficiary or Trustee is served with any legal process,
discovery notice or subpoena and (ii) in each of the foregoing instances such
action or proceeding in any manner relates to or arises out of this Deed of
Trust or Beneficiary's lending to Grantor, then Grantor will immediately
reimburse or pay to Beneficiary and Trustee all of the expenses which have been
or may be incurred by Beneficiary and Trustee, respectively, with respect to the
foregoing (including reasonable counsel fees and disbursements), together with
interest thereon at the Default Rate, and any such sum and the interest thereon
shall be a lien on the Trust Property, prior to any right, or title to, interest
in or claim upon the Trust Property attaching or accruing subsequent to the lien
of this Deed of Trust, and shall be deemed to be secured by this Deed of Trust.
In any action or proceeding to sell the Trust Property, to foreclose this Deed
of Trust, or to recover or collect the Indebtedness, the provisions of law
respecting the recovering of costs, disbursements and allowances shall prevail
unaffected by this covenant.
(c) Grantor shall indemnify and hold harmless each of Beneficiary and
Trustee and each of their respective affiliates, and the respective directors,
officers, agents and employees of each of Beneficiary and Trustee and each of
their respective affiliates (all of the foregoing indemnified parties
collectively, the "Obligees") from and against all claims, damages, losses and
liabilities (including, without limitation, reasonable attorneys' fees and
expenses) arising out of or based upon any matter related to this Deed of Trust,
the Trust Property or the
<PAGE>
25
occupancy, ownership, maintenance or management of the Trust Property by
Grantor, including, without limitation, any claims based on the alleged acts or
omissions of any employee or agent of Grantor. It is intended that the foregoing
agreement of Grantor to indemnify the Obligees include, without limitation,
indemnification for claims, damages, losses and liabilities the Obligees may
sustain as a result of the Obligees' own negligence and this indemnification
shall be in addition to any other liability which Grantor may otherwise have to
Beneficiary or Trustee.
36. Successors and Assigns. All covenants of Grantor contained in this
Deed of Trust are imposed solely and exclusively for the benefit of Beneficiary
and Trustee and their respective successors and assigns, and no other person or
entity shall have standing to require compliance with such covenants or be
deemed, under any circumstances, to be a beneficiary of such covenants, any or
all of which may be freely waived in whole or in part by Beneficiary or Trustee
at any time if in its sole discretion it deems such waiver advisable. All such
covenants of Grantor shall run with the land and bind Grantor, the successors
and assigns of Grantor (and each of them) and all subsequent owners,
encumbrancers and tenants of the Trust Property, and shall inure to the benefit
of Beneficiary, its successors and assigns. The word "Grantor" shall be
construed as if it read "Grantors" whenever the sense of this Deed of Trust so
requires and if there shall be more than one Grantor, the obligations of the
Grantors shall be joint and several.
37. No Waivers, etc. Any failure by Beneficiary to insist upon the
strict performance by Grantor of any of the terms and provisions of this Deed of
Trust shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Beneficiary or Trustee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Grantor of any and
all of the terms and provisions of this Deed of Trust to be performed by
Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in any way impairing or affecting
the lien of this Deed of Trust or the priority of such lien over any subordinate
lien.
38. GOVERNING LAW, ETC. THIS DEED OF TRUST SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT THAT GRANTOR
EXPRESSLY ACKNOWLEDGES THAT BY ITS TERMS THE CREDIT AGREEMENT SHALL BE GOVERNED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAW, AND FOR PURPOSES OF CONSISTENCY, GRANTOR AGREES
THAT IN ANY IN PERSONAM PROCEEDING RELATED TO THIS DEED OF TRUST THE RIGHTS OF
THE PARTIES TO THIS DEED OF TRUST SHALL ALSO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK GOVERNING CONTRACT MADE AND TO
BE PERFORMED IN THAT STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.
<PAGE>
26
39. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or proceeding relating to this Deed of Trust and for any counterclaim
brought therein. Grantor hereby waives all rights to interpose any counterclaim
in any suit brought by Beneficiary hereunder and all rights to have any such
suit consolidated with any separate suit, action or proceeding.
40. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any subsequent borrower under the
Credit Agreement," the word "Credit Agreement" shall mean "the Credit Agreement
or any other evidence of indebtedness secured by this Deed of Trust," the word
"person" shall include any individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, or other entity,
and the words "Trust Property" shall include any portion of the Trust Property
or interest therein. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Deed of Trust are for convenience or reference only and in no
way limit or amplify the provisions hereof.
41. Revolving Credit; Future Advances. The Loans secured hereby
include revolving lines of credit extended by the Banks to Grantor pursuant to
the Credit Agreement. The outstanding balance of such revolving lines of credit
may increase and decrease from time to time, and sums may be advanced, repaid
and readvanced thereunder until the final maturity of the Loans. This Deed of
Trust is intended to secure all indebtedness of Grantor under the Loans so long
as the Credit Agreement continues in effect, regardless of such repayments and
readvances of the proceeds of the Loans, and regardless of whether the balance
of such obligations may be reduced, from time to time, to zero. In addition to
all other indebtedness secured by this Deed of Trust, this Deed of Trust shall
secure also and constitute a first lien subject only to the Permitted Exceptions
on the Trust Property for all future advances made by the Banks to Grantor for
any purpose within six (6) years from the date of this Deed of Trust to the same
extent as if such advances were made on the date of the execution of this Deed
of Trust. The total amount of the indebtedness, including future advances, that
is secured by this Deed of Trust, may increase or decrease from time to time,
but shall not exceed the maximum principal amount of the Loans as set forth in
the Credit Agreement at any one time, together with interest thereon at the
rates provided in the Credit Agreement, and plus any disbursement made by
Beneficiary or any of the Banks to protect the security of this Deed of Trust,
with interest on such disbursement at the Default Rate.
42. Last Dollars Secured; Priority. This Deed of Trust secures only a
portion of the Indebtedness owing or which may become owing by the Grantor to
the Banks. The parties agree that any payments or repayments of such
Indebtedness shall be and be deemed to be applied first to the portion of the
Indebtedness that is not secured hereby, it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.
<PAGE>
27
42. Enforceability; Usury. In no event shall any provision of this
Deed of Trust, the Note, or any other instrument evidencing or securing the
indebtedness ever obligate Grantor to pay or allow Beneficiary to collect
interest on the Note or any other indebtedness secured hereby at a rate greater
than the maximum non-usurious rate permitted by applicable law (herein referred
to as the "Highest Lawful Rate"), or obligate Grantor to pay any taxes,
assessments, charges, insurance premiums or other amounts to the extent that
such payments, when added to the interest payable on the Note or any other note
secured hereby, would be held to constitute the payment by Grantor of interest
at a rate greater than the Highest Lawful Rate; and this provision shall control
over any provision to the contrary. To the extent the Highest Lawful Rate is
determined by reference to the laws of the State of Texas, same shall be
determined by reference to the indicated (weekly) rate ceiling (as defined and
described in Texas Revised Civil Statutes Article 5069-1.04, as amended) at the
applicable time in effect.
Without limiting the generality of the foregoing, in the event the
maturity of all or any part of the principal amount of the Indebtedness shall be
accelerated for any reason, then such principal amount so accelerated shall be
credited with any interest theretofore paid thereon in advance and remaining
unearned at the time of such acceleration. If, pursuant to the terms of this
instrument or the Note, any funds are applied to the payment of any part of the
principal amount of the Indebtedness prior to the maturity thereof, then (a) any
interest which would otherwise thereafter accrue on the principal amount so paid
by such application shall be canceled, and (b) the Indebtedness remaining unpaid
after such application shall be credited with the amount of all interest, if
any, theretofore collected on the principal amount so paid by such application
and remaining unearned at the date of said application; and if the funds so
applied shall be sufficient to pay in full all the Indebtedness, then
Beneficiary shall refund to Grantor all interest theretofore paid thereon in
advance and remaining unearned at the time of such acceleration. Regardless of
any other provision in this instrument, or in any of the written evidences of
the Indebtedness, Grantor shall never be required to pay any unearned interest
on the Indebtedness or any portion thereof, and shall never be required to pay
interest thereon at a rate in excess of the Highest Lawful Rate construed by
courts having competent jurisdiction thereof.
43. Homestead. Grantor represents and covenants that the Trust
Property forms no part any property owned, used or claimed by Grantor as a
business or residential homestead, or as exempt from forced sale under the laws
of the State of Texas, and disclaims and renounces all and every such claim
thereto.
44. Substitute Trustee. In case of the resignation of the Trustee, or
the inability (through death or otherwise), refusal or failure of the Trustee to
act, or at the option of Beneficiary or the holder(s) of a majority of the
Indebtedness for any other reason (which reason need not be stated), a
Substitute Trustee may be named, constituted and appointed by Beneficiary or the
holder(s) of a majority of the Indebtedness, without other formality than an
appointment and designation in writing, which appointment and designation shall
be full evidence of the right and authority to make the same and of all facts
therein recited, and this conveyance shall vest in the Substitute Trustee the
title, powers and duties herein conferred on the Trustee originally named
herein, and the conveyance of the Substitute Trustee to the purchaser(s) at any
sale of the Trust Property of any part thereof shall be equally valid and
effective. The right to appoint a
<PAGE>
28
Substitute Trustee shall exist as often and whenever from any of said causes,
the Trustee, original or Substitute, resigns or cannot, will not or does not
act, or Beneficiary or the holder(s) of a majority of the Indebtedness desires
to appoint a new Trustee. No bond shall ever be required of the Trustee,
original or Substitute. The recitals in any conveyance made by the Trustee,
original or Substitute, shall be accepted and construed in court and elsewhere
as prima facie evidence and proof of the facts recited, and no other proof shall
be required as to the request by Beneficiary or the Holder(s) of a majority of
the Indebtedness to the Trustee to enforce this Deed of Trust, or as to the
notice of or holding of the sale, or as to any particulars thereof, or as to the
resignation of the Trustee, original or Substitute, or as to the inability,
refusal or failure of the Trustee, original or Substitute, to act, or as to the
election of Beneficiary or the holder(s) of a majority of the Indebtedness to
appoint a new Trustee, or as to appointment of a Substitute Trustee, and all
prerequisites of said sale shall be presumed to have been performed; and each
sale made under the powers herein granted shall be a perpetual bar against
Grantor and the heirs, personal representatives, successors and assigns of
Grantor. Trustee, original or substitute, is hereby authorized and empowered to
appoint any one or more persons as attorney-in-fact to act as Trustee under him
and in his name, place and stead in order to take any actions that Trustee is
authorized and empowered to do hereunder, such appointment to be evidenced by an
instrument signed and acknowledged by said Trustee, original or substitute; and
all acts done by said attorney-in-fact shall be valid, lawful and binding as if
done by said Trustee, original or substitute, in person.
45. Indemnification of Trustee. Except for gross negligence or willful
misconduct, Trustee shall not be liable for any act or omission or error of
judgment. Trustee may rely on any document believed by him in good faith to be
genuine. All money received by Trustee shall, until used or applied as herein
provided, be held in trust, and Trustee shall not be liable for interest
thereon. Grantor shall indemnify Trustee against all liability and expenses that
he may incur in the performance of his duties hereunder except for gross
negligence or willful misconduct.
46. Business or Commercial Purpose. Grantor warrants that the
extension of credit evidenced by the Note secured hereby is solely for business
or commercial purposes, other than agricultural purposes. Grantor further
warrants that the credit transaction evidenced by the Note is specifically
exempted under Section 226.3(a) of Regulation Z issued by the Board of Governors
of the Federal Reserve System and Title 12 (Truth in Lending Act) and Section
1603 of Title 15 (General Provisions) of the Consumer Credit Protection Act and
that no disclosures are required to be given under such regulations and federal
laws in connection with the above transaction.
47. Final Agreement. In consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby confirms and agrees that this Deed of Trust
(including the Schedules hereto), the Note, any guarantees of the Note executed
by any guarantors and all other Loan Documents and loan papers together
constitute a written "loan agreement" as defined in Section 26.02(a) of the
Texas Business and Commerce Code.
<PAGE>
29
48. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
43. Receipt of Copy. Grantor acknowledges that it has received a true
copy of this Deed of Trust.
<PAGE>
30
This Deed of Trust has been duly executed by Grantor as of the date
first above written.
NUEVO SOL TURF CLUB INC.
By: /S/ Susan J. Carstensen
-----------------------------------------
Name: Susan J. Carstensen
Title: Treasurer
<PAGE>
31
STATE OF MONTANA )
) ss.:
COUNTY OF GALLATIN )
On this 8th day of October, 1998, personally came Susan J. Carstensen,
before me came _______________, to be duly sworn by me, and did depose and say
that she executed the foregoing instument in the name of Nuevo Sol Turf Club,
Inc., the corporation therein mentioned for the purposes therein mentioned.
/S/ Vicki L. Consoli
---------------------------------------------
Notary Public
Residing at: Bozeman, MT
My Commission expires: 2/12/02
[Notarial Stamp]
<PAGE>
32
Schedule A
[Attach legal description]
<PAGE>
EXHIBIT D-2
================================================================================
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
dated as of
October 9, 1998
made by
POWERHOUSE TECHNOLOGIES, INC.
in favor of
LEHMAN COMMERCIAL PAPER INC., as Administrative Agent, as Mortgagee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS............. .............. 1
SECTION 1.1. Definitions...................................................... 1
ARTICLE II
GRANTING CLAUSE............................. 4
ARTICLE III
COVENANTS, REPRESENTATIONS AND WARRANTIES................. 5
SECTION 3.1. Maintenance of Security Interest............................... 5
SECTION 3.2. Handling of Payments........................................... 6
SECTION 3.3. General Collateral Warranties, Representations and Covenants... 6
SECTION 3.4. Aircraft and Engine Covenants, Warranties and Representations.. 10
SECTION 3.5. Insurance Required............................................. 13
SECTION 3.6. Events of Loss; Governmental Authorities....................... 15
ARTICLE IV
REMEDIES................................. 17
SECTION 4.1. Remedies....................................................... 17
SECTION 4.2. Possession of Aircraft......................................... 17
SECTION 4.3. Receiver....................................................... 18
SECTION 4.4. Sale and Suits for Enforcement................................. 18
SECTION 4.5. Waiver of Appraisement, etc.................................... 19
SECTION 4.6. Remedies Cumulative............................................ 19
SECTION 4.7. Application of Proceeds........................................ 19
SECTION 4.8. Delay or Omission; Possession of Notes......................... 19
ARTICLE V
MISCELLANEOUS PROVISIONS......................... 20
SECTION 5.1. Amendments, etc................................................ 20
SECTION 5.2. Notices........................................................ 20
SECTION 5.3. Governing Law; Terms........................................... 20
SECTION 5.4. Severability................................................... 20
-i-
<PAGE>
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT, dated as of October 9, 1998,
made by POWERHOUSE TECHNOLOGIES, INC., a Montana corporation (together with its
successors and assigns, the "Grantor") with its principal place of business at
2311 South Seventh Avenue, Bozeman, MT 59715, in favor of LEHMAN COMMERCIAL
PAPER INC., a New York corporation, in its capacity as administrative agent for
the Lenders (as defined herein) (in such capacity, and together with any
successor agent appointed in accordance with the terms of Section 9.9 of the
Credit Agreement referred to herein, the "Administrative Agent" or the
"Mortgagee"), having an office at 3 World Financial Center, New York, NY, 10285.
W I T N E S S E T H :
WHEREAS, the Mortgagee is a party to that certain Credit Agreement,
dated October 9, 1998 (as the same may be amended, modified or supplemented from
time to time, the "Credit Agreement"), among Powerhouse Technologies, Inc. (the
"Borrower"), the several Lenders from time to time parties thereto, Lehman
Brothers Inc., as Arranger, Canadian Imperial Bank of Commerce, as Documentation
Agent, Lehman Commercial Paper Inc., as Syndication Agent and Lehman Commercial
Paper Inc., as Administrative Agent;
WHEREAS, the Lenders have agreed to make revolving credit
loans to the Borrower in an aggregate principal amount of up to $100,000,000
(the "Loans") pursuant to the Credit Agreement;
WHEREAS, the Grantor is a wholly owned subsidiary of the Borrower; and
WHEREAS, it is a condition precedent to the making of the Loans that
the Grantor shall have executed and delivered this Mortgage to the Mortgagee;
NOW, THEREFORE, in consideration of the premises and in order to
induce the Mortgagee to make the Loans and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Grantor hereby
agrees with the Mortgagee for its benefit as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Definitions. Unless otherwise defined herein, capitalized
terms defined in the Credit Agreement shall have the respective meanings
ascribed to them therein, other capitalized terms defined in the preamble and
recitals to this Aircraft Mortgage and Security Agreement shall have the
respective meanings ascribed to them therein and the following terms shall have
the following defined meanings (and shall be applicable to both the singular and
the plural forms of such terms):
<PAGE>
2
"Aircraft" means the Airframe, together with the two Engines initially
installed thereon (or any Engine substituted for one of said Engines pursuant to
Section 3.6(a) hereof), whether or not any of said initial or substitute Engines
may from time to time be installed on such Airframe.
"Airframe" means the North American NA-265-40 aircraft (except for the
Engines or engines from time to time installed thereon) bearing Registration no.
N999VT and manufacturer's Serial No. 282-38 together with any and all Parts
which are either incorporated or installed in or attached to such Airframe or
required to be subject to the lien and security interest of this Mortgage in
respect of such Airframe as provided in Section 3.4(f) hereof.
"Borrower Obligations": means the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and all
other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement and after the maturity of the Loans and Reimbursement Obligations and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding) to the Administrative Agent or any Lender (or, in the case of any
Hedge Agreement referred to below, any Affiliate of any Lender), whether direct
or indirect, absolute or contingent which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the , due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan Documents,
any Letter of Credit or any Hedge Agreement entered into by the Borrower with
any Lender (or any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of any of the foregoing agreements).
"Business Day" means any day which is not a Saturday, Sunday or a day
on which banks in the States of New York are authorized or obligated by law,
executive order or governmental decree to be closed.
"Collateral" has the meaning given in Article II hereof.
"Engine" means each of the two Pratt & Whitney JT12A-6A jet aircraft
engines bearing the following manufacturer's serial numbers:
Manufacturer Manufacturer's Serial No.
------------ -------------------------
Pratt & Whitney 673169
Pratt & Whitney 638084;
053113-1107-02517-98AWC9V3-MTG
<PAGE>
3
together with any and all Parts which are either incorporated or installed in or
attached to such Engine or required to be subject to the Lien and security
interest of this Mortgage in respect of such Engine as provided in Section
3.4(f) hereof. Each of which Engines is capable of producing 750 or more rated
takeoff horsepower or the equivalent thereof.
"Event of Loss" has the meaning given in Section 3.6 hereof.
"FAA" means the United States Federal Aviation Administration.
"FAA Act" or "Act" means 49 U.S.C. Subtitle VII, ss.ss. 40101
et seq., as amended from time to time, any regulations promulgated thereunder
and any successor provision.
"FAA Recording Office": the office of the FAA in Oklahoma City,
Oklahoma maintained for the recording of Liens on aircraft and aircraft engines
pursuant to the FAA Act.
"Grantor Obligations": means all obligations and liabilities of the
Grantor which may arise under or in connection with this Mortgage or any other
Loan Document to which the Grantor is a party, in each case whether on account
of guarantee obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Mortgagee, Administrative Agent or to the Lenders that are
required to be paid by the Grantor pursuant to the terms of this Mortgage or any
other Loan Document).
"Obligations": means the collective reference to the Borrower
Obligations and the Grantor Obligations.
"Mortgage" means this Aircraft Mortgage and Security Agreement, as the
same may be amended, modified or supplemented from time to time.
"Net Collateral Insurance Proceeds" means the proceeds of any
settlement, award or payment in respect of any insurance mentioned pursuant to
Section 3.5(a) hereof, net of any taxes, fees and expenses (including attorney's
fees) incurred or the reasonably estimated to be incurred in the collection and
application thereof.
"Parts" means, at any time, all parts, components, equipment,
instruments, appliances, avionics, radio and radar devices, quick engine change
equipment, cargo handling systems and loose equipment that are at such time
incorporated or installed in or attached to the Airframe or any Engine or with
respect to which the Lien of this Agreement extends pursuant to Section 3.4(f).
"Proceeds" means whatever is receivable or received when the Airframe
or any Engine or Part or other Collateral is sold, exchanged, collected or
otherwise disposed of, including, without limitation, all amounts payable or
paid under insurance, requisition or other payments as the result of any loss
(including an Event of Loss) or damage to such Airframe or Engine or Part and
shall also include all "Proceeds" as defined in the Uniform Commercial Code of
the State of New York.
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4
ARTICLE II
GRANTING CLAUSE
The Grantor hereby assigns, mortgages, transfers and confirms unto the
Mortgagee, and hereby grants to the Mortgagee, a first priority security
interest in, all right, title and interest of the Grantor in and to the
following property, whether now owned or hereafter acquired (herein collectively
called the "Collateral"), as collateral security for the prompt and complete
payment and performance when due of all the Obligations:
(a) the Aircraft (including the Airframe and the Engines), and all
replacements thereof and substitutions therefor in which the Grantor shall
from time to time acquire an interest, and all records, logs and other
documents at any time maintained with respect to the foregoing property;
(b) all Parts;
(c) all right, title and interest of the Grantor in, to and under any
of the following related to the Airframe, any Engine or any Parts: (i) all
warranties, service contracts and product agreements of any manufacturer or
of any maintenance or overhaul agency of the Airframe or the Engines, or
any subcontractor or supplier or vendor thereof, to the extent assignable
or enforceable, and any and all rights of the Grantor to compel performance
of the terms of such warranties, service contracts or product agreements
respecting the Airframe or any of the Engines and (ii) all documents with
respect to the Airframe or any of the Engines, whether maintained in Lease
form, electronic form or on microfiche, including but not limited to:
manufacturer's maintenance and inspection manuals, parts catalog, engine
and airframe logs, pilot check lists, and operator's manuals for installed
equipment, all of which shall be current and complete from the date of
manufacture, all wiring diagrams and supporting technical publications, and
all other documentation and technical information relating to the Airframe
or any of the Engines, whether in the Grantor's control or the control of a
lessee of the Airframe or any of the Engines;
(d) all rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Lien of this
Mortgage;
(e) all insurance policies required to be maintained hereunder
otherwise maintained with respect to the Aircraft and all insurance and
requisition proceeds with respect to the Aircraft or any part thereof
including but not limited to the insurance required under this Mortgage or
any Lease;
(f) all moneys and securities now or hereafter paid or deposited or
required to be paid or deposited to or with the Mortgagee by or for the
account of the Grantor pursuant to any term of any Loan Document and held
or required to be held by the Mortgagee hereunder or under any Loan
Document; and
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5
(g) all Proceeds of all or any of the foregoing.
Notwithstanding the foregoing the Grantor, and not the Mortgagee,
shall exclusively be entitled to collect all rent and other amounts under the
Lease and related documentation and exercise all its other rights under the
Lease and related documentation prior to the occurrence and continuance of an
Event of Default, provided that no action may be taken without the consent of
the Mortgagee which would result in a Default or an Event of Default hereunder.
ARTICLE III
COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Maintenance of Security Interest. The Grantor will
perform, or will cause to be performed, unless expressly waived in writing by
the Mortgagee, each and all of the following:
(a) Record, register and file this Mortgage, as well as such notices,
financing statements, and/or other documents or instruments as may, from
time to time, be reasonably requested by the Mortgagee to carry out fully
the intent of this Mortgage, with:
(i) the FAA Recording Office, in the case of the Aircraft and
Engines; and
(ii) such other administrative or governmental agencies, whether
domestic or foreign, as may be reasonably determined by the Mortgagee
to be necessary or advisable in order to perfect, establish, confirm
and/or maintain the security interest and lien created hereunder as a
legal, valid and binding first priority security interest and lien
upon the Collateral except for Liens permitted to exist under Section
7.3 of the Credit Agreement (collectively, "Permitted Liens").
(b) Furnish to the Mortgagee an opinion, dated the Closing Date, from
a counsel acceptable to the Mortgagee specializing in matters related to
the FAA Act ("FAA Counsel") as to the Grantor's fulfillment of the
requirements of this Mortgage relating to the propriety of registration of
the Aircraft, the perfection of the security interests in the Aircraft and
the Engines described herein, and the absence of Liens and encumbrances
against the Aircraft and Engines, other than Permitted Liens;
(c) Furnish to the Mortgagee copies of all documents or other evidence
of every such recording, registering and filing;
(d) Execute and deliver or perform, or cause to be executed and
delivered or performed, such further and other instruments and/or acts as
the Mortgagee reasonably determines are necessary or advisable to carry out
fully the intent and purpose of this
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6
Mortgage or to subject the Collateral to any security interest and Lien
created hereunder, including, without limitation:
(i) defending the right, title and interest of the Grantor, the
Mortgagee and the Lenders in and to the Collateral by means of
negotiation and, if necessary, appropriate legal proceedings, against
each and every party claiming an interest therein (other than
Permitted Liens) contrary or adverse to the Grantor's, the Mortgagee's
or the Lenders' right, title and interest, as the case may be, in and
to same; and
(ii) execute and deliver to the Mortgagee the Lease chattel paper
counterpart of each Lease, if such a counterpart exists; and
(e) Do and cause to be done all things necessary to perfect and keep
in full force the security interest granted in favor of the Mortgagee for
the benefit of the Lenders, including, but not limited to, one or more
applications for certificate of title and any other papers, documents or
instruments requested by the Mortgagee or any one of the Lenders in
connection with this Mortgage, the prompt payment of all fees and expenses
incurred in connection with any filings to be made to perfect or continue a
security interest in the Collateral in favor of the Mortgagee for the
benefit of the Lenders and the making of appropriate entries on its
financial statements and books and records disclosing the security interest
granted hereunder to the Mortgagee for the benefit of the Lenders. The
Grantor hereby consents to the filing of extensions of such filings without
the Grantor's signature.
SECTION 3.2. Handling of Payments. In the event an Event of Default
shall occur and be continuing and the Grantor (or any of its affiliates,
subsidiaries, stockholders, directors, officers, employees or agents) shall
receive any proceeds of Collateral, including without limitation monies, checks,
notes, drafts or any other items of payment, the Grantor shall hold all such
items of payment in trust for the Mortgagee, for the benefit of the Lenders, and
as the property of the Mortgagee, for the benefit of the Lenders, separate from
the funds of the Grantor, and no later than the first Business Day following the
receipt thereof, at the election of the Mortgagee, the Grantor shall cause the
same to be forwarded to the Mortgagee for its custody and possession on behalf
of the Lenders as additional Collateral.
SECTION 3.3. General Collateral Warranties, Representations and
Covenants. The Grantor warrants, represents and covenants with the Mortgagee and
each of the Lenders as follows:
(a) Representations in Credit Agreement. The representations and
warranties set forth in Section 4 of the Credit Agreement as they relate to
the Grantor and this Mortgage, each of which is hereby incorporated herein
by reference, are true and correct, and the Mortgagee and each Lender shall
be entitled to rely on each of them as if they were fully set forth herein,
provided that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 3.3(a), be
deemed to be a reference to the Grantor's knowledge.
<PAGE>
7
(b) Inspection. The Mortgagee (by any of its officers, employees and
agents), on behalf of the Lenders, shall have the right upon prior notice
to an officer of the Grantor, and at any reasonable times during the
Grantor's usual business hours, (i) to inspect the Collateral, all records
related thereto (and to make extracts or copies from such records), and the
premises upon which any of the Collateral is located (subject to any
restriction on inspection contained in a Lease with respect to the Aircraft
or related Collateral; provided that notwithstanding any such Lease, (A)
any Person designated by the Mortgagee may inspect such Aircraft and
Engines at any reasonable time upon an event of default under such Lease
and (B) upon any Event of Default, any Person designated by the Mortgagee
may inspect the Aircraft and Engines at any time), and (ii) to discuss the
Grantor's affairs and finances with any Person and to verify with any
Person other than account debtors the amount, quality, quantity, value and
condition of, or any other matter relating to, the Collateral and, (iii) if
an Event of Default has occurred and is continuing, to discuss the
Grantor's affairs and finances with the Grantor's Lessees and account
debtors and to verify the amount, quality, value and condition of, or any
other matter relating to, the Collateral and such Lessees and account
debtors. Upon or after the occurrence and during the continuation of an
Event of Default, the Mortgagee may at any time and from time to time
employ and maintain on the Grantor's premises a custodian selected by the
Mortgagee who shall have full authority to do all acts necessary to protect
the Mortgagee's (for the benefit of the Lenders) interest. All expenses
incurred by the Mortgagee, on behalf of the Lenders, by reason of the
employment of such custodian shall be paid by the Grantor, added to the
Obligations and secured by the Col lateral.
(c) Transfers and Other Liens. The Grantor shall not (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of any of, or grant
any option with respect to, the Collateral, except for dispositions
permitted under this Mortgage or the Credit Agreement, (ii) create or
suffer to exist any Lien, security interest or other charge or encumbrance
upon or with respect to any of the Collateral except for the security
interests created by this Mortgage or other Permitted Liens; or (iii) take
any other action in connection with any of the Collateral that would result
in a Default, materially impair the value of the interest or rights of the
Grantor in the Collateral taken as a whole or that would materially impair
the interest or rights of the Mortgagee.
(d) Location of Collateral. The chief and other places of business of
the Grantor, the books and records relating to the Collateral and the
Collateral (other than the Airframe and the Engines, as to which the
Grantor will issue to the Mortgagee, upon request, written reports
indicating the location of such Airframe and Engines) are located at the
addresses set forth on Schedule I hereto, and the Grantor will not change
any of the same without prior written notice to and consent of the
Mortgagee.
(e) Use of Collateral. The Collateral is and will be used in the
business of the Borrower and its Subsidiaries (including the Grantor).
(f) Owner of Collateral. The Grantor is and, except as expressly
permitted by this Mortgage or the Credit Agreement, will continue to be the
owner of the Collateral
<PAGE>
8
hereunder, now owned and upon the acquisition of the same, free and clear
of all Liens, claims, encumbrances and security interests other than the
security interest in favor of the Mortgagee for the benefit of the Lenders
hereunder and Permitted Liens, and that it will defend such Collateral and
any products and proceeds thereof against all material claims and demands
of all Persons (other than holders of Permitted Liens) at any time claiming
the same or any interest therein adverse to the Mortgagee or the Lenders,
except as otherwise in the Loan Documents. The inclusion of proceeds of the
Collateral under the security interest granted herein shall not be deemed a
consent by the Lenders, individually or collectively, to any sale or other
disposition of any part or all of the Collateral except as expressly
permitted herein.
(g) Payment of Taxes. The Grantor has made and will continue to make
payment or deposit or otherwise provide for the payment, when due, of all
taxes, assessments or contributions required by law which have been or may
be levied or assessed against the undersigned, whether with respect to any
of the Collateral or any wages or salaries paid by the Grantor or in
respect of the Grantor's income, or otherwise, and will deliver to the
Mortgagee, on demand, certificates or other evidence satisfactory to the
Mortgagee attesting thereto. Notwithstanding the foregoing, the Grantor
shall have the right to contest any tax, assessment, or contribution
required by law to the extent such contest is provided for under any Lease
so long as (i) such contest is diligently conducted in good faith by
appropriate proceedings, (ii) no Lien (other than a Permitted Lien) results
on the Airframe, any Engine or other Collateral, (iii) there is no
reasonable likelihood of the sale, appropriation, or foreclosure on the
Airframe, any Engine or other Collateral, and (iv) adequate reserves or
other appropriate provisions are being maintained in accordance with GAAP.
(h) Compliance with Laws. The Grantor will use or cause to be used the
Collateral for lawful purposes only, with all reasonable care and caution
and in conformity in all material respects with all applicable laws,
ordinances and regulations. Notwithstanding the foregoing, the Grantor
shall have the right to contest the compliance with any applicable law,
ordinance or regulation to the extent such contest is provided for under
any Lease so long as (i) such contest is diligently conducted in good faith
by appropriate proceedings, (ii) no Lien (other than a Permitted Lien)
results on the Airframe, any Engine or other Collateral, (iii) there is no
reasonable likelihood of the sale, appropriation, or foreclosure on the
Airframe, any Engine or other Collateral, and (iv) adequate reserves or
other appropriate provisions are being maintained in accordance with GAAP.
(i) Personal Property. The Collateral is now and shall remain personal
property.
(j) Mortgagee May Act. The Mortgagee may, in its discretion, for the
account and expense of the Grantor, pay any amount or do any act required
of the Grantor hereunder or reasonably requested by the Mortgagee to
preserve, protect, maintain or enforce the Obligations, the Collateral or
the first priority Lien granted herein (subject only to Permitted Liens),
and which the Grantor fails to do or pay within any applicable
<PAGE>
9
grace period provided for in the Loan Documents (it being understood that
no grace period exists for the maintenance of insurance required by Section
3.5), and any such payment shall be deemed an advance by the Lenders to the
Grantor and shall be payable on demand together with interest at the rate
applicable to overdue amounts as specified in Section 2.13(c) of the Credit
Agreement, and shall constitute part of the Obligations.
(k) Grantor Responsible for Collateral. The Grantor assumes all
responsibility and liability arising from the use of the Collateral unless
the claim giving rise to such responsibility or liability arises out of the
gross negligence or wilful misconduct of the Mortgagee or the Lenders,
provided, however, that this provision is given solely for the benefit of
the Mortgagee and the Lenders and the Grantor does not waive any right it
may have against third parties.
(l) Instrument or Chattel Paper. If any amount payable under, in, or
in connection with any of the Collateral shall be or become evidenced by
any instrument or chattel paper, such instrument or chattel paper shall be
immediately delivered to the Mortgagee and duly endorsed in a manner
satisfactory to the Mortgagee to be held as Collateral pursuant to this
Mortgage.
(m) Notice of Liens and Other Events. The Grantor will advise the
Mortgagee promptly, in reasonable detail, if it has knowledge (i) of any
Lien (other than Permitted Liens) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could
reasonably be expected to have a Material Adverse Effect on the Collateral
or on the Liens created hereunder.
(n) New Mortgagee. At any time, the Mortgagee may assign, transfer and
deliver any or all of the Collateral to any successor Mortgagee in
accordance with the terms of Section 10.6 of the Credit Agreement,
whereupon the retiring Mortgagee shall be fully discharged from all
responsibility and such successor shall be vested with all powers and
rights of the Mortgagee hereunder with respect thereto, but the Mortgagee
shall retain all rights and powers with respect to any Collateral not
assigned, transferred or delivered, provided that no such assignment shall
increase the liability of the Grantor hereunder.
(o) No Consents. No authorization, consent, approval or other action
by, and no notice to or filing with, any governmental authority or
regulatory body or any other Person is required either (i) for the grant by
the Grantor of the security interests granted hereby or for the execution,
delivery or performance of this Mortgage by the Grantor, or (ii) for the
perfection of or the exercise by the Mortgagee, on behalf of the Lenders,
of its rights and remedies hereunder, except for the filings required by
the Uniform Commercial Code of the State in which the Grantor maintains its
chief executive office and the other jurisdictions on Schedule I attached
hereto and the filing of this Mortgage with the FAA Recording Office.
(p) No Liens. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral purported to
be granted by the Grantor
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10
hereunder is on file in any recording office, except such as may have been
filed in favor of the Mortgagee for the benefit of the Lenders and except
for Permitted Liens.
(q) Condemnation. The Grantor shall, immediately upon obtaining
knowledge of the institution or threatened institution of any requisition,
condemnation or other eminent domain proceedings for the taking of any
portion of or interest in the Collateral, notify the Mortgagee thereof in
writing. The Mortgagee may participate in any such proceedings. The Grantor
shall deliver, or cause to be delivered, to the Mortgagee all instruments
requested by the Mortgagee to permit such participation. In any such
proceedings, the Mortgagee may be represented by counsel satisfactory to
it.
SECTION 3.4. Aircraft and Engine Covenants, Warranties and
Representations. The Grantor warrants, represents and covenants with the
Mortgagee and each of the Lenders as follows:
(a) Recordation of Ownership. The Grantor's ownership of or first
priority Lien on the Aircraft and Engines will be duly recorded with the
FAA Recording Office upon recordation of an aircraft registration
application.
(b) Compliance with Laws. The Grantor agrees that it shall not use or
operate the Aircraft or any Engine, or permit the Aircraft or any Engine to
be used or operated, in violation of any law (including, without
limitation, laws concerning alcoholic beverages, prohibited substances, or
insurance) of any Governmental Authority or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
or any Engine issued by any such Governmental Authority. In the event that
any such law requires the alteration of the Aircraft or any Engine, the
Grantor will conform thereto or obtain conformance therewith and will
maintain or cause to be maintained the Aircraft and Engines in proper
operating condition under such laws, rules, regulations and orders (or if
the Aircraft or any Engine is in storage, in compliance with all applicable
laws and with all manufacturers warranties and requirements for storage).
Notwithstanding the foregoing, the Grantor shall have the right to contest
the compliance with any applicable law, ordinance or regulation to the
extent such contest is provided for under any Lease so long as (i) such
contest is diligently conducted in good faith by appropriate proceedings,
(ii) no Lien (other than Permitted Liens) results on the Airframe, any
Engine or other Collateral, (iii) there is no reasonable likelihood of the
sale, appropriation, or foreclosure on the Airframe, any Engine or other
Collateral, and (iv) adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP;
(c) Legal Limitations. The Grantor agrees that it will not permit the
Airframe or any Engine to be operated, used or located in violation of law.
(d) Possession. Except as otherwise set forth expressly herein or in
the Credit Agreement, the Grantor will not permit and will not, without the
prior written consent of the Mortgagee and the Required Lenders, lease,
sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Airframe or any Engine; provided however, that so long as
no Event of Default shall have occurred and be continuing, the
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11
Grantor may, without such prior written consent deliver or permit the
delivery or possession of the Airframe or Engines to the manufacturer
thereof for testing or for other similar purposes, or to any organization
for service, repair, maintenance or overhaul work on the Airframe or
Engines or for alterations in or modifications or additions to the Airframe
or Engines to the extent required or permitted by the terms hereof and the
other Loan Documents;
None of the permitted relinquishments of possession set forth above
shall affect the registration of the Aircraft or in any way discharge or
diminish any of the Grantor's obligations to the Mortgagee or the Lenders
hereunder or under any other Loan Document or constitute a waiver of the
Mortgagee's or the Lenders' right or remedies hereunder or thereunder.
(e) Records and Reports. The Grantor shall maintain or cause to be
maintained accurate and complete records, logs, manuals and all other
materials required by the FAA to be maintained in respect of the Aircraft
and each Engine. The Grantor shall promptly furnish or cause to be
furnished to the Mortgagee such information as may be required to enable
the Mortgagee to file any reports required to be filed by the Mortgagee
with the FAA because of the Mortgagee's interest in the Airframe or any
Engine and upon the occurrence of an Event of Default (upon the Mortgagee's
request) shall deliver to the Mortgagee the Leases of all such documents in
possession of the Grantor and copies of all such documents relating to
Aircraft and Engines leased or sold to third parties.
(f) Maintenance. Grantor will keep or will cause to be kept the
Aircraft and each Engine in good repair and condition and airworthy in all
respects and will perform all checks and overhauls required by the FAA and
by the applicable maintenance program.
(g) Replacement of Parts. Grantor shall promptly replace or cause to
be replaced all Parts, which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition,
the Grantor may remove or may cause to be removed in the ordinary course of
maintenance, service, repair, overhaul or testing of any Parts, whether or
not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, that the
Grantor will replace or will cause to be replaced such Parts as promptly as
possible. All replacement Parts shall be free and clear of all Liens (other
than Permitted Liens) and shall be in as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced,
assuming such replaced Parts were in the condition and repair required to
be maintained by the terms hereof; provided, however, that the Grantor
shall have the right to install or to cause to be installed temporary
replacement Parts pending the completion of permanent repairs or
installation of permanent replacement Parts, in which event the Grantor
shall install or shall cause to be installed permanent replacement Parts to
meet such requirements as soon as reasonably possible and in any event
within ninety days from the date of installation of such temporary
replacement Parts. All Parts at any time
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12
removed from the Airframe or any Engine shall remain subject to the Lien
created under this Mortgage no matter where located, until such time as
such Parts shall be replaced by Parts which have been incorporated in the
Aircraft or such Engine and which meet the requirements of subsections (i)
and (ii) below. Immediately upon any replacement Part becoming incorporated
or installed in or attached to the Airframe or any Engine as provided
above, without further act, (i) such replacement Part shall become subject
to the Lien created under this Mortgage and be deemed part of the Aircraft
or such Engine for all purposes hereof to the same extent as the Parts
originally incorporated in the Aircraft or such Engine (and the Grantor
shall make all filings or registrations necessary to perfect the
Mortgagee's Lien in such Part), and (ii) the replaced Part shall be
released from the Lien of this Mortgage and the replaced Part shall no
longer be deemed a Part hereunder;
(h) Alterations, Modifications and Additions. Grantor shall make or
shall cause to be made such alterations and modifications in and additions
to the Aircraft and Engines as may be required from time to time to meet
the requirements of the FAA and to maintain the certificate of
airworthiness therefor. In addition, the Grantor may make or may cause to
be made from time to time make such alterations and modifications in and
additions to the Airframe or any Engine as the Grantor may deem desirable;
provided that each such alteration, modification and addition is readily
removable from the Aircraft or such Engine or that such alteration,
modification or addition shall not diminish the value, utility or condition
of the Aircraft or any Engine below the value, utility or condition thereof
immediately prior to such alteration, modification or addition, assuming
the Aircraft or such Engine was then of the value or utility and in the
condition required to be maintained by the terms of this Mortgage; and
provided, further, that no such alteration, modification or addition shall
cause the airworthiness certification or other license, registration or
authorization of the Aircraft or any Engine to cease to be in good standing
under the FAA Act. All Parts added to the Airframe or any Engine as the
result of such alteration, modification or addition shall, without further
act, be subject to the Lien created under this Mortgage. Notwithstanding
the foregoing sentence, so long as no Event of Default is in existence, the
Grantor may remove or may cause to be removed any Part if (A) such Part is
in addition to, and not in replacement of or substitution for, any Part
originally incorporated in the Aircraft or any Engine at the time of
delivery thereof or any Part in replacement of or substitution for any such
Part or such Part is obsolete or no longer useful in the operation of the
Aircraft or any Engine, (B) such Part is not required to be incorporated or
installed in or attached or added to the Aircraft or any Engine pursuant to
the terms of this Section 3.4, and (C) such Part can be removed from the
Aircraft or such Engine without causing any material damage thereto. Upon
the removal of any Part as provided above, such Part shall be released from
the Lien created under this Mortgage.
(i) Nameplate. Grantor shall place and maintain, or shall cause to be
placed and maintained, a fireproof plate in a reasonably prominent position
on the flightdeck or cockpit of each Aircraft and on each Engine stating:
THIS [AIRCRAFT][ENGINE] IS OWNED BY POWERHOUSE TECHNOLOGIES, INC. AND
IS SUBJECT TO A FIRST PRIORITY
<PAGE>
13
SECURITY INTEREST IN FAVOR OF LEHMAN COMMERCIAL PAPER INC., AS
ADMINISTRATIVE AGENT, AS MORTGAGEE.
SECTION 3.5. Insurance Required.
(a) Type of Insurance Required. The Grantor will keep the
Collateral continuously insured against such risks as are customarily
insured against by businesses of like size and type engaged in the
same or similar operations.
(b) Policy Provisions Required. Each insurance policy obtained in
satisfaction of the requirements of Section 3.5 hereof:
(i) shall be issued by such insurer (or insurers) as shall
be financially responsible, of recognized standing and reasonably
acceptable to the Mortgagee;
(ii) shall be in such form and have such provisions
(including without limitation the loss payable clause, the waiver
of subrogation clause, the deductible amount, if any, and the
standard mortgagee endorsement clause), as are generally
considered standard provisions for the type of insurance involved
and are reasonably acceptable in all respects to the Mortgagee;
(iii) shall prohibit cancellation or substantial
modification, termination or lapse in coverage by the insurer
without prior written notice to the Mortgagee of at least thirty
days (or with respect to war risk and allied perils coverage,
seven days or such other period as may be customary in the
industry);
(iv) without limiting the generality of the foregoing, all
insurance policies for (A) hull insurance carried on the
Collateral shall name the Mortgagee, for the benefit of itself
and the Lenders, as loss payee and (B) liability insurance shall
name the Mortgagee, for the benefit of the Lenders, as additional
assureds thereunder in respect of any claim for payment;
(v) shall contain such other customary provisions and
endorsements as the Mortgagee may reasonably require;
(vi) shall provide that in respect of the interests of the
Mortgagee under such insurance policies, such insurance shall not
be invalidated by any action or inaction of the Grantor or any
other Person and shall insure such interests of the Mortgagee
regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the
Grantor or any other Person;
(vii) shall be primary without right of contribution from
any other insurance which is carried by the Mortgagee or any
Lender with respect to its interest in the Airframe or any
Engine;
<PAGE>
14
(viii) shall provide the coverage required under this
Section 3.5 at all times and whether or not the Aircraft and
Engines are in the possession and control of the Grantor or any
third party;
(ix) shall provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner
as if there were a separate policy covering each insured and
shall waive any rights of subrogation of the insurers against the
Mortgagee or any Lender; and
(x) shall waive any right of the insurers to setoff,
recoupment, counterclaim or any other deduction in respect of any
liability of the Mortgagee or any Lender.
(c) Insurance Certificates Required. The Grantor agrees to
furnish the Mortgagee on or before the date of the advance of Loans to
which this Mortgage relates, an insurance certificate signed by an
independent insurance broker reasonably acceptable to the Mortgagee
describing in reasonable detail the insurance carried on the Aircraft
and certifying that such insurance complies with the terms hereof and
that such insurance adequately protects the interests of the
Mortgagee. Prior to expiration of any such policy, the Grantor shall
furnish the Mortgagee with the same evidence required to be delivered
on or prior to the date of the advance of Loans to which this Mortgage
relates and otherwise satisfactory to the Mortgagee that the policy or
certificate has been renewed or replaced or is no longer required by
this Agreement.
(d) Power of Attorney. The Grantor hereby irrevocably makes,
constitutes and appoints the Mortgagee (and all officers, employees or
agents designated by the Mortgagee), for the benefit of the Lenders,
effective upon the occurrence and during the continuance of an Event
of Default, as the Grantor's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of the
Grantor on any check, draft, instrument or other item or payment for
the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance.
(e) Mortgagee May Act. In the event the Grantor (i) shall fail to
maintain, or fail to cause to be maintained, the full insurance
coverage required hereunder or (ii) shall fail to keep any of its
Collateral in good repair and good operating condition subject to
ordinary wear and tear, then the Mortgagee may (but shall be under no
obligation to), without waiving or releasing any Obligation or Event
of Default by the Grantor hereunder, contract for the required
policies of insurance and pay the premiums on the same or make any
required repairs, renewals and replacements; and all sums so disbursed
by Mortgagee, including reasonable attorneys' fees, court costs,
expenses and other charges related thereto, shall be payable on demand
by the Grantor to the Mortgagee and shall be additional Obligations
secured by the Collateral.
(f) Payment for Uninsured Loss. The Grantor agrees that to the
extent that it shall not carry insurance required by Section 3.5(a)
hereof, it shall in the event of any loss
<PAGE>
15
or casualty pay promptly to the Mortgagee, for the benefit of the
Lenders, for application in accordance with the provisions of Section
3.5(g) hereof, such amount as would have been received as Net
Collateral Insurance Proceeds (as hereinafter defined) by the
Mortgagee, for the benefit of the Lenders hereof had such insurance
been carried to the extent required.
(g) Application of Insurance Proceeds. Any Net Collateral
Insurance Proceeds received by shall be applied by the Grantor toward
extinguishment of the defect or claim or satisfaction of the liability
with respect to which such insurance proceeds may be paid.
(h) Notice of Loss. In case of any material damage to or
destruction of all or any part of the Collateral pledged hereunder by
the Grantor, the Grantor shall give prompt notice thereof to the
Mortgagee. Each such notice shall describe generally the nature and
extent of such damage, destruction, taking, loss, proceeding or
negotiations. The Grantor is hereby authorized and empowered to adjust
or compromise any loss under any such insurance.
(i) Lender Insurance. Nothing herein shall prevent the Mortgagee
or any Lender from maintaining additional insurance at its own
expense; provided that the maintenance of such insurance shall not
prejudice the Grantor's ability to obtain, or recover under, the
insurance required under this Section 3.5 or materially increase the
costs thereof.
SECTION 3.6. Events of Loss; Governmental Authorities. As used herein,
"Event of Loss" means, with respect to the Airframe or an Engine, any of the
following events: (i) loss of such Airframe or Engine or of the use thereof due
to the destruction of or damage to such Airframe or Engine to such extent as
shall render repair thereof uneconomical, provided that such repair shall not be
deemed uneconomical if the proceeds of insurance with respect to such damage or
destruction (plus any applicable amounts of deductibles) shall be in an amount
at least equal to the cost of such repair; (ii) any damage to such Airframe or
Engine which results in an insurance settlement with respect to such Airframe or
Engine on the basis of a total loss or a constructive or compromised total loss;
(iii) the disappearance of such Airframe or Engine which shall have resulted in
the loss of possession of such Airframe or Engine by the Grantor for a period of
five (5) consecutive days; (iv) the theft of such Airframe or Engine which shall
have resulted in the loss of Airframe or Engine by the Grantor for five (5)
consecutive days; (v) the requisition of title, confiscation or seizure of such
Airframe or Engine; (vi) as a result of any requirement by the FAA or other
Governmental Authority, the use of such Airframe or Engine in the normal course
of interstate air transportation shall have been prohibited for a period through
and including the December 31, 2004 unless, prior to the expiration of such
period, the Grantor shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such Airframe or Engine, or, in any event, if such use shall have been
prohibited for a period of 360 days; (vii) the operation or location of such
Airframe or Engine, while under requisition for use by a Governmental Authority,
in any area excluded from coverage by any insurance policy in effect with
respect thereto required by the terms of Section 3.5; or (viii) any other event
resulting in such Airframe or Engine being permanently rendered
<PAGE>
16
unfit for normal use for any reason whatsoever. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. Upon the occurrence of an Event of Loss, the provisions
of this Section 3.6 shall apply, govern and control.
(a) Event of Loss with Respect to an Engine. Upon the occurrence of an
Event of Loss with respect to the Engine (but not the Aircraft), the
Grantor shall within three Business Days of the Grantor's actual knowledge
of such occurrence) give the Mortgagee written notice of such Event of Loss
and shall as promptly as practicable, and in any event on or before the
Business Day next preceding the sixtieth day following the date of
occurrence of such Event of Loss, the Grantor shall subject or cause to be
subjected to this Mortgage in replacement thereof, a replacement Engine of
the same model and having not less than the same value as the Engine being
replaced and which be free and clear of all Liens (other than Permitted
Liens) and which shall be of like kind and equivalent value to, and which
shall be in as good operating condition as, the Engine so replaced (for
such purpose, it shall be assumed that such Engine was in the condition and
repair required by the terms hereof) and, following such replacement, the
replaced Engine shall be released from the Lien created by this Mortgage.
If the Grantor shall not perform its obligation to effect such replacement
hereunder during the period of time provided herein, such failure shall be
an Event of Default.
(b) Event of Loss with Respect to the Aircraft. Upon the occurrence of
an Event of Loss with respect to the Aircraft, the Grantor shall give the
Mortgagee prompt written notice (and in any event within three Business
Days of the Grantor's actual knowledge of such occurrence) thereof and
shall, upon the receipt of any Net Collateral Insurance Proceeds, prepay
the Loans in accordance with Section 2.10(b) of the Credit Agreement. In
the event of payment in full by the Grantor of all amounts then due and
payable hereunder upon the occurrence of an Event of Loss, the Aircraft
shall be released from the Lien of this Mortgage, and the Mortgagee shall
execute and deliver such instruments as may be reasonably required to
evidence such release.
(c) Replacement of Engines. If Net Collateral Insurance Proceeds are
received with respect to the Engine that has been or is being replaced (and
which by the terms of this Section 3.6 may be replaced) by the Grantor
pursuant to Section 3.5(a), such Net Collateral Insurance Proceeds shall be
paid over to, or retained by, the Mortgagee, and at the time of such
replacement in accordance with Section 3.6(a), the amount of such Net
Collateral Insurance Proceeds remaining after reimbursement of the
Mortgagee for costs and expenses (and the Mortgagee is hereby authorized to
so apply such Net Collateral Insurance Proceeds to such reimbursement)
shall be paid over to the Grantor and as provided for in Section 3.5.
(d) Use of Aircraft Not Constituting an Event of Loss. If payments are
received with respect to a requisition for use by any Governmental
Authority which does not constitute an Event of Loss under the definition
thereof, such payments may be retained by the Grantor.
<PAGE>
17
(e) Default. Notwithstanding the foregoing provisions of this Section
3.6, any payments received at any time by the Mortgagee from any
Governmental Authority or other Person, whether or not with respect to an
Event of Loss, which are payable to the Grantor, shall not be paid to the
Grantor if at the time of such payment an Event of Default shall have
occurred and be continuing, in which event all such amounts shall be paid
to and held by the Mortgagee as security for the Obligations of the Grantor
hereunder and under the other Loan Documents and applied by the Mortgagee
toward the payment of such Obligations.
ARTICLE IV
REMEDIES
SECTION 4.1. Remedies. If an Event of Default shall occur and be
continuing, the Mortgagee may, without notice of any kind to the Grantor, and at
the direction of the Required Lenders shall, carry out or enforce the actions or
remedies provided in this Article IV or elsewhere in this Mortgage or in the
Loan Documents or otherwise available to a secured party under the Uniform
Commercial Code or other applicable law as in effect at the time in any
applicable jurisdiction.
SECTION 4.2. Possession of Aircraft. If an Event of Default shall have
occurred and be continuing, the Mortgagee may, without notice, take possession
of all or any part of the Aircraft and may exclude the Grantor, and all persons
claiming under the Grantor, wholly or partly therefrom. If an Event of Default
shall have occurred and be continuing, at the request of the Mortgagee, the
Grantor shall promptly deliver or cause to be delivered to the Mortgagee or to
whomsoever the Mortgagee shall designate, at such time or times and place or
places as the Mortgagee may specify, and fly or cause to be flown to such
airport or airports in the continental United States as the Mortgagee may
specify, without risk or expense to the Mortgagee, all or any part of the
Aircraft specified by the Mortgagee. In addition, the Grantor will provide,
without cost or expense to the Mortgagee, storage facilities for the Aircraft.
In addition, without the necessity of any demand upon the Grantor, the Mortgagee
may, without being responsible for loss or damage, except to the extent caused
by the gross negligence or wilful misconduct of the Mortgagee, (i) obtain a
judgment conferring on the Mortgagee the right to immediate possession or
requiring the Grantor to deliver immediate possession of all or part of such
Aircraft to the Mortgagee, to the entry of which judgment the Grantor hereby
specifically consents, and/or (ii) with or, to the fullest extent provided by
law, without such judgment, pursue all or any part of such Aircraft wherever
they may be found and enter any of the premises of the Grantor where such
Aircraft may be and search for such Aircraft and take possession of and remove
the same. The Grantor agrees to pay to the Mortgagee, all expenses incurred in
taking any such action; and all such expenses shall, until paid, be secured by
the lien and security interest of this Mortgage. Upon every such taking of
possession, the Mortgagee may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions
<PAGE>
18
and improvements to and of the Aircraft as it may deem proper and such
expenditures shall constitute obligations secured hereby.
SECTION 4.3. Receiver. If an Event of Default shall have occurred and
be continuing, the Mortgagee shall be entitled, as a matter of right as against
the Grantor, without notice or demand and without regard to the adequacy of the
security for the Obligations by virtue of this Mortgage or any other collateral
or to the solvency of the Grantor, upon the commencement of judicial proceedings
by it to enforce any right under this Mortgage, to the appointment of a receiver
of all or any part of the Collateral.
SECTION 4.4. Sale and Suits for Enforcement. (i) If an Event of
Default shall have occurred and be continuing, the Mortgagee, with or without
taking possession of the Aircraft, may
(A) to the extent and in the manner permitted by law, sell at one or
more sales, as an entirety or in separate lots or parcels, all or any part
of the Aircraft, subject to any existing Lease or not, as the Mortgagee may
decide, at public or private sale, at such place or places and at such time
or times and upon such terms, including terms of credit (which may include
the retention of title by the Mortgagee to the property so sold), as the
Mortgagee may determine, whether or not the Aircraft shall be at the place
of sale; and
(B) proceed to protect and enforce its rights under this Mortgage by
suit, whether for specific performance of any covenant herein contained or
in aid of the exercise of any power herein granted or for the foreclosure
of this Mortgage and the sale of the Collateral under the judgment or
decree of a court of competent jurisdiction or for the enforcement of any
other right.
(ii) At any sale of the Aircraft or any part thereof by the Mortgagee
pursuant to paragraph (i) (A) above, the Mortgagee may consider and accept bids
requiring the extension of credit to the bidder and may determine the highest
bidder at such sale, whether or not the bid of such bidder shall be solely for
cash or shall require the extension of credit.
(iii) The Mortgagee, to the extent permitted by law, may from time to
time adjourn any sale under paragraph (i)(A) above by announcement at the time
and place appointed for such sale or for any adjournment thereof; and without
further notice or publication, except as may be required by law, such sale be
made at the time and place to which the same shall have been so adjourned.
(iv) Upon the completion of any sale under paragraph (i)(A) above,
full title and right of possession to the Aircraft so sold shall (subject to any
retention of title by the Mortgagee as part of the terms of such sale) pass to
the accepted purchaser forthwith upon the completion of such sale, and the
Grantor shall deliver, in accordance with the instructions of the Mortgagee
(including flying the Aircraft or causing the same to be flown to such airports
in the continental United States as the Mortgagee may specify), such Aircraft so
sold. If the Grantor shall for any reason fail to deliver such Aircraft, the
Mortgagee shall have all of the rights granted by Section 4.2 hereof. The
Mortgagee is hereby irrevocably appointed the true and
<PAGE>
19
lawful attorney of the Grantor, in its name and stead, to make all necessary
conveyances of the Aircraft so sold. Nevertheless, if so requested by the
Mortgagee or by any purchaser, the Grantor shall confirm any such sale or
conveyance by executing and delivering all proper instruments of conveyance or
releases as may be designated in any such request.
SECTION 4.5. Waiver of Appraisement, etc. The Grantor agrees, to the
fullest extent that it lawfully may, that it will not (and hereby irrevocably
waives its right to) at any time plead, or claim the benefit or advantage of,
any appraisement, valuation, stay, extension, moratorium or redemption law now
or hereafter in force, in order to prevent or hinder the enforcement of this
Mortgage or the absolute sale of the Collateral.
SECTION 4.6. Remedies Cumulative. No remedy herein conferred upon the
Mortgagee is intended to be exclusive of any other remedy, but every such remedy
shall be cumulative and shall be in addition to every other remedy herein
conferred or now or hereafter existing in law.
SECTION 4.7. Application of Proceeds. If an Event of Default shall
have occurred and be continuing, the proceeds of any sale, lease or other
disposition of all or any part of the Collateral pursuant to this Mortgage and
all other sums realized or held by the Mortgagee under this Mortgage or any
proceedings hereunder shall be applied in the following order of priority
(unless otherwise directed by the Required Lenders):
First: To the payment of the expenses of any such sale, lease,
disposition or other realization (and of the retaking, holding and
preparing for sale or lease), including reasonable compensation to the
Mortgagee's agents and counsel, and all expenses, liabilities and advances
made or incurred by the Mortgagee in connection therewith or incurred
pursuant to Section 3.3(j) hereof, including, without limitation, taxes
upon or with respect to such sale, lease, disposition or realization and
the payment of taxes and Liens, if any, prior to the Lien of this Mortgage;
Second: To the payment of the Obligations in whole or in part in such
order as the Mortgagee may elect; and
Third: To the Grantor or as any court of competent jurisdiction may
otherwise direct.
SECTION 4.8. Delay or Omission; Possession of Notes. (i) No delay or
omission of the Mortgagee to exercise any right or remedy arising upon the
happening of any Default or Event of Default shall impair any right or remedy or
shall be construed to be a waiver of any such Default or Event of Default or an
acquiescence therein; and every right and remedy given to the Mortgagee by this
Article IV or by applicable law may be exercised from time to time and as often
as may be deemed expedient by the Mortgagee.
(ii) All rights of action under this Mortgage may be enforced by the
Mortgagee without the possession of the Notes or any other instrument or
document evidencing any Obligation or the production thereof in any proceeding.
<PAGE>
20
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Amendments, etc. No amendment or waiver of any provision
of this Mortgage nor consent to any departure by the Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Mortgagee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 5.2. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be given in accordance with
Section 10.2 of the Credit Agreement;
SECTION 5.3. Governing Law; Terms. This Mortgage shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the law of another jurisdiction may be mandatorily applicable to
proceedings taken for the enforcement of the rights and remedies of the
Mortgagee hereunder, provided that any such rights or remedies which shall be
valid under the laws of such other jurisdiction shall not be affected by any
invalidity thereof under the laws of the State of New York.
SECTION 5.4. Severability. The invalidity of any one or more of the
provisions of this Mortgage shall not affect the remaining provisions of this
Mortgage should be held by any court of law to be invalid, or should operate to
render this Mortgage invalid or to impair the lien and security interest of this
Mortgage on all or the major portion of the property intended to be mortgaged
hereunder, this Mortgage shall be construed as if such provisions had not been
contained therein.
IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to be
duly executed and delivered as of the day and year first above written.
POWERHOUSE TECHNOLOGIES, INC.
By: /S/ Susan J. Carstensen
-----------------------------------------
Title: CFO and Treasurer
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent, as Mortgage
By: /S/ William J. Gallagher
-----------------------------------------
Title: Authorized Signatory
<PAGE>
Schedule I
----------
Places of Filings
-----------------
Federal Aviation Administration Oklahoma City, Oklahoma
<PAGE>
SCHEDULES
SCHEDULE I - Location of Collateral
-ii-
<PAGE>
SCHEDULE I
[Waived Conditions Precedent]
[Describe any conditions precedent waived on
Closing Date and terms of any waiver]
<PAGE>
ANNEX 1
[Board Resolutions]
<PAGE>
ANNEX 2
[By-Laws]
<PAGE>
ANNEX 3
[Certificate of Incorporation]
<PAGE>
EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies, Inc., (the "Borrower"), the Lenders
named therein, Lehman Brothers Inc., as Arranger, Lehman Commercial Paper Inc.,
Administrative Agent and as Syndication Agent, and Canadian Imperial Bank of
Commerce as Documentation Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor") and the
Assignee identified on Schedule l hereto (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
<PAGE>
2
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) represents that it
is a financial institution regulated by a Governmental Authority of the United
States of America or a State thereof, or is a wholly-owned subsidiary of, or is
managed by such a financial institution; (c) confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
delivered pursuant to Section 6.1 thereof (or, if no such financial statements
have been delivered, copies of the financial statements delivered pursuant to
Section 4.1 thereof), each other Loan Document and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (d) agrees that it will,
independently and without reliance upon the Assignor, the Agents or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (e) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agents by the terms thereof, together with such powers as are
incidental thereto; and (f) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to Section
2.18(d) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance and the rights and obligations of
the parties under this Agreement and Acceptance shall be governed by, and
construed and interpreted in accordance, with the law of the State of New York.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor: __________________________________
Name of Assignee: __________________________________
Effective Date of Assignment: ______________________
Credit Principal Commitment Percentage Assigned
Facility Assigned Amount Assigned --------------------------------
- ---------------------- --------------------
$__________ __._______%
[Name of Assignee] [Name of Assignor]
By: ________________________________ By: __________________________________
Title: Title:
Accepted: Consented To:
LEHMAN COMMERCIAL PAPER INC, as POWERHOUSE TECHNOLOGIES, INC.
Administrative Agent
By: _______________________________ By: __________________________________
Title: Title:
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent
By: ___________________________________
Title:
<PAGE>
EXHIBIT F
MATTERS TO BE COVERED IN LEGAL OPINIONS
I. OPINION OF ROGERS & HARDIN
A. Each of the Loan Parties (i) has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of the
state of Delaware, (ii) has the corporate power and authority to execute and
deliver each of the Loan Documents to which it is a party, to perform its
obligations under each such Loan Document and to grant the security interests to
be granted by it pursuant to the Security Documents and, in the case of the
Borrower, to borrow under the Credit Agreement and (iii) has duly authorized,
executed and delivered each Loan Document to which it is a party.
B. The execution and delivery by any Loan Party of the Loan Documents
to which it is a party, the granting by it of the security interests to be
granted by it pursuant to the Security Documents and, in the case of the
Borrower, its borrowings in accordance with the terms of the Loan Documents, and
performance of its payment obligations thereunder (i) will not result in any
violation of (A) the Certificate of Incorporation or By-Laws of such Loan Party
and (B) assuming that proceeds of borrowings will be used in accordance with the
terms of the Credit Agreement, any Federal or Georgia statute or the Delaware
General Corporation Law or any rule or regulation issued pursuant to any Federal
or Georgia statute or the Delaware General Corporation Law or any order known to
us issued by any court or governmental agency or body and ii) will not breach or
result in a default under or result in the creation of any lien upon or security
interest in the Loan Parties' properties pursuant to the terms of any agreement
or instrument (other than the security interests created by the Security
Documents.
C. No consent, approval, authorization, order, filing, registration or
qualification of or with any Federal or Georgia governmental agency or body or
any Delaware governmental agency or body acting pursuant to the Delaware General
Corporation Law is required for the execution and delivery by any Loan Party of
the Loan Documents to which it is a party, the borrowings by any Loan Party in
accordance with the terms of the Loan Documents or the performance by the Loan
Parties of their respective payment obligations under the Loan Documents or the
granting of any security interests under the Security Documents, except filings
required for the perfection of security interests granted pursuant to the
Security Documents.
[The foregoing assumes all parties are Delaware Corporations. If this assumption
is incorrect, counsel in the appropriate jurisdiction should cover issues in
paragraph 1,2, and 3 that are governed by the law of the state of
incorporation.]
D. The courts of Georgia would give effect to the provisions of the
Loan Documents whereby the parties thereto have agreed that the Loan Documents
shall be governed
<PAGE>
by, and construed and interpreted in accordance with, the laws of the Sate of
New York. If, however, the courts of Georgia were to apply the laws of Georgia
as the governing law in respect of any Loan Document, then, assuming that each
of the Loan Documents is a valid and legally binding obligation of each of the
Lenders parties thereto, each Loan Document constitutes and each Note delivered
to a Lender after the date hereof, assuming the due execution and delivery by
the Loan Party which is the maker of such Note, will constitute, the valid and
legally binding obligation of each Loan Party which is a party thereto,
enforceable against such Loan Party in accordance with its terms.
E. To our knowledge there is no action, suit or proceeding before or
by any court, arbitrator or governmental agency, body or official, now pending,
to which any Loan Party is a party or to which the business, assets or property
of any Loan Party is subject and no such action, suit or proceeding is
threatened to which any Loan Party or the business, assets or property of any
Loan Party would be subject that in either case questions the validity of the
Loan Documents.
F. No Loan Party is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
G. Each of the Financing Statements listed in Schedule __ hereto (the
"Financing Statements") is in appropriate form for filing in the filing offices
listed in Schedule __ (the "Filing Offers").
H. The UCC Search Reports listed in Schedule ____ hereto set forth the
proper filing offices and the proper debtors necessary to identify those persons
who under the Uniform Commercial Code have on file financing statements in
[specify States] (each, an "Opinion State") against the Loan Parties covering
the Collateral in which a security interest is perfected by filing a financing
statement under the Uniform Commercial Code as in effect in the Opinion State[s]
as of the effective dates therefor set forth on Schedule __ hereto.
[UCC issues for states other than Georgia which are not covered by other state
counsel may be covered by Rogers & Hardin based solely on review by applicable
UCC provisions of the relevant states.]
XI. The Guarantee and Collateral Agreement creates in favor of the
Administrative Agent for the benefit of the Lenders a security interest in the
collateral described therein in which a security interest may be created under
Article 9 of each Opinion State UCC (the "Security Agreement Article 9
Collateral").
J. Upon the filing in the Filing Offices of the Financing Statements,
the Administrative Agent will have a perfected security interest for the benefit
of the Lenders in that portion of the Security Agreement Article 9 Collateral in
which a security interest is perfected by filing a financing statement under
each Opinion State UCC.
K. The security interest of the Administrative Agent for the benefit
of the Lenders in that portion of the collateral described in the Guarantee and
Collateral Agreement as
<PAGE>
instruments will be a perfected security interest upon delivery of such
instruments to the Administrative Agent in the State of New York.
L. All of the shares of capital stock described on Schedule 2 to the
Guarantee and Collateral Agreement (except for directors' qualifying shares) are
owned of record by the Borrower or a Subsidiary of the Borrower, as described on
such Schedule 2.
M. The Guarantee and Collateral Agreement creates in favor of the
Administrative Agent for the benefit of the Lenders a security interest under
each Opinion State UCC in the investment property identified on Schedule 2 to
the Guarantee and Collateral Agreement (the "Pledged Securities").
N. The Administrative Agent will have a perfected security interest in
the Pledged Securities for the benefit of the Lenders upon delivery to the
Administrative Agent for the benefit of the Lenders of the certificates
representing the Pledged Securities in registered form, indorsed in blank by an
effective indorsement or accompanied by undated stock powers with respect
thereto duly indorsed in blank by an effective indorsement. Assuming the
Administrative Agent and each of the Lenders does not have notice of any adverse
claim to the Pledged Securities, the Administrative Agent will acquire the
security interest in the Pledged Securities for the benefit of the Lenders free
of any adverse claim.
O. The [Borrower] [relevant Subsidiary] is licensed under the laws of
the Opinion State to __________ [describe terms of license]; and such license is
in full force and effect.
P. [AWI] is a party to [describe contract with Opinion State] (the
"Contract"). Although the Contract prohibits assignment by [AWI] of its rights
and obligations under the Contract, neither the Contract nor the laws of the
Opinion State prohibit the creator by AWI of a security interest in the Contract
pursuant to the Guarantee and Collateral Agreement, to the extent such security
interest relates to money due or to become due to AWI pursuant to the Contract.
The foregoing opinions may be subject to such qualifications, exceptions and
limitations as shall be reasonable and customary.
<PAGE>
II. OPINIONS OF LOCAL COUNSEL
A. The execution and delivery by any Loan Party of the Loan Documents
to which it is a party, its borrowings in accordance with the terms of the Loan
Documents, performance of its payment obligations thereunder and granting of the
security interests to be granted by it pursuant to the Security Documents will
not result in any violation of any Federal or statute of the State of
___________ (the "Opinion State"), or any rule or regulation issued pursuant to
any statute of the Opinion State.
B. No consent, approval, authorization, order, filing, registration or
qualification of with any Opinion State governmental agency or body is required
for the execution and delivery by any Loan Party of the Loan Documents to which
it is a party, the borrowings by the Borrower in accordance with the terms of
the Loan Documents or the performance by the Loan Parties of their respective
payment obligations under the Loan Documents or the granting of any security
interests under the Security Documents, except filings required for the
perfection of security interests granted pursuant to the Security Documents.
C. Each of the financing statements listed on Schedule ___ (the
"Financing Statements") is in appropriate form for filing in the filing offices
listed on Schedule __ (the "Filing Offices").
D. The UCC Search Reports listed on Schedule ___ set forth the proper
filing offices and the proper debtors necessary to identify those persons who
under the Uniform Commercial Code have on file financing statements in the
Opinion State against the Loan Parties covering the Collateral in which a
security interest is perfected by filing a financing statement under the Uniform
Commercial Code as in effect in the Opinion State (the "Opinion State UCC") as
of the effective dates therefor set forth on Schedule ___.
E. The Guarantee and Collateral Agreement creates in favor of the
Administrative Agent for the benefit of the Lenders a security interest in the
collateral described therein in which a security interest may be created under
Article 9 of the Opinion State UCC (the "Security Agreement Article 9
Collateral").
F. Upon the filing in the Filing Offices of the Financing Statements,
the Administrative Agent will have a perfected security interest for the benefit
of the Lenders in that portion of the Security Agreement Article 9 Collateral in
which a security interest is perfected by filing a financing statement under the
Opinion State UCC.
G. The [Borrower] [relevant Subsidiary] is licensed under the laws of
the Opinion State to __________ [describe terms of license]; and license is in
full force and effect.
H. [AWI] is a party to [describe contract with Opinion State] (the
"Contract"). Although the Contract prohibits assignment by [AWI] of its rights
and obligations under the Contract, neither the Contract nor the laws of the
Opinion State prohibit the creator by AWI of a
<PAGE>
security interest in the Contract pursuant to the Guarantee and Collateral
Agreement, to the extent such security interest relates to money due or to
become due to AWI pursuant to the Contract.
I. The Mortgage listed on Schedule __(the "State Mortgage"):
A. constitutes a legal, valid and binding obligation of
_______________[mortgagor] enforceable against _______________ in
accordance with its terms;
B. is in proper form for recording;
C. complies as to form with all existing Requirements of Law; and
D. creates in favor of the Administrative Agent for the ratable
benefit of the Lenders a legal, valid and binding lien on the
real property and fixtures described in such State Mortgage,
enforceable as such against the Borrower and, when recorded in
the applicable office listed on Schedule __, all other Persons.
The facts that (a) the State Mortgage secures obligations arising
under a revolving line of credit and (b) the Revolving Credit Loans may from
time to time be repaid in full or in part and reborrowed in accordance with the
terms of the Credit Agreement will not result in a subordination of the liens of
any State Mortgage to any other lien on the real property and fixtures described
in such State Mortgage or otherwise impair the priority of the lien of such
State Mortgage.
J. The courts of the Opinion State will enforce those provisions in
the Guarantee and Collateral Agreement and the State Mortgages which provide
that the validity, construction and enforceability of such documents will be
governed by the laws of the State of New York, except that the courts of the
Opinion State may apply the internal law of the State to determine the
perfection and effect of perfection of the liens created under such documents
and the application of remedies in enforcing such liens with respect to property
located in the State.
The foregoing opinions may be subject to such qualifications, exceptions and
limitations as shall be reasonable and customary.
<PAGE>
III. OPINIONS OF COUNSEL IN STATES WITH LOTTERY CONTRACTS
Section 9-318(4) of the Uniform Commercial Code in effect in the State
of ____________ provides as follows:
Such provision of the State UCC is applicable to the provisions of the
Guarantee and Collateral Agreement whereby [AWI] grants a security interest (the
"Security Interest") in all Accounts and General Intangibles for money due or to
become due under the [describe Contract] (the "State Lottery Contract"). There
is no other provision of the laws of the State of _______ (including, without
limitation, any laws relating to gambling, gaming or lotteries) that conflicts
with such provision of the State UCC, as such provision applies to the grant by
[AWI] of the Security Interest, nor does such grant of the Security Interest
require any consent or authorization of, notice to, or filing or registration
with, any governmental authority of the State of __________. Accordingly,
insofar as the laws of the State of _______ are applicable, the Security
Interest is a valid and enforceable security interest in all right, title and
interest of [AWI] in Accounts and General Intangibles for money due and to
become due under the State Lottery Contract. Assuming that the chief executive
office of [AWI] is located in a jurisdiction other than the State of
___________, no filing or registration with any governmental authority of the
State of _______ is required under the laws of the State of ________ to perfect
the Security Interest.
<PAGE>
IV. OPINIONS OF AIRCRAFT COUNSEL
A. the Agreement, as supplemented by the Agreement Supplement, creates
a duly perfected first priority security interest in the aircraft in favor of
the Agent, it being understood that no opinion is herein expressed as to the
validity, priority or enforceability of such security interest under local law
or as to the recognition of the perfection of such security interest as against
third parties in any legal proceeding outside the United States;
B. none of the Agreement, the Agreement Supplement, or the Security
Assignment are required to be refiled with the FAA or filed or recorded in any
other place within the United States in order to perfect, or maintain the
perfection of the security interest in the Aircraft (insofar as such assignment
affects an interest covered by the recording system established by the FAA
pursuant to 49 U.S.C. Section 44107), all as created by the Agreement, as
supplemented by the Agreement Supplement, and the Security Assignment; and
C. no authorization, approval, consent, license or order of, or
registration with, or the giving of notice to, the FAA is required for the valid
authorization, delivery and performance of the Agreement, as supplemented by the
Agreement Supplement, or the Security Assignment, except for such filings as are
referred to above.
<PAGE>
EXHIBIT G-1
TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$5,000,000 New York, New York
October 14, 1998
FOR VALUE RECEIVED, the undersigned, POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
LaSalle National Bank (the "Lender") or its registered assigns at the Payment
Office specified in the Credit Agreement (as hereinafter defined) in lawful
money of the United States and in immediately available funds, the principal
amount of (a) FIVE MILLION DOLLARS ($5,000,000), or, if less, (b) the unpaid
principal amount of the Tranche [A] Term Loan made by the Lender pursuant to
Section 2.1 of the Credit Agreement. The principal amount shall be paid in the
amounts and on the dates specified in Section 2.3 of the Credit Agreement. The
Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.13 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of the
Tranche [A] Term Loan and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof to
another Type, each continuation of all or a portion thereof as the same Type
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto. Each such endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed. The failure to make any such
endorsement or any error in any such endorsement shall not affect the
obligations of the Borrower in respect of the Tranche [A] Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit
Agreement dated as of October 9, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
Lender, the other banks and financial institutions from time to time parties
thereto, Lehman Commercial Paper Inc., as Administrative Agent, Lehman Brothers,
Inc., as Arranger and Lehman Commercial Paper Inc., as Syndication Agent, and
Canadian Imperial Bank of Commerce, as Documentation Agent, (b) is subject to
the provisions
<PAGE>
of the Credit Agreement and (c) is subject to optional andmandatory prepayment
in whole or in part as provided in the Credit Agreement. This Note is secured
and guaranteed as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE
CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
POWERHOUSE TECHNOLOGIES INC.
By: /S/ Susan J. Carstensen
---------------------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
<PAGE>
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
Amount of Amount of Base
Amount Principal of Base Rate Loans Unpaid Principal
Amount of Base Converted to Rate Loans Converted to Balance of Base Notation
Date Rate Loans Base Rate Loans Repaid Eurodollar Loans Rate Loans Made By
---- ---------- --------------- ------ ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ========== =============== ====== ================ ========== =======
</TABLE>
<PAGE>
Schedule B
to Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of
Interest Period Eurodollar Unpaid
Amount and Eurodollar Amount of Loans Principal
Amount of Converted to Rate with Principal of Converted to Balance of
Eurodollar Eurodollar Respect Eurodollar Base Rate Eurodollar Notation
Date Loans Loans Thereto Loans Repaid Loans Loans Made By
---- ----- ----- ------- ------------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ===== ===== ======= ============ ===== ===== =======
</TABLE>
<PAGE>
TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$6,666,666.66 New York, New York
October 14, 1998
FOR VALUE RECEIVED, the undersigned, POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
CIBC Inc. (the "Lender") or its registered assigns at the Payment Office
specified in the Credit Agreement (as hereinafter defined) in lawful money of
the United States and in immediately available funds, the principal amount of
(a) SIX MILLION, SIX HUNDRED AND SIXTY-SIX THOUSAND, SIX HUNDRED AND SIXTY-SIX
DOLLARS AND SIXTY-SIX CENTS ($6,666,666.66), or, if less, (b) the unpaid
principal amount of the Tranche [A] Term Loan made by the Lender pursuant to
Section 2.1 of the Credit Agreement. The principal amount shall be paid in the
amounts and on the dates specified in Section 2.3 of the Credit Agreement. The
Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.13 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of the
Tranche [A] Term Loan and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof to
another Type, each continuation of all or a portion thereof as the same Type
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto. Each such endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed. The failure to make any such
endorsement or any error in any such endorsement shall not affect the
obligations of the Borrower in respect of the Tranche [A] Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit
Agreement dated as of October 9, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
Lender, the other banks and financial institutions from time to time parties
thereto, Lehman Commercial Paper Inc., as Administrative Agent, Lehman Brothers,
Inc., as Arranger and Lehman Commercial Paper Inc., as Syndication Agent, (b) is
subject to the provisions
<PAGE>
of the Credit Agreement and (c) is subject to optional andmandatory prepayment
in whole or in part as provided in the Credit Agreement. This Note is secured
and guaranteed as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE
CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
POWERHOUSE TECHNOLOGIES INC.
By: /S/ Susan J. Carstensen
---------------------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
<PAGE>
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
Amount of Amount of Base
Amount Principal of Base Rate Loans Unpaid Principal
Amount of Base Converted to Rate Loans Converted to Balance of Base Notation
Date Rate Loans Base Rate Loans Repaid Eurodollar Loans Rate Loans Made By
---- ---------- --------------- ------ ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ========== =============== ====== ================ ========== =======
</TABLE>
<PAGE>
Schedule B
to Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of
Interest Period Eurodollar Unpaid
Amount and Eurodollar Amount of Loans Principal
Amount of Converted to Rate with Principal of Converted to Balance of
Eurodollar Eurodollar Respect Eurodollar Base Rate Eurodollar Notation
Date Loans Loans Thereto Loans Repaid Loans Loans Made By
---- ----- ----- ------- ------------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ===== ===== ======= ============ ===== ===== =======
</TABLE>
<PAGE>
EXHIBIT G-2
REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$10,000,000 New York, New York
October 14, 1998
FOR VALUE RECEIVED, the undersigned, POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
LaSalle National Bank (the "Lender") or its registered assigns at the Payment
Office specified in the Credit Agreement (as hereinafter defined) in lawful
money of the United States and in immediately available funds, on the Revolving
Credit Termination Date the principal amount of (a) TEN MILLION DOLLARS
($10,000,000), or, if less, (b) the aggregate unpaid principal amount of all
Revolving Credit Loans made by the Lender to the Borrower pursuant to Section
2.4 of the Credit Agreement. The Borrower further agrees to pay interest in like
money at such Payment Office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.13 of the
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
or any error in any such endorsement shall not affect the obligations of the
Borrower in respect of any Revolving Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of October 9, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto, Lehman Brothers, Inc., as Arranger, Lehman Commercial
Paper Inc., as Syndication Agent and Canadian Imperial Bank of Commerce, as
Documentation Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been
<PAGE>
2
granted, the nature and extent of the security and the guarantees, the terms and
conditions uponwhich the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE
CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
POWERHOUSE TECHNOLOGIES, INC.
By: /S/ Susan J. Carstensen
------------------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
<PAGE>
Schedule A
to Revolving Credit Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
Amount of Amount of Base
Amount Principal of Base Rate Loans Unpaid Principal
Amount of Base Converted to Rate Loans Converted to Balance of Base Notation
Date Rate Loans Base Rate Loans Repaid Eurodollar Loans Rate Loans Made By
---- ---------- --------------- ------ ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
==== ========== =============== ====== ================ ========== =======
</TABLE>
<PAGE>
Schedule B
to Revolving Credit Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of
Interest Period Eurodollar Unpaid
Amount and Eurodollar Amount of Loans Principal
Amount of Converted to Rate with Principal of Converted to Balance of
Eurodollar Eurodollar Respect Eurodollar Base Rate Eurodollar Notation
Date Loans Loans Thereto Loans Repaid Loans Loans Made By
---- ----- ----- ------- ------------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ===== ===== ======= ============ ===== ===== =======
</TABLE>
<PAGE>
REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$13,333,333.34 New York, New York
October 14, 1998
FOR VALUE RECEIVED, the undersigned, POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
CIBC Inc. (the "Lender") or its registered assigns at the Payment Office
specified in the Credit Agreement (as hereinafter defined) in lawful money of
the United States and in immediately available funds, on the Revolving Credit
Termination Date the principal amount of (a) THIRTEEN MILLION, THREE HUNDRED AND
THIRTY-THREE THOUSAND, THREE HUNDRED AND THIRTY-THREE DOLLARS AND THIRTY-THREE
CENTS ($1,333,333.33), or, if less, (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by the Lender to the Borrower pursuant to
Section 2.4 of the Credit Agreement. The Borrower further agrees to pay interest
in like money at such Payment Office on the unpaid principal amount hereof from
time to time outstanding at the rates and on the dates specified in Section 2.13
of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
or any error in any such endorsement shall not affect the obligations of the
Borrower in respect of any Revolving Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of October 9, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto, Lehman Commercial Paper Inc., as Administrative Agent,
Lehman Brothers, Inc., as Arranger, Lehman Commercial Paper Inc., as Syndication
Agent and Canadian Imperial Bank of Commerce, as Documentation Agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to optional
and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been
<PAGE>
2
granted, the nature and extent of the security and the guarantees, the terms and
conditions uponwhich the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE
CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
POWERHOUSE TECHNOLOGIES, INC.
By: /S/ Susan J. Carstensen
------------------------------------------
Name: Susan J. Carstensen
Title: CFO and Treasurer
<PAGE>
Schedule A
to Revolving Credit Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
Amount of Amount of Base
Amount Principal of Base Rate Loans Unpaid Principal
Amount of Base Converted to Rate Loans Converted to Balance of Base Notation
Date Rate Loans Base Rate Loans Repaid Eurodollar Loans Rate Loans Made By
---- ---------- --------------- ------ ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
==== ========== =============== ====== ================ ========== =======
</TABLE>
<PAGE>
Schedule B
to Revolving Credit Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of
Interest Period Eurodollar Unpaid
Amount and Eurodollar Amount of Loans Principal
Amount of Converted to Rate with Principal of Converted to Balance of
Eurodollar Eurodollar Respect Eurodollar Base Rate Eurodollar Notation
Date Loans Loans Thereto Loans Repaid Loans Loans Made By
---- ----- ----- ------- ------------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
==== ===== ===== ======= ============ ===== ===== =======
</TABLE>
<PAGE>
EXHIBIT H
FORM OF
PREPAYMENT OPTION NOTICE
Attention of [ ]
Telecopy No. [ ]
[Date]
Ladies and Gentlemen:
The undersigned, LEHMAN COMMERCIAL PAPER INC., as administrative agent
(in such capacity, the "Administrative Agent") for the Lenders, refers to the
Credit Agreement, dated as of October 9, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among POWERHOUSE
TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), the several banks
and other financial institutions from time to time parties to this Agreement
(the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in such
capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent
(in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (in such capacity, the "Administrative Agent") and
CANADIAN IMPERIAL BANK OF COMMERCE., as Documentation Agent (in such capacity,
the "Documentation Agent"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Administrative Agent hereby gives notice of an offer of
prepayment made by the Borrower pursuant to Section 2.10(d) of the Credit
Agreement of the Tranche B Prepayment Amount. Amounts applied to prepay the
Tranche B Term Loans shall be applied pro rata to the Tranche B Term Loan held
by you. The portion of the prepayment amount to be allocated to the Tranche B
Term Loan held by you and the date on which such prepayment will be made to you
(should you elect to receive such prepayment) are set forth below:
(A) Total Tranche B Term Loan Prepayment Amount __________
(B) Portion of Tranche B Term Loan Prepayment
Amount to be received by you __________
(C) Prepayment Date (10 Business Days after the
date of this Prepayment Option Notice) __________
IF YOU DO NOT WISH TO RECEIVE ALL OF THE TRANCHE B TERM LOAN
PREPAYMENT AMOUNT TO BE ALLOCATED TO YOU ON THE MANDATORY PREPAYMENT DATE
INDICATED IN PARAGRAPH (B) ABOVE, please sign this notice in the space provided
below and indicate the percentage of the Tranche B Term Loan Prepayment Amount
otherwise payable which you do not wish to receive. Please
<PAGE>
return this notice as so completed via telecopy to the attention of
[___________________] at ____________________, no later than [10:00] a.m., New
York City time, on the Prepayment Date, at Telecopy No. [________________]. IF
YOU DO NOT RETURN THIS NOTICE, YOU WILL RECEIVE 100% OF THE TRANCHE B TERM LOAN
PREPAYMENT ALLOCATED TO YOU ON THE MANDATORY PREPAYMENT DATE.
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: ________________________________________
Name:
Title:
[Lender]
By: ________________________________________
Name:
Title:
Percentage of Tranche B
Prepayment Amount
Declined: ________%
<PAGE>
EXHIBIT I
FORM OF EXEMPTION CERTIFICATE
Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among POWERHOUSE TECHNOLOGIES, INC., a Delaware corporation (the
"Borrower"), the several banks and other financial institutions from time to
time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor
and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC.,
as syndication agent (in such capacity, the "Syndication Agent"), and LEHMAN
COMMERCIAL PAPER INC., as administrative agent (in such capacity, the
"Administrative Agent") and CANADIAN IMPERIAL BANK OF COMMERCE., as
Documentation Agent (in such capacity, the "Documentation Agent"). Capitalized
terms used herein that are not defined herein shall have the meanings ascribed
to them in the Credit Agreement. ______________________ (the "Non-U.S. Lender")
is providing this certificate pursuant to subsection 2.18(d) of the Credit
Agreement. The Non-U.S. Lender hereby represents and warrants that:
1. The Non-U.S. Lender is the sole record and beneficial owner of the Loans or
the obligations evidenced by Note(s) in respect of which it is providing this
certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). In
this regard, the Non-U.S. Lender further represents and warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other legal
requirements as a bank in any jurisdiction; and
(b) the Non-U.S. Lender has not been treated as a bank for purposes of
any tax, securities law or other filing or submission made to any
Governmental Authority, any application made to a rating agency or
qualification for any exemption from tax, securities law or other
legal requirements;
3. The Non-U.S. Lender is not a 10-percent shareholder of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code; and
4. The Non-U.S. Lender is not a controlled foreign corporation
receiving interest from a related person within the meaning of Section
881(c)(3)(C) of the Code.
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate.
[NAME OF NON-U.S. LENDER]
By:_________________________________________
Name:
Title:
Date: ____________________
<PAGE>
EXHIBIT J
FORM OF LENDER ADDENDUM
Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies, Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as Arranger, Lehman Commercial Paper Inc., as Syndication Agent and Lehman
Commercial Paper Inc., as Administrative Agent, and Canadian Imperial Bank of
Commerce., as Documentation Agent. Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
Upon execution and delivery of this Lender Addendum by the parties
hereto as provided in Section 10.17 of the Credit Agreement, the undersigned
hereby becomes a Lender thereunder having the Commitments set forth in Schedule
1 hereto, effective as of the Closing Date.
THIS LENDER ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Lender Addendum may be executed by one or more of the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
Delivery of an executed signature page hereof by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Lender
Addendum to be duly executed and delivered by their proper and duly authorized
officers as of this ____ day of ____, 1998.
[ NAME OF LENDER ]
By: ________________________________________
Name:
Title:
Accepted and agreed:
POWERHOUSE TECHNOLOGIES, INC.
By: __________________________
Name:
Title:
<PAGE>
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent
By: ____________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent
By: ____________________________
Name:
Title:
<PAGE>
Schedule 1
COMMITMENTS AND NOTICE ADDRESS
Name and Notice Revolving Tranche A Term Tranche B Term
Address of Lender Credit Commitment Loan Commitment Loan Commitment
- ----------------- ----------------- --------------- ---------------
<PAGE>
EXHIBIT K
FORM OF REVOLVING CREDIT
COMMITMENT INCREASE SUPPLEMENT
Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies, Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as Arranger, Lehman Commercial Paper Inc., as Syndication Agent, Lehman
Commercial Paper Inc., as Administrative Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
The Increasing Lender identified on Schedule l hereto (the "Increasing
Lender"), the Administrative Agent and the Borrower agree as follows:
i. The Increasing Lender hereby irrevocably increases its Revolving
Credit Commitment to the Borrower by the amount set forth on Schedule 1 hereto
(the "Increased Commitment") pursuant to Section 2.8(c) of the Credit Agreement.
From and after the Effective Date (as defined below) the Increasing Lender will
be a Lender under the Credit Agreement with respect to the Increased Commitment
as well as its existing Revolving Credit Commitment under the Credit Agreement.
ii. The Administrative Agent (a) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto. The Borrower, upon request by the
Increasing Lender, in accordance with Section 2.6(e) will issue a Note or Notes
payable to the Increasing Lender and in amounts which reflect the aggregate
Revolving Credit Commitment of the Increasing Lender after giving effect to this
Increase Supplement.
iii. The Increasing Lender (a) represents and warrants that it is
legally authorized to enter into this Increase Supplement; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 6.1 thereof (or, if no
such financial statements have been delivered, copies of the financial
statements delivered pursuant to Section 4.1 thereof), each other Loan Document
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Increase Supplement; (c)
agrees that it will, independently and without reliance upon any Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such
<PAGE>
powers and discretion under the Credit Agreement, the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agents by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
2.18(e) of the Credit Agreement.
iv. The effective date of this Increase Supplement shall be the
Effective Date of the Increased Commitment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this Increase Supplement by each
of the Increasing Lender and the Borrower, it will be delivered to the
Administrative Agent for acceptance and recording by it pursuant to the Credit
Agreement, effective as of the Effective Date (which shall not, unless otherwise
agreed to by the Administrative Agent, be earlier than five Business Days after
the date of such acceptance and recording by the Administrative Agent).
v. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Increased Commitment (including payments of principal, interest, fees and other
amounts) to the Increasing Lender for amounts which have accrued on and
subsequent to the Effective Date.
vi. From and after the Effective Date, the Increasing Lender shall be
a party to the Credit Agreement and, to the extent provided in this Increase
Supplement, have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof.
vii. This Increase Supplement shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Increase
Supplement to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Increasing Lender Supplement
Name of Increasing Lender: ___________________________________________
Effective Date of Increased Commitment: ______________________________
Principal Total Amount of Commitment
Amount of of Increasing Lender
Increased Commitment: (including Increased Commitment):
- --------------------- ---------------------------------
$____________________ $________________________________
[INCREASING LENDER] POWERHOUSE TECHNOLOGIES, INC.
By:__________________________ By:__________________________________
Name: Name:
Title: Title:
Accepted:
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT L
FORM OF
NEW LENDER SUPPLEMENT
Reference is made to the Credit Agreement dated as of October 9, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies, Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as Arranger, Lehman Commercial Paper Inc., as Syndication Agent, Lehman
Commercial Paper Inc., as Administrative Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
The New Lender identified on Schedule l hereto (the "New Lender"), the
Administrative Agent and the Borrower agree as follows:
viii. The New Lender hereby irrevocably makes a Revolving Credit
Commitment to the Borrower of the amount set forth on Schedule 1 hereto (the
"New Commitment") pursuant to Section 2.8(d) of the Credit Agreement. From and
after the Effective Date (as defined below) the New Lender will be a Lender
under the Credit Agreement with respect to the New Commitment.
ix. The Administrative Agent (a) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto. The Borrower, upon request by the
New Lender, in accordance with Section 2.6(e) will issue a Note or Notes payable
to the New Lender and in amounts which reflect the aggregate Revolving Credit
Commitment of the New Lender after giving effect to this New Lender Supplement.
x. The New Lender (a) represents and warrants that it is legally
authorized to enter into this New Lender Supplement; (b) represents that it is a
financial institution regulated by a Governmental Authority of the United States
of America or a State thereof, or is a wholly-owned subsidiary of or is managed
by such a financial institution; (c) confirms that it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 6.1 thereof (or, if no such financial statements
have been delivered, copies of the financial statements delivered pursuant to
Section 4.1 thereof), each other Loan Document and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this New Lender Supplement; (d) agrees that it will,
independently and without reliance upon any Agent or any Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement or any other instrument or document furnished pursuant
hereto or thereto; (e) appoints and authorizes the Agents to take such action as
agent on its behalf and to exercise such powers and discretion under
<PAGE>
the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto as are delegated to the Agents by
the terms thereof, together with such powers as are incidental thereto; and (f)
agrees that it will be bound by the provisions of the Credit Agreement and will
perform in accordance with its terms all the obligations which by the terms of
the Credit Agreement are required to be performed by it as a Lender including,
if it is organized under the laws of a jurisdiction outside the United States,
its obligation pursuant to subsection 2.18(d) of the Credit Agreement.
xi. The effective date of this New Lender Supplement shall be the
Effective Date of the New Commitment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this New Lender Supplement by each
of the New Lender and the Borrower, it will be delivered to the Administrative
Agent for acceptance and recording by it pursuant to the Credit Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed to
by the Administrative Agent, be earlier than five Business Days after the date
of such acceptance and recording by the Administrative Agent).
xii. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the New
Commitment (including payments of principal, interest, fees and other amounts)
to the New Lender for amounts which have accrued on and subsequent to the
Effective Date.
xiii. From and after the Effective Date, the New Lender shall be a
party to the Credit Agreement and, to the extent provided in this New Lender
Supplement, have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof.
xiv. This New Lender Supplement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this New Lender
Supplement to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to New Lender Supplement
Name of New Lender:_________________________________________
Effective Date of New Commitment:_________________________________
Principal Amount of New Commitment: $________________________________
[NEW LENDER] POWERHOUSE TECHNOLOGIES, INC.
By:______________________________ By:________________________________
Name: Name:
Title: Title:
Accepted:
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT M
PARTICIPATION AGREEMENT
This Participation Agreement is entered into as of October 8th, 1998
between LEHMAN COMMERCIAL PAPER, INC., a Delaware corporation ( "Participant")
and U.S. BANK NATIONAL ASSOCIATION , a national banking association ("U.S.
Bank").
Preliminary Statement
U.S. Bank, as the "Administrative Bank" and as the sole "Bank" party
thereto, has entered into a Credit Agreement, dated as of February 16, 1995
(together with any and all other agreements, documents, instruments, whether
heretofore or hereafter executed and delivered by the Borrower or any other
obligor in connection with the Credit Agreement and as such documents may have
been or may hereafter be amended, restated or modified from time to time, the
"U.S Bank Credit Agreement") with Powerhouse Technologies, Inc., a Delaware
corporation f/k/a Video Lottery Technologies, Inc. (the "Borrower") pursuant to
which U.S. Bank has made loans (collectively, the "U.S. Bank Loans" and
individually, a "U.S. Bank Loan") and issued the letters of credit described on
Schedule A attached hereto and incorporated herein by reference (collectively,
the "U.S. Bank Letters of Credit" and individually, a "U.S Bank Letter of
Credit").
In connection with the issuance of a U.S. Bank Letter of Credit, the
Borrower executed and delivered to U.S. Bank an Application and Agreement for
Standby Letter of Credit described on said Schedule A with respect to such U.S.
Bank Letter of Credit (collectively, the "U.S. Bank L/C Agreements" and
individually, a "U.S Bank L/C Agreement").
The Participant, as Agent and a "Lender" party thereto, has entered into a
Credit Agreement, dated as of October 9, 1998 (together with any and all other
agreements, documents, instruments, whether heretofore or hereafter executed and
delivered by the Borrower or any other obligor in connection with such Credit
Agreement and as such documents may have been or may hereafter be amended,
restated or modified from time to time, the "Lehman Credit Agreement") with the
Borrower pursuant to which the Participant and the other "Lender" parties
thereto have agreed to make loans or other financial accommodations to the
Borrower (collectively, the "Lehman Loans" and individually, a "Lehman Loan")
for the purpose of, among other things, refinancing the U.S. Bank Loans.
The Borrower has requested that U.S. Bank terminate the U.S. Bank Credit
Agreement but that U.S. Bank maintain the U.S. Bank Letters of Credit
outstanding without requiring the Borrower to post cash collateral for the
entire amount available to be drawn on the U.S. Bank Letters of
As a condition precedent to doing so, U.S. Bank has required that:
1
<PAGE>
(1) the Borrower execute and deliver to U.S. Bank the Amendment No. 1
to each U.S. Bank L/C Agreement described in said Schedule A pursuant to
which, among other things, the Borrower and U.S. Bank have agreed that such
U.S. Bank L/C Agreement: (a) shall survive the termination of the U.S. Bank
Credit Agreement and the "Loan Documents" described therein; and (b) sets
forth the Borrower's covenants and obligations with respect to the U.S.
Bank Letter of Credit issued pursuant thereto; and
(2) the Borrower cause the Participant to execute and deliver to U.S.
this Agreement.
To induce U.S. Bank to terminate the U.S. Bank Credit Agreement and the
other "Loan Documents" described therein, other than the U.S. Bank L/C
Agreements, and to release its collateral, other than cash collateral (the
"Collateral") securing the Borrower's payment of its obligations under the U.S.
Bank L/C Agreements (collectively the "Letter of Credit Obligations") prior to
the payment in full of the Letter of Credit Obligations or discharge thereof,
Participant has agreed to purchase a 100% participation interest in the U.S.
Bank Letters of Credit and in the Letter of Credit Obligations relating to the
U.S. Bank Letters of Credit.
In consideration of the premises and the mutual covenants contained herein,
U.S. Bank and the Participant hereby covenant and agree as follows:
1. Purchase and Sale of Participation Interests.
(a) Concurrently with the execution hereof, U.S. Bank shall be deemed
to have sold and transferred to Participant, and Participant shall be
deemed irrevocably and unconditionally to have purchased and received from
U.S. Bank, without recourse or warranty, an undivided interest (the
"Participation") equal to 100% (such percentage is hereinafter called the
Participant's "Percentage") in: (i) all U.S. Bank Letters of Credit and the
Letter of Credit Obligations arising therefrom or relating thereto
(collectively, the "Credit"); and (ii) all existing and future property and
interests in property of the Borrower securing payment and performance of
such Letter of Credit Obligations (the "Collateral").
(b) Except as otherwise provided in Section 3 or 4, the Participation
includes a pro rata interest, equal to the Participant's Percentage of all
amounts ("Payments") which are actually received by U.S. Bank or the
Participant from, or for the account of, the Borrower on account of or with
respect to the Credit, whether from: (i) the Borrower: (ii) the Collateral;
or (iii) any other source, including, without limitation, recovery from
litigation.
(c) The relationship between the Participant and U.S. Bank is and
shall be that of a purchaser and seller of a property interest (i.e., an
outright, partial assignment of an interest in the Credit and the
Collateral) and not a creditor-debtor relationship. Accordingly, U.S. Bank
shall hold possession of and legal title to the U.S. Bank L/C Agreements
and all of the Participant's rights with respect to the Credit and the
Collateral shall be held and
2
<PAGE>
exercised by U.S. Bank in its own name subject to the terms of this
Agreement, but all such action by U.S. Bank shall, to the extent of the
Participation, be taken by U.S. Bank as trustee for the Participant, and
all Payments, Collateral and documents which at any time may come into U.S.
Bank's possession shall at all times be held by U.S. Bank in trust and as
agent for the Participant, to the extent of the Participation; provided,
that, upon Participant's payment of its purchase price for its
Participation in a demand for payment under a U.S. Bank Letter of Credit in
accordance with Section 2 hereof, U.S. Bank shall be deemed to have
assigned to Participant, without recourse or warranty, the Letter of Credit
Obligations arising from U.S. Bank's payment of such demand for payment and
Participant shall directly collect such Letter of Credit Obligations from
Borrower and apply such collections to the payment of such Letter of Credit
Obligations without U.S. Bank being the recipient of, or the intended
beneficiary of, such collection or a transferee from Participant of any
portion of such collection except to the extent that Participant has
distributed a portion of such collection to U. S. Bank in accordance with
Section 3 hereof. Participant shall indemnify and hold harmless U.S. Bank
from and against any and all claims, liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time
(including, without limitation, at any time following the payment of any of
the Letter of Credit Obligations) be imposed on, incurred by or asserted
against U.S. Bank in any way relating to or arising out of Participant's
collection of any Letter of Credit Obligations except to the extent that
Participant has distributed a portion of such collection to U. S. Bank in
accordance with Section 3 hereof. All of Participant's indemnification
obligations provided for in this subsection (c) shall survive the
termination of this Agreement.
(d) Upon Participant's request and at Participant's sole cost and
expense including, without limitation, payment of U.S. Bank's reasonable
attorney's fees and legal expenses, U.S. Bank shall execute and deliver to
Participant a separate assignment of any Letter of Credit Obligation which
is deemed to have been assigned to Participant pursuant to Section 1(c)
hereof.
2. Funding of Participation.
(a) U.S. Bank shall promptly notify Participant of each demand for
payment under a U. S. Bank Letter of Credit, the amount thereof (
including, without, limitation, all of customary fees, charges or expenses
which U.S. Bank may assess in connection with such payment), the date on
which such payment is to be made and the amount of Participant's Percentage
thereof. By not later than 12:00 noon. (Minneapolis time) on the date on
which such payment is to be made by U.S. Bank (provided that Participant
shall have received notice from U.S. Bank of the amount of such payment not
later than 10:00 a.m. (New York time) on the date of such payment,
Participant shall pay to U.S. Bank in immediately available funds as and
for the purchase price of Participant's Participation therein,
Participant's Percentage of such demand for payment. Participant's
obligation to make such amounts available to U.S. Bank shall be irrevocable
and shall not be subject to any
3
<PAGE>
qualification or exception whatsoever and shall be made in accordance with
the terms and conditions of this Agreement under all circumstances ,
provided, that Participant shall not be required to reimburse U.S. Bank
hereunder for any amount for which the Borrower would not be required to
reimburse U.S. Bank pursuant to the relevant U.S. Bank L/C Agreement.
(b) If and to the extent Participant shall not have made such amount
available to U.S. Bank on any such date, Participant agrees, upon demand,
to pay interest on such amount to U.S. Bank for the account of U.S. Bank
for each day from and including the date on which such payment was to be
made to but excluding the date such payment is made at a rate per annum
equal to the rate payable equal to the Reference Rate plus 2.00 % per
annum.
(c) Participant agrees with U.S. Bank that Participant's purchase of
its Participation shall be with its own funds and not with the funds of the
Borrower and Participant shall indemnify and hold harmless U.S. Bank from
and against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may at any time (including, without
limitation, at any time following the payment of any of the Letter of
Credit Obligations) be imposed on, incurred by or asserted against U.S.
Bank in any way relating to or arising out of Participant's failure to use
its own funds to purchase its Participation. All of Participant's
indemnification obligations provided for in this subsection (c) shall
survive the termination of this Agreement.
(d) U.S. Bank and Participant agree that U.S. Bank shall not be
required to apply any Collateral to reduce the Letter of Credit Obligations
when calculating the amount of Participant's purchase price and that U.S.
Bank may retain all such Collateral until the Participant has purchased its
Participation in all of the Letter of Credit Obligations arising from, or
relating to the U. S. Bank Letters of Credit , whereupon U.S. Bank shall
deliver such Collateral to Participant in the form held by U.S. Bank,
without recourse or warranty , provided, that when the aggregate amount of
the Letter of Credit Obligations has been reduced to an amount equal to or
less than the amount of cash collateral held by U.S. Bank in respect of the
Letter of Credit Obligations, U.S. Bank will apply such cash collateral
toward payment of the Letter of Credit Obligations before making any demand
on Participant hereunder.
3. Allocation of Payments.
(a) Distributions with respect to the Credit and the Participation
shall be made and payable only out of Payments actually received in good
funds by U.S. Bank or, if the Payment has been collected by Participant in
accordance with the proviso clause to Section 1(c), by Participant.
4
<PAGE>
(b) It is understood and agreed that the Participant shall have no
interest in, and shall not be entitled to receive any part of the customary
fees, charges or expenses which U.S. Bank may assess in connection with the
issuance, extension (but only if such extennsion is approved by the
Participant in accordance with Section 7 hereof), amendment or payment of
any U.S. Bank Letter of Credit in accordance with any U.S. Bank L/C
Agreement (all such fees, charges and expenses being hereinafter
collectively referred to as "Fees").
(c) All Payments received by U.S. Bank or Participant, as the case may
be, shall be retained by the recipient or distributed to the non-recipient
party, as applicable, and applied by the parties in the following order
unless a Payment is required to be otherwise applied by agreement,
direction of the payor or law: (1) first, to Fees, which shall be retained
by U.S. Bank or, if Participant is the recipient of such Payment,
distributed to U.S.. Bank, (2) second, to Extraordinary Expenses (as
defined in Section 10 hereof), which shall be distributed to the
Participant to the extent of its Percentage thereof provided that
Participant is in compliance with its obligations under Section 10 hereof,
(3) third, to the outstanding Letter of Credit Obligations, which shall be
distributed to the Participant provided the Participant is in compliance
with its obligations under Section 2(a) hereof; provided, that, U. S. Bank
may set off against any amount distributable to Participant the amount, if
any, which Participant is obligated to pay to U.S. Bank under this
Agreement.
(d) If any of the Payments received by, or distributed to, U.S. Bank
are later returned or repaid by U.S. Bank to the Borrower or its
representative or successor in interest, whether by court order, settlement
or otherwise, the Participant shall, upon notice U.S. Bank, immediately pay
to U.S. Bank the Participant's Percentage of all Payments so returned or
repaid together with any interest which U.S. Bank may be required to pay in
connection therewith. All of Participant's obligations provided for in this
subsection (d) shall survive the termination of this Agreement.
4. Allocations of Fees and Letter of Credit Commission Between Participant
and U.S. Bank.
(a) As consideration for U.S. Bank's expenses and efforts in servicing
the U.S. Bank L/C Agreement, the Participant agrees that the Participant
does not own and shall have no claim to any Fees.
(b) On the date hereof, U.S. Bank agrees to pay the Participant an
amount equal to $0.00 as Participant's share of the "Letter of Credit
Commission" previously paid by the Borrower to U.S. Bank pursuant to the
U.S. Bank Credit Agreement. U.S. Bank shall retain as its share of such
Letter of Credit Commission and as compensation for its services and the
costs and expenses herein agreed to be borne by it, the difference, if any,
between the total of such Letter of Credit Commission received by U.S. Bank
and the share thereof allocated and paid to the Participant in accordance
with this Section 4(b).
5
<PAGE>
5. Access to Information; Independent Investigation.
The Participant acknowledges that the Participant has independently, and
without reliance upon any representations of U.S. Bank, and based on (i) the
financial information provided to the Participant by the Borrower, (ii) various
information provided to the Participant by the Borrower, and (iii) such other
financial statements, documents and information as the Participant deemed
appropriate, made and relied upon its own credit analysis and judgment to
execute this Agreement and purchase the Participation. The Participant also
acknowledges that it will, independently and without reliance upon U.S. Bank,
and based on such financial statements, documents and information as the
Participant deems appropriate at the time, continue to make and rely upon its
own credit decision in taking or not taking action under this Agreement.
6. Documents and Other Agreements Regarding Administration of the Loans.
In order to enable U.S. Bank to better administer and enforce the U.S. Bank
L/C Agreements on its own behalf, and as trustee for the Participant, and as an
inducement to U.S. Bank to enter into this Agreement and to sell the
Participation to the Participant hereunder, the Participant acknowledges and
agrees that it is in the Participant's best interest that: (i) U.S. Bank hold
for itself, and as bailee for the Participant, all executed original copies of
the U.S. Bank L/C Agreements, at its offices at U.S. Bank Place, 601 Second
Avenue South, Minneapolis, Minnesota 55402-4302 or such other office of U.S.
Bank as U.S. Bank shall determine to be appropriate; (ii) U.S. Bank not be
required to segregate from its own funds Payments allocable to te Participant
hereunder; and (iii)U.S. Bank not be required to maintain separate, internal
records with respect to the Participant's Participation (other than
Participation Reports). The agreements of the Participant in the preceding
sentence notwithstanding, all Payments and Collateral which are not for any
reason disbursed to, or applied for the benefit of, the Participant in
accordance with Sections 3 or 4 hereof, but which are otherwise allocable to the
Participant hereunder, will be held by U.S. Bank as agent and in trust for the
Participant, subject at all times to the Participant's rights hereunder. Upon
written notice from the Participant, U.S. Bank will permit the Participant's
agents, at any reasonable time during business hours, to examine the copies of
the U.S. Bank L/C Agreements which are in U.S. Bank's possession and U.S. Bank's
books and records relating to the U.S. Bank Letters of Credit and U.S. Bank
will, upon the Participant's request, and at the Participant's expense, furnish
to the Participant copies of such documents and agreements relating to the U.S.
Bank Letters of Credit as U.S. Bank may have in its possession.
7. U.S. Bank's Representations, Duty of Care and Responsibility to
Participant.
The Participant accepts the full risk of non-payment of the Participation
and agrees that U.S. Bank shall not be responsible for the performance or
observance by the Borrower of any of the terms, covenants or conditions of the
U.S. Bank L/C Agreements or for the inspection or policing of any of the
Collateral. The Participant specifically acknowledges that U.S. Bank has made no
warranty or representation to the Participant with respect to the due execution,
legality, accuracy, authenticity, completeness, validity, enforceability or
collectibility of the U.S. Bank L/C Agreements (including,
6
<PAGE>
without limitation, any warranty or representation of the Borrower contained
therein) or the U.S. Bank Letters of Credit, or with respect to the solvency or
financial condition of the Borrower or the future existence or value of any of
the Collateral. Notwithstanding anything to the contrary contained herein or in
any law applicable generally to transactions of the type evidenced by this
Agreement, the Participant and U.S. Bank agree that U.S. Bank shall be obligated
to manage and supervise the Credit and the U.S. Bank L/C Agreements only in
accordance with its usual practices, modified from time to time as it deems
appropriate under the circumstances, and U.S. Bank shall be entitled to take all
actions with respect to the Credit as if there were no participants and as if
U.S. Bank were solely involved in the Credit and the U.S. Bank L/C Agreements
except that U.S. Bank agrees that it will: (i) consult with Participant prior to
agreeing to amend, modify or waive any material term or condition of any U.S.
Bank Letter of Credit; and (ii) not agree, without obtaining Participant's prior
written consent , to any amendment, modification or waiver of the U.S. Bank L/C
Agreements, any U.S. Bank Letter of Credit or any Letter of Credit Obligation
which would reduce the principal of, or rate of interest on, any Letter of
Credit Obligation or postpone the date fixed for the payment thereof or which
would extend the expiry date of any U.S. Bank Letter of Credit or would permit
any drawing in excess of the stated amount of the applicable U.S. Bank Letter of
Credit. The Participant further agrees that U.S. Bank shall not be liable to the
Participant under any circumstances except for actual losses, if any, suffered
by the Participant hereunder which are proximately caused either by U.S. Bank's
gross negligence, willful misconduct or bad faith; subject only to such limited
liability, the Participant hereby exonerates and releases U.S. Bank now and
hereafter from any existing or future obligation or liability to the
Participant, express or implied, for any (i) loss of, release of, depreciation
of, or failure to realize upon any of the Collateral; (ii) failure to collect or
receive payment of the Letter of Credit Obligations; (iii) mistake, omission or
error of judgment in: (a) honoring, or failing to honor, any demand for payment
on any U.S. Bank Letter of Credit, or (b) making or failing to make any
examinations, appraisals, audits or checkups of the Borrower's affairs or the
Collateral.
8. Waivers and Release of Rights Under the Loan Agreements. U.S. Bank
reserves the right, in its sole discretion, at any time or times hereafter,
without giving prior notice to the Participant or obtaining Participant's
consent except as provided in Section 7 hereof, (i) to release any of the
Collateral, (ii) to resolve any discrepancy in any demand for payment on any
U.S. Bank Letter of Credit with the terms and conditions thereof, (iii) to
consent to any action or failure to act by the Borrower, (iv) to exercise or
refrain from exercising any powers or rights which U.S. Bank may have as a
matter of law, or under, or in respect of the U.S. Bank L/C Agreements,
including, without limitation, the right to enforce the obligations of the
Borrower, and (v) to take any other action allowed under the U.S. Bank L/C
Agreements or applicable law. U.S. Bank will use its best efforts to give the
Participant notice of the occurrence of any material Event of Default of which
U.S. Bank shall have actual knowledge; but the Participant agrees that U.S.
Bank's failure to give the Participant any such notice shall not result in any
liability on U.S. Bank's part to the Participant.
9. Additional Credit to Borrower.
7
<PAGE>
U. S. Bank agrees that it will not extend additional credit to the Borrower
(other than in connection with honoring a demand for payment on a U.S. Bank
Letter of Credit) without first obtaining Participant's prior written consent.
10. Expenses.
(a) Except as set forth herein, all routine costs and expenses of
monitoring the U.S. Bank Letters of Credit and collecting the Letter of
Credit Obligations shall be borne by U.S. Bank.
(b) Upon demand by U.S. Bank, the Participant shall pay its Percentage
of all Extraordinary Expenses incurred by U.S. Bank in connection with the
Credit and not recovered from the Borrower. The term "Extraordinary
Expense" means all costs, expenses (including, without limitation,
attorney's fees and legal expenses), taxes, costs and expenses of appeals,
and out-of-pocket advances (not including ordinary overhead expenses or
salary expenses for U.S. Bank's clerical or supervisory personnel) which
are incurred by U.S. Bank at any time or times hereafter, in connection
with (i) the collection or enforcement of the Letter of Credit Obligations;
(ii) the preservation of the Collateral; (iii) the sale, disposition or
other realization upon or the recovery of possession of the Collateral; or
(iv) the filing and prosecution of a complaint with respect to any of the
above matters or the defense of any claim, actual or threatened, by the
Borrower, a receiver or trustee in bankruptcy for the Borrower, any third
party, for, or on account of, or with respect to the U.S. Bank L/C
Agreements, whether to recover damages for business interference, for
liabilities for debts of the Borrower, including, without limitation,
taxes, for alleged preferences or fraudulent conveyances or transfers
received or alleged to have been received from the Borrower as a result of
the Credit or in connection with any Payments, or otherwise, and shall
include the amount of any recovery from U.S. Bank in such litigation or
proceeding, whether by settlement or pursuant to a judgment. All of
Participant's obligations provided for in this subsection (b) shall survive
the termination of this Agreement.
11. U.S. Bank's Books and Records to be Presumed Correct.
U.S. Bank's books and records and all entries thereon, and statements
received by the Participant from U.S. Bank with respect to the Credit, will at
all times (i) evidence both the Participant's interest and U.S. Bank's interest
in the Credit; (ii) identify the same as such; and (iii) subject to the
Participant's express right to rebut the presumption by conclusively
demonstrating the existence of an error on the part of U.S. Bank, be presumed to
be correct, prima facie evidence of the amount of the Credit and the
Participant's interest therein. For the purposes of this Agreement, "U.S. Bank's
books and records" shall include: any book, register, statement of account, copy
statement of account, contract of loan, letter of undertaking, bill signed by
U.S. Bank, index, sheet of paper coil, any device for storing data used by
electronic computer, the printouts of such computers and other device for
storing data used by U.S. Bank. For the purposes of this Section 11, "entries"
shall be deemed to include any entry or copy thereof whether recorded or copied
in
8
<PAGE>
handwriting or by typewriter and whether recorded or copied by a method of
typing, duplication, photography (including microfilm) or by means of any
mechanical, electrical or electronic device or by means of electronic recording
or by any other method of recording or presentation of words or figures or of
any other symbols.
12. Sharing of Setoffs and Collateral.
(a) U.S. Bank agrees that, so long as any portion of the Credit
remains outstanding, any payment to U.S. Bank by way of set-off of the
Borrower's accounts shall be applied to the Borrower's Letter of Credit
Obligations and shall be shared with the Participant in accordance with
Section 3 hereof.
(b) The Participant agrees that any security interest granted by the
Borrower to the Participant at any time or times hereafter in all or any
part of the Collateral shall be subordinate in all respects to the security
interests of U.S. Bank, irrespective of the actual date or order of filing
of any financing statements or other means of perfection under applicable
law, or the date of extension of credit by U.S. Bank. U.S. Bank hereby
expressly appoints the Participant as U.S. Bank's agent for the purpose of
perfecting U.S. Bank's security interest in any of the Collateral which may
at any time come into the possession of the Participant, and the
Participant hereby agrees to hold any such Collateral for U.S. Bank's
benefit and, upon request, to deliver such Collateral to U.S. Bank.
(c) The Participant shall have no interest in any property taken as
security for any credit, loan or financial accommodation made or furnished
to the Borrower by U.S. Bank in which the Participant has no Participation,
or in any property now or hereafter in U.S. Bank's possession or under U.S.
Bank's control or in any deposit held or other indebtedness owing by U.S.
Bank which may be or might become security for performance and payment of
the Borrower's obligations and liabilities under and in connection with the
U.S. Bank L/C Agreements by reason of the general description contained in
any general loan or collateral agreement, collateral note or other
instrument held by U.S. Bank or by reason of any right of setoff,
counterclaim, banker's lien or otherwise, except that if such property,
deposit, indebtedness or the proceeds thereof shall be applied to the
payment or reduction of any Letter of Credit Obligation owing by the
Borrower, then the Participant shall be entitled to its Percentage of such
application.
13. Participant's Right to Terminate.
The Participant may not terminate its obligations hereunder unless and
until all U.S. Bank Letters of Credit have: (i) expired in accordance with their
respective terms, (ii) been returned to U.S. Bank with written instructions from
the beneficiary thereof to cancel the relevant U.S. Bank Letter of Credit;
and/or (iii) been drawn upon to the maximum stated amount thereof and, if so
drawn upon, all Letter of Credit Obligations have been paid.
9
<PAGE>
14. Method for Making Payments Hereunder.
Unless otherwise agreed in writing from time to time hereafter, all
payments which the Participant is required to make to U.S. Bank or which U.S.
Bank is required to make to the Participant under this Agreement shall be made
by wire transfer, or in other immediately available funds so that the recipient
of the payment receives the funds no later than the day the payment is due. If
for any reason such payments are not made when due, U.S. Bank and the
Participant shall make such adjustments as may be equitable under the
circumstances to compensate the recipient for the delay in payment.
15. Notices.
All notices or other communications to any party in connection with this
Agreement shall be in writing and shall be sent by manual delivery, telegram,
telex, facsimile transmission, overnight courier or United States mail (postage
prepaid) addressed to such party at the address specified on the signature page
hereof, or at such other address as such party shall have specified to the other
party hereto in writing. All periods of notice shall be measured from the date
of delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or from two Business Day
after the date of mailing if mailed.
16. Governing Law; Successors.
This Agreement shall be binding upon and shall inure to the benefit of the
legal representatives, successors and assigns of the respective parties hereto
and shall be governed by and interpreted in accordance with the laws of the
State of Minnesota., without giving effect to conflict of laws principles
thereof, but giving effect to federal laws of the United States applicable to
national banks.
17. Consent to Jurisdiction.
AT THE OPTION OF U.S BANK, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA;
AND THE PARTICIPANT CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE PARTICIPANT COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, U.S BANK, AT ITS OPTION, SHALL BE ENTITLED TO HAVE
THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR
IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
10
<PAGE>
18. Waiver of Jury Trial.
EACH OF U.S. BANK AND THE PARTICIPANT WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
19. Participant's Compliance with Law; Resale or Assignment of
Participation.
The Participant hereby warrants and represents to U.S. Bank that (i) the
Participant's execution and delivery of this Agreement and purchase of the
Participation does not constitute a violation by the Participant of any
agreement, law, statute, decree or decision (including any legal lending limits)
which is binding on the Participant; and (ii) the Participant is acquiring the
Participation for its own account and , except as contemplated by the Lehman
Credit Agreement, will not sell, pledge, encumber, assign, or subparticipate its
Participation, or any part thereof, to any person without U.S. Bank's prior
written consent unless any such sale, pledge, encumbrance, assignment or
subparticipation is to the parent or an affiliate of the Participant. U.S. Bank
may deal exclusively with the Participant concerning the Participation
notwithstanding U.S. Bank's knowledge of and/or consent to the Participant's
sale, transfer, assignment or subparticipation of the Participation. U.S. Bank
and the Participant hereby agree that any such transfer of an interest in the
Participation, except as contemplated by the second preceding sentence. The
Participant and U.S. Bank further agree it is their intent that the
Participation shall not be, and shall not be construed to be, a "security" under
any federal or state securities laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly authorized officers as of the day first written
above.
U.S. BANK NATIONAL ASSOCIATION
By: ______________________________________
Richard J. Mikos (print name)
Title: Vice President
Address:
U.S. Bank Place MPFP 1802
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Mr. Richard Mikos
Reference: Powerhouse Technologies, Inc.
Telephone: (612) 973-2134
Fax No.: (612) 973-2148
LEHMAN COMMERCIAL PAPER, INC.
By: ______________________________________
_____________________________(print name)
Title:_____________________________________
Address:
3 World Trade Center
10th Floor
New York, New York 10285
Attention: Mr. Michael O'Brien
Reference: Powerhouse Technologies, Inc.
Telephone:
Fax No.:
12
<PAGE>
SCHEDULE A
U. S Bank Letters of Credit
1. Letter of Credit No. SLCMMSP00165, dated July 3, 1998 in favor of T.L.
International Manufacturing/Distribution, Inc. in the amount of
$475,000.00, as amended by Amendment No. 1, dated July 27, 1998 issued by
U. S. Bank pursuant to Application and Agreement for Standby Letter of
Credit dated July 1, 1998.
2. Letter of Credit No. 75800, dated June 26, 1995 in favor of Firemen's
Insurance Company, in the amount of $7,500,000.00, as amended by Amendment
No. 1, dated June 28, 1995, Amendment No. 2, dated March 11, 1996,
Amendment No. 3, dated March 22, 1996 and Amendment No. 4, dated February
3, 1997issued by U. S. Bank pursuant to Application and Agreement for
Standby Letter of Credit dated June 16, 1995 as revised June 19, 1995.
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,482
<SECURITIES> 0
<RECEIVABLES> 22,134
<ALLOWANCES> 1,014
<INVENTORY> 23,789
<CURRENT-ASSETS> 69,154
<PP&E> 161,572
<DEPRECIATION> 97,620
<TOTAL-ASSETS> 158,373
<CURRENT-LIABILITIES> 30,681
<BONDS> 36,350
0
19
<COMMON> 114
<OTHER-SE> 87,649
<TOTAL-LIABILITY-AND-EQUITY> 158,373
<SALES> 36,431
<TOTAL-REVENUES> 146,536
<CGS> 24,373
<TOTAL-COSTS> 91,066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 73
<INTEREST-EXPENSE> 2,317
<INCOME-PRETAX> 5,296
<INCOME-TAX> 2,216
<INCOME-CONTINUING> 3,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,080
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.28
</TABLE>
