<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: SEPTEMBER 30, 1997
-----------------------------------------------
[ ] 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: 0-22752
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MIKOHN GAMING CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0218876
- ----------------------------- ---------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1045 PALMS AIRPORT DRIVE, P.O. BOX 98686, LAS VEGAS, NV 89193-8686
- -------------------------------------------------------------------------------
(Address or principal executive office and zip code)
(702) 896-3890
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a 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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as the latest practicable date:
10,202,088 as of NOVEMBER 11, 1997
- ------------------------------- ----------------------------------
(Amount Outstanding) (Date)
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MIKOHN GAMING CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Part I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1997
and December 31, 1996 2
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
1
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 4,237,714 $ 1,798,207
Trade accounts receivable, net 21,206,364 25,269,290
Installment sales receivable, current
portion 964,036 816,861
Other receivables 1,094,563 424,316
Inventories:
Raw materials 12,602,151 12,135,004
Work in process 4,062,585 5,752,481
Finished goods 5,441,208 5,124,484
Prepaid expenses 4,305,105 2,621,985
Deferred tax asset - current 639,466 639,466
----------- -----------
Total current assets 54,553,192 54,582,094
Installment sales receivable, net of
current portion 200,322 562,288
Property and equipment, net 15,942,114 15,847,881
Intangible assets 14,867,504 15,328,738
Other assets 3,617,646 3,759,380
Deferred tax asset - noncurrent 372,204 372,204
----------- -----------
Total assets $89,552,982 $90,452,585
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt and
notes payable $ 597,197 $18,697,744
Trade accounts payable 6,389,917 7,355,022
Customer deposits 5,694,647 6,565,657
Accrued and other current liabilities 4,978,792 3,668,919
----------- -----------
Total current liabilities 17,660,553 36,287,342
----------- -----------
Long-term debt, net of current portion 20,548,465 4,020,996
----------- -----------
Stockholders' equity:
Preferred stock, $.10 par value,
5,000,000 shares authorized, none
issued
Common stock, $.10 par value,
20,000,000 shares authorized,
9,931,997 and 9,898,824 shares
issued 993,200 989,882
Additional paid-in capital 48,618,900 48,436,536
Foreign currency translation
adjustment (694,872) (170,576)
Retained earnings 2,654,579 939,368
----------- -----------
Total 51,571,807 50,195,210
Less treasury stock, 19,113 and 4,863
shares, at cost (227,843) (50,963)
----------- -----------
Total stockholders' equity 51,343,964 50,144,247
----------- -----------
Total liabilities and stockholders'
equity $89,552,982 $90,452,585
=========== ===========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
2
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $23,610,558 $21,651,274 $73,573,424 $65,671,474
Cost of sales 14,620,294 14,211,272 46,060,896 43,616,552
----------- ------------ ------------ ------------
Gross profit 8,990,264 7,440,002 27,512,528 22,054,922
Selling, general and administrative
expenses 8,013,001 7,129,701 23,114,584 21,419,331
----------- ------------ ------------ ------------
Operating income 977,263 310,301 4,397,944 635,591
Interest expense (668,783) (475,443) (1,735,262) (1,412,125)
Other income and (expense) 332,144 189,969 102,529 459,618
----------- ----------- ----------- -----------
Income (loss) before income tax
(provision) benefit 640,624 24,827 2,765,211 (316,916)
Income tax (provision) benefit (249,000) (8,689) (1,050,000) 110,921
----------- ------------ ------------ ------------
Net income (loss) $ 391,624 $ 16,138 $ 1,715,211 $ (205,995)
=========== =========== =========== ===========
Weighted average common shares 9,893,989 9,838,357 9,892,431 9,817,189
=========== =========== =========== ===========
Earnings (loss) per common share $ 0.04 $ 0.00 $ 0.17 $ (0.02)
=========== =========== =========== ===========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
3
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,715,211 $ (205,995)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 2,036,476 1,853,934
Amortization 1,086,644 1,502,942
Change in exchange rate variance (524,296) (20,087)
Provision for bad debts 43,129 29,516
Changes in assets and liabilities:
Accounts receivable 3,349,550 1,108,241
Installment sales receivable 214,791 119,148
Inventories 906,025 (4,299,072)
Prepaid expenses and other assets (2,166,796) (1,375,291)
Trade accounts payable (965,105) (1,633,140)
Customer deposits (871,010) 4,272,461
Accrued and other liabilities 1,309,873 (489,943)
----------- -----------
Net cash provided by operating
activities 6,134,492 862,714
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (2,153,154) (1,955,515)
Proceeds from sale of property and
equipment 22,445 1,275
----------- -----------
Net cash used in investing activities (2,130,709) (1,954,240)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt and
notes payable 975,000 550,682
Principal payments on notes payable
and long-term debt (2,548,078) (665,316)
Proceeds from sale of common stock 185,682 180,461
(Purchases) cancellation of treasury
stock (176,880) 201,062
----------- -----------
Net cash provided by (used in)
financing activities (1,564,276) 266,889
----------- -----------
Increase / decrease in cash and cash
equivalents 2,439,507 (824,637)
Cash and cash equivalents, beginning of
period 1,798,207 5,453,136
----------- -----------
Cash and cash equivalents, end of period $ 4,237,714 $ 4,628,499
=========== ===========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
4
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MIKOHN GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - GENERAL
These condensed unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal accruals)
necessary to present fairly the financial position of the Company at September
30, 1997, the results of its operations for the three and nine months ended
September 30, 1997 and 1996 and cash flows for the nine months ended September
30, 1997 and 1996. The results of operations for the three and nine months
ended September 30, 1997 are not necessarily indicative of the results to be
expected for the entire year.
NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS
In February, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 - Earnings Per Share. SFAS 128
is effective for financial statements issued for periods after December 15, 1997
and replaces currently reported earnings per share with "basic" or undiluted,
earnings per share and "diluted" earnings per share. Basic earnings per share
is computed by dividing net income by the weighted average number of shares
outstanding during the period; diluted earnings per share reflect all
potentially dilutive securities, such as stock options. Early application of
SFAS 128 is not permitted, and the Company will adopt the provisions of SFAS 128
for financial statements issued for periods ending after December 15, 1997,
including the required restating of all previously reported earnings per share.
The following table reflects the Company's pro-forma earnings per
share for the three and nine months periods ended September 30, 1997 and 1996 as
determined in accordance with SFAS 128:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
----- ----- ----- ------
<S> <C> <C> <C> <C>
Earnings per Share:
As reported $0.04 $0.00 $0.17 $(0.02)
Basic $0.04 $0.00 $0.17 $(0.02)
Diluted $0.04 $0.00 $0.17 $(0.02)
</TABLE>
5
<PAGE>
Also during February, 1997, the FASB issued SFAS No. 129 - Disclosure
of Information About Capital Structure. This statement establishes standards
for disclosing information about an entity's capital structure. Management
intends to comply with the disclosure requirements of this statement which are
effective for periods ending after December 15, 1997.
On September 30, 1997, the FASB issued SFAS No. 130 - Reporting
Comprehensive Income. This statement requires companies to classify items of
other comprehensive income by their nature in a financial statement and to
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in-capital in the equity section of a
statement of financial position. This statement also is effective for financial
statements issued for fiscal years beginning after December 15, 1997.
Management intends to comply with the disclosure requirements of this statement,
which are effective for the year ending December 31, 1998.
Finally, on September 30, 1997, the FASB issued SFAS No. 131 -
Disclosure About Segments of an Enterprise and Related Information. This
statement establishes new standards for segment reporting in the financial
statements and is effective for financial statements issued for fiscal years
beginning after December 15, 1997. Management has not yet determined the impact
this statement will have on the Company's financial statements but intends to
comply with the disclosure requirements of this statement, which are effective
for the year ending December 31, 1998.
NOTE 3 - COMPUTER SOFTWARE DEVELOPMENT COSTS
In 1997, the Company capitalized software development costs starting
when technological feasibility is established and ending when the product is
ready for release. Software development costs are amortized by the straight-
line method over the remaining estimated economic life of the product.
Amortization of the software development costs begins when the product is ready
for general release. To date, the Company has capitalized $384,000 of software
development costs, none of which have yet been amortized. Prior to 1997, the
Company did not incur significant computer software development costs which meet
the criteria for capitalization in accordance with the provisions of SFAS 86 -
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed.
NOTE 4 - CONTINGENCIES
On June 20, 1997, the Colorado Limited Gaming Control Commission
granted the Company's application to renew its Colorado Gaming License on the
condition that the Company terminate all business relations with Progressive
Games, Inc. (PGI) within 180 days. PGI and the Company are parties to a license
agreement (License Agreement) by which the Company is granted the right to
distribute certain live table games including Caribbean Stud(TM) (the "Games")
in a defined territory. These table games are leased by the Company to customers
for a monthly rental fee which is split 60% to PGI and 40% to the Company. In
the month of June 1997, these tables generated revenues to the Company of
approximately $170,000 net of PGI's share. On September 27, 1997, the Company
and PGI signed an agreement ("Agreement") terminating any on-going material
relationship. The Agreement provides that the Company (i) will be granted the
exclusive royalty-free rights to the Games in the territories of Missouri, New
Mexico, Colorado, Oregon, South Dakota and The Netherlands; (ii) the remaining
territories under the License
6
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Agreement will be transferred to PGI and (iii) PGI will pay to the Company a
one-time payment of $400,000. The territories which are granted to the Company
under the Agreement currently generate about $120,000 per month in revenues. The
Agreement is expressly conditioned upon (i) the approval of the Chairman of the
State of Nevada Gaming Control Board ("SNGCB") and (ii) a determination by the
SNGCB to allow PGI to withdraw its pending application for a Nevada gaming
license. There has been no assurance by the SNGCB or its Chairman that these
conditions will be met.
NOTE 5 - SUBSEQUENT EVENTS
- --------------------------
On October 24, 1997 the Company closed a $40.0 million debt financing
facility documented by a new Credit Agreement. This facility is funded by a
consortium of lenders including Hartford Life Insurance Company, The Travelers
Insurance Company, Allstate Insurance Company, Fidelity Guarantee Life Insurance
Company, United States Fidelity & Guarantee Company, and First Source Financial
LLP and consists of a $15.0 million fixed rate term loan, a $15.0 million
variable rate term loan, and a $10.0 million variable rate revolving line of
credit. The fixed interest rate on term loan A is 10%, the interest rate on
term loan B is either the prime rate plus 2 percentage points or LIBOR plus 3
percentage points, and the interest rate applicable to revolver loans is either
prime plus 1.5 percentage points or LIBOR plus 2.5 percentage points. Security
for the term loans includes all of the Company's domestic real property, as well
as domestic personal property assets including certain contract rights, accounts
receivable, inventories, furniture, fixtures, equipment, intangible assets, 100%
of the stock of domestic subsidiaries the stock of which may lawfully be pledged
and 60% of the stock in the Company's foreign subsidiaries. Loans under the
revolving credit facility are secured by accounts receivable and inventories.
Under the terms of the Credit Agreement the Company has agreed to maintain
certain financial ratios; to comply with certain financial covenants; not to
allow the incurrence of additional debt unless expressly authorized by the
Credit Agreement and to observe a number of other financial restrictions. The
term loans begin maturing in April 2002 with $2,500,000 principal repayments due
every six months until repayment in full on October 31, 2004. The revolving
credit facility, to the extent that it is drawn down, will mature on October 31,
2002, with two successive one year extensions at the Company's option. In
essence, this allows the extension of the revolving credit facility until
October 31, 2004. As of the date of this filing, both of the $15.0 million term
loans have been funded. The Company has not borrowed under the revolving line of
credit and has $10.0 million available under this line. On the funding date,
October 24, 1997, the Company repaid all of its outstanding indebtedness to Bank
of America Nevada, as well as its note payable to Michael Wichinsky and the
mortgage owed on its Gulfport, Mississippi property. Net of all debt repayments
and prior to payment of transaction expenses the Company received net proceeds
of $9.6 million. The Company believes that the funds available to it under its
revolving line of credit together with cash provided by operating earnings will
enable it to meet its cash requirements for the immediate and foreseeable
future.
As provided by SFAS No. 6 - Classification of Short-Term Obligations
Expected to Be Refinanced, the Company reclassified the Bank of America Nevada
debt from current to long-term.
On November 15, 1994, Casino Excitement, Inc. (CEI), a wholly owned
subsidiary of the Company, completed the first step of a plan to acquire the
business operations of a group of companies from John Renton Young (the "JRY
Companies"). The second and final step of the acquisition was contingent upon
the Company receiving certain written "Non-Liability Assurances"
7
<PAGE>
assuring the Company that it would sustain no damages or liabilities, including
costs and attorneys fees, arising out of the partial destruction of the world's
largest free-standing sign at the Las Vegas Hilton (the "Hilton Sign") on July
18, 1994 during a violent wind storm. The Hilton Sign was built by one of the
JRY Companies. The written Non-Liability Assurances were received by the Company
on November 7, 1997, thereby requiring the Company to complete the acquisition
of the JRY Companies and obligating it to (i) acquire all of the outstanding
stock of the parent company of the JRY Companies, for a payment of an additional
$1.0 million less the amount of any unrealized assets and other set-offs; (ii)
purchase the real property owned by an affiliate of the JRY Companies for cash
equal to 90% of the amount, if any, by which the fair market value of the
property exceeds the amount of the deposit paid in the first step of the
acquisition plan and (iii) issue 66,666 shares of the Company's restricted
Common Stock. The Company anticipates that this transaction will close prior to
January 1, 1998.
NOTE 6 - RECLASSIFICATIONS
Certain amounts in the September 30, 1996 condensed consolidated
financial statements have been reclassified to be consistent with the
presentation used for September 30, 1997.
8
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MIKOHN GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTICE
This report contains forward looking statements in which management
shares its knowledge and judgment about factors that it believes may materially
affect Company performance in the future. Terms expressing future expectations,
enthusiasm about future potential and anticipated growth in sales, revenues and
earnings and like expressions typically identify such statements.
All forward looking statements, although made in good faith, are
subject to the uncertainties inherent in predicting the future. They are
necessarily speculative, and unforeseen factors such as unusual production
problems, competitive pressures, failure to gain the acceptance of regulatory
authorities and other adverse government action, customer resistance and general
deterioration in economic conditions may cause results to differ materially from
any that may be projected. Forward looking statements speak only as of the date
they are made, and readers are warned that the Company undertakes no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
Readers are urged to carefully review and consider disclosures made by
the Company in this and other reports that discuss factors germane to the
Company's business. See particularly the Company's reports on Forms 10-K and
10-Q filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
- ---------------------------------------------
SALES
Sales for the nine months ended September 30, 1997 were $73.6 million
compared to $65.6 million in the prior year period, an increase of $7.9 million
or 12.0%. Sales in the 1997 period include approximately $29.5 million by the
domestic interior sign division, $10.2 million by the outdoor lighting and sign
group, $8.8 million by the games division (which includes revenues from table
game leasing, keno equipment sales, slot machine sales, and slot route
operations), $4.0 million by the surveillance division, and $11.7 million by
the international subsidiaries. Sales by the electronics division in the nine
months ended September 30, 1997 were $16.1 million, including $6.7 million in
intracompany sales which have been eliminated in the consolidated statement of
operations. Sales for the comparable 1996 period include approximately $29.6
million by the domestic interior sign division, $11.4 million by the outdoor
lighting and sign group, $4.5 million by the games division, $4.8 million by the
surveillance division, $8.9 million by the international subsidiaries, and $14.9
million by the electronics division, including $8.5 million in intracompany
sales that have been eliminated in the consolidated statement of operations.
The domestic interior sign division had a decrease in sales of $0.1
million or 0.3%. The outdoor lighting and sign group had a decrease in sales of
$1.2 million or 10.5% due to fewer
9
<PAGE>
major sign projects. Sales by the games division increased $4.3 million or 95.6%
owing to an exceptionally large sale of Mini-Bertha(TM) slot machines in the
1997 period.
Sales by the international subsidiaries increased $2.8 million or
31.5% owing in significant measure to strong sales in the Australian market of
our interior signs, including a $2.2 million sale to Crown Casino in Melbourne,
Australia. Sales by the international subsidiaries accounted for 15.9% of total
sales for the nine months ended September 30, 1997 compared to 13.6% during the
same period of 1996. Sales by the surveillance division decreased $0.8 million
or 16.7% because of continued weakness in the casino market and the Company's
decision to not accept low margin sales.
At September 30, 1997, the Company had a backlog of orders believed to
be firm of $22.0 million, compared to $24.1 million at September 30, 1996. The
Company's backlog at June 30, 1997 was $17.3 million. Management expects that
the backlog at September 30, 1997 will be filled within 120 days of that date.
GROSS PROFIT
Gross profit for the nine months ended September 30, 1997 increased by
$5.5 million, to $27.5 million from $22.0 million in the 1996 period. The gross
margin was 37.4% in the 1997 period compared to 33.5% in the nine months ended
September 30, 1996. Gross margin in the interior sign division decreased to
28.8% for the nine months compared to 30.4% for the same period last year.
Gross margin in the outdoor lighting and sign group was 22.6% for the first nine
months of 1997 compared to 20.4% for the same period in 1996. Gross margin in
the electronics division was 38.1% for the first nine months of 1997 compared to
34.2% for the like period in 1996. The games division gross margin in the first
nine months was 57.8% in 1997 and 69.4% in 1996. The decrease in 1997 gross
margin for games was due to an increase in slot machine sales that carry a lower
margin than the table game leases and slot route revenues. The surveillance
division gross margin was 10.1% in the first nine months of 1997 compared to
(1.8%) for the same period in 1996. Surveillance division margins have suffered
due to an increasingly competitive market and an increasing portion of the sales
being made on a low margin, equipment only basis. During the nine months ended
September 30, 1997 the Company decided to refuse low margin, equipment only
orders for surveillance equipment.
The international subsidiaries' gross margin was 31.0% for the first
nine months of 1997 compared to 18.2% for the same period in 1996. The increase
is attributable to higher margins in our Australian subsidiary, resulting from
greater efficiencies and higher sales volumes. Overall gross margins have
improved owing largely to a change in the sales mix; higher margin sales by
divisions such as games are growing rapidly while lower margin sales by
divisions such as surveillance are decreasing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the nine months ended September 30, 1997, selling, general and
administrative expenses were $23.1 million or 31.4% of sales compared to $21.4
million or 32.6% of sales for the comparable nine months of 1996. Selling
expenses of $9.4 million in the 1997 period decreased 2.1% from $9.6 million in
the comparable period in 1996. Administrative expenses of $10.8 million for the
1997 period were higher by 14.9% then the $9.4 million experienced in the
10
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comparable period in 1996. The games division and the international subsidiaries
increased $0.3 million and $0.7 million, respectively, due to higher labor costs
along with the reclassification of selling expense to administrative expense in
the third quarter of 1997 in Australia. Depreciation and amortization were $3.1
million and $2.4 million, 1997 over 1996, respectively.
Research and development expenses were $2.9 million for the nine
months ended September 30, 1997 compared to $2.4 million for the comparable
period in 1996. This increase primarily resulted from an increase in
engineering staff due to new products being developed. Because certain software
development projects achieved technological feasibility during 1997, the Company
capitalized $384,000 of eligible software development costs in the nine months
ended September 30, 1997.
OTHER INCOME AND EXPENSE
Other income totaled $103,000 for the nine months ended September 30,
1997 compared to $460,000 for the same period in 1996. Currency translation
losses on the Australian dollar and the Dutch guilder totaled $103,000 for the
nine months ended September 30, 1997 compared to currency translation gains of
$116,000 for the same period in 1996. The unfavorable variance was due to the
increase in strength of the U.S. dollar compared to these currencies.
Interest expense increased to $1.7 million from $1.4 million, 1997
over the nine months ended September 30, 1996 owing to increased bank borrowings
and increased borrowing rates.
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
- ----------------------------------------------
SALES
Sales for the quarter ended September 30, 1997 were $23.6 million
compared to $21.7 million in the prior year period, an increase of $1.9 million
or 8.8%. Sales in the 1997 and 1996 periods, respectively, include
approximately $8.1 million and $10.9 million by the domestic interior sign
division, $3.3 million and $3.0 million by the outdoor lighting and sign group,
$2.0 million and $1.4 million by the games division (which includes revenues
from table game leasing, keno equipment sales, slot machine sales, and slot
route operations), $1.1 million in both periods by the surveillance division
and $4.2 and $3.7 million by the international subsidiaries. Sales by the
electronics division in the third quarter were $7.3 million and $5.4 million
1997 over 1996, including $2.4 million and $3.8 million, respectively, of
intracompany sales which have been eliminated in the consolidated statement of
operations.
Third quarter sales by the games division increased $0.6 million or
42.9% due primarily to sales of Mini-Bertha(TM) slot machines. The $0.5 million
or 13.5% increase in sales by the international subsidiaries is attributable to
continued strong sales of our interior signs in the Australian market. Sales by
the international subsidiaries accounted for 17.8% of total sales for the third
quarter compared to 17.1% for the same quarter last year. Sales by the domestic
interior sign division decreased by $2.8 million or 25% during the 1997 third
quarter due to a fewer number of major casino openings, remodels and expansions.
Sales by the electronics division during the 1997 third quarter increased $3.3
million or 35.2% because of strong sales of our CasinoLink(TM) product.
11
<PAGE>
GROSS PROFIT
Gross profit for the quarter ended September 30, 1997 increased $1.5
million, to $9.0 million from $7.5 million 1997 over 1996, gross margins being
38.1% and 34.4%, respectively. In the third quarter, 1997 over 1996: gross
margins in the interior sign division were 27.6% and 32.7%, respectively; gross
margins in the outdoor lighting and sign group were 20.3% and 15.2%,
respectively; gross margins in the electronics division were 41.6% and 30.2%,
respectively and gross margins in the games division were 53.5% and 77.8%,
respectively. The increase in electronic division's gross margin was due in
part to increased margins in the CasinoLink product line. The decrease in 1997
gross margin in the games division was due to an increase in slot machine sales
that carry a lower margin than the table games leases and slot route revenues.
The surveillance division gross margin was 4.6% in the third quarter of 1997
compared to (27.0%) for the third quarter of 1996. Surveillance division margins
suffered because of an increasingly competitive market and an increasing portion
of sales being made on a low margin, equipment only basis while the
international subsidiaries' third quarter gross margins, 1997 over 1996, were
36.1% and 16.2%, respectively. The increase was due to higher margins in our
Australian subsidiary.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended
September 30, 1997 were $8.0 million or 33.9% of sales compared to $7.1 million
or 32.7% of sales for the comparable quarter of 1996. Third quarter, 1997 over
1996, selling expenses were $2.8 million and $3.3 million, respectively;
administrative expenses were $4.8 million and $3.0 million or an increase of
60.0% and depreciation and amortization were $0.9 million and $1.1 million,
respectively. During the quarter ended September 30, 1997, the international
subsidiaries reclassified $0.5 million of expenses from selling to
administrative. The games division increased $0.1 million, the international
subsidiaries increased $0.5 million (net of reclassification) and Corporate
increased $0.6 million due to increases in revenue.
In the third quarter, 1997 over 1996, research and development
expenses were $1.1 million and $0.8 million. This increase primarily resulted
from an increase in engineering staff due to new products being developed.
Because certain software development projects achieved technological feasibility
during 1997, the Company capitalized eligible software development costs.
During the third quarter of 1997, $128,000 of these software development costs
were capitalized.
OTHER INCOME AND EXPENSE
Other income totaled $332,000 in the quarter ended September 30, 1997
compared to $190,000 for the same period in 1996. Currency translation gains on
the Australian dollar and the Dutch guilder totaled $285,000 for the third
quarter of 1997 compared to currency translation gains of $67,000 for the same
period in 1996. This net gain includes a one-time adjustment resulting from the
reclassification of a portion of the Company's foreign subsidiaries intercompany
balances to long term investments.
Interest expense increased to $669,000 in the third quarter of 1997
compared to $475,000 in the same period in 1996 because of higher interest rates
and increased bank borrowings.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the nine months ending September 30, 1997 the Company had net
income of $1.7 million. Net cash provided by operating activities for the period
was $6.1 million compared to $0.9 million during the same period in 1996.
Reflected in this change are a $3.3 million decrease in accounts receivable, a
$0.9 million decrease in inventories, a $0.9 million decrease in customer
deposits, a $1.0 million decrease in accounts payable, an increase of $2.2
million in prepaid expenses and other assets and a $1.3 million increase in
accrued liabilities. Cash balance as of September 30, 1997 was $4.2 million, up
from $1.8 million at the same date in 1996. The Company expects that cash
provided from its operating earnings as well as its line of credit will be
sufficient to meet its requirements for the remainder of 1997 and beyond.
On September 5, 1997, the Company completed negotiations with Bank of
America Nevada to extend the maturity date of its $20.0 million line of credit
from August 27, 1997 to May 31, 1998. Subsequent to September 30, 1997, the
Company closed a new seven year, $40.0 million Credit Agreement. See Note 5 of
the Notes to the Condensed Consolidated Financial Statements for further details
on this financing.
13
<PAGE>
MIKOHN GAMING CORPORATION
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits
10.35 Credit Agreement dated October 24, 1997 between the
Company and First Source Financial LLP ("Credit Agreement")
documenting the Company's new $40.0 million secured credit
facility including exhibits.
10.36 Assignment from First Source Financial LLP to Eaton Vance
under the Credit Agreement.
10.37 $10.0 million Revolving Note under the Credit Agreement.
10.38 Term Loan Note A under the Credit Agreement.
10.39 Term Loan Note B under the Credit Agreement.
10.40 Guaranty Executed by Each Guarantor under the Credit Agreement.
10.41 Security Agreement Executed by Borrower and Each Guarantor
under the Credit Agreement.
10.42 Trademark Security Agreement under the Credit Agreement.
10.43 Patent Security Agreement under the Credit Agreement.
10.44 Stock Pledge Agreement Executed by Mikohn under the Credit
Agreement.
10.45 Bank Agency Agreements under the Credit Agreement.
10.46 Post Closing Agreement under the Credit Agreement.
10.47 Deed of Trust under the Credit Agreement
10.48 Deed of Trust under the Credit Agreement
10.49 Composition Mortgage under the Credit Agreement
27 Financial Data Schedule
B. Reports on Form 8-K:
None
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
MIKOHN GAMING CORPORATION, REGISTRANT
BY: /s/ Donald W. Stevens
--------------------------------------------
Donald W. Stevens, Executive Vice President
Treasurer (Principal Financial Officer)
Dated: November 14, 1997
15
<PAGE>
EXECUTION COPY
================================================================================
$40,000,000
CREDIT AGREEMENT
AMONG
MIKOHN GAMING CORPORATION,
AS BORROWER,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THEIR ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF
AS LENDERS,
AND
FIRST SOURCE FINANCIAL LLP,
AS AGENT
DATED AS OF OCTOBER 24, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS .............................................. 1
1.1 General Definitions.................................... 1
Account ........................................................ 1
Affiliate ...................................................... 1
................................................................ 1
Agent Advances ................................................. 1
Annual Fee ..................................................... 1
Applicable Gaming Laws ......................................... 1
Applicable Lending Office....................................... 1
Assignment and Assumption Agreement ............................ 1
Auditors ....................................................... 1
Bankruptcy Code ................................................ 1
Benefit Plan ................................................... 2
Borrower ....................................................... 2
Borrowing Base ................................................. 2
Borrowing Base Certificate ..................................... 2
Business Day ................................................... 2
Capital Expenditures ........................................... 2
Cash Equivalents ............................................... 3
CEI ............................................................ 3
Change of Control .............................................. 3
Change of Control Notice ....................................... 4
Closing Date ................................................... 4
Closing Document List .......................................... 4
Closing Fee .................................................... 4
Code ........................................................... 4
Collateral ..................................................... 4
Collateral Access Agreement .................................... 4
Collateral Documents ........................................... 4
Commitments .................................................... 4
Consolidated Entity ............................................ 4
Contingent Obligation .......................................... 4
Credit Documents ............................................... 4
Credit Parties ................................................. 4
Current Assets ................................................. 5
Current Liabilities ............................................ 5
Current Ratio .................................................. 5
Default ........................................................ 5
Defaulting Lender .............................................. 5
Default Rate ................................................... 5
Default Rate Period ............................................ 5
Depreciation and Amortization Expense .......................... 5
Dollar(s) ...................................................... 5
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Domestic Lending Office........................................ 5
EBITDA......................................................... 5
Eligible Accounts Receivable................................... 5
Eligible Inventory............................................. 7
ERISA.......................................................... 7
ERISA Affiliate................................................ 7
Eurocurrency Reserve Requirements.............................. 8
Event of Default............................................... 8
Exchange Act................................................... 8
Expenses....................................................... 8
Expiration Date................................................ 8
Extension Request.............................................. 8
Extraordinary Gains............................................ 8
Federal Funds Rate............................................. 8
Federal Reserve Board.......................................... 9
Fee Letter..................................................... 9
Fees........................................................... 9
Financial Statements........................................... 9
Fixed Charge Coverage Ratio.................................... 9
Fixed Charges.................................................. 9
Foreign Subsidiaries........................................... 9
............................................................... 9
Funding Date................................................... 9
GAAP........................................................... 9
Gaming Authorities............................................. 9
Gaming Equipment............................................... 9
Good Funds..................................................... 10
Governing Documents............................................ 10
Governmental Authority......................................... 10
Guarantors..................................................... 10
Guaranty....................................................... 10
Gulfport Property.............................................. 10
Gulfport Replacement Property.................................. 10
Highest Lawful Rate............................................ 10
Income Tax Expense............................................. 10
Indebtedness................................................... 11
Insolvency Event............................................... 11
Intangible Assets.............................................. 11
Interest Expense............................................... 11
Interest Income................................................ 12
Interest Period................................................ 12
Interest Rate Agreement........................................ 12
Internal Revenue Code.......................................... 12
Inventory...................................................... 12
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Investment..................................................... 12
Issuing Bank................................................... 13
Issuing Bank Fees.............................................. 13
JRY Property................................................... 13
JRY Replacement Property....................................... 13
............................................................... 13
Lender Advances................................................ 13
Letter of Credit Fee........................................... 13
Letter of Credit Obligations................................... 13
Letter of Credit Request....................................... 13
Letter of Credit............................................... 13
LIBOR Lending Office........................................... 13
LIBOR Election Notice.......................................... 13
LIBOR Loan..................................................... 13
LIBOR Rate Determination Date.................................. 13
LIBOR Rate..................................................... 14
LIBOR Rate Loan................................................ 14
Lien........................................................... 14
Loan Account................................................... 14
Loans.......................................................... 14
Loan Year...................................................... 14
Majority Lenders............................................... 14
Make-Whole Amount.............................................. 14
Management Holders............................................. 14
Material Adverse Effect........................................ 14
Material Contract.............................................. 14
Maturity Date.................................................. 15
Mikohn Nevada.................................................. 15
MGC............................................................ 15
Moody's........................................................ 15
Multiemployer Plan............................................. 15
Net Cash Proceeds.............................................. 15
Net Income..................................................... 15
Net Worth...................................................... 15
Notice of Borrowing............................................ 15
Note........................................................... 15
Obligations.................................................... 15
Permitted Investments.......................................... 16
Permitted Liens................................................ 16
Person......................................................... 16
Plan........................................................... 16
Post-Closing Agreement......................................... 16
Prime Lending Rate............................................. 16
Prime Rate Loan................................................ 17
Principal Balance.............................................. 17
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Proprietary Gaming Equipment.................................... 17
Pro Rata Share.................................................. 17
Purchase Money Liens............................................ 17
Register........................................................ 17
Regulation D.................................................... 17
Regulation G.................................................... 17
Regulation Z.................................................... 17
Related Fund.................................................... 17
Related Parties................................................. 17
Reportable Event................................................ 17
Requirement of Law.............................................. 17
Retiree Health Plan............................................. 18
Revolving Lender................................................ 18
Revolving Loan.................................................. 18
Revolving Loan Commitment....................................... 18
Revolving Loan Commitment Termination Date...................... 18
Revolving Note.................................................. 18
S&P............................................................. 18
Security Agreement.............................................. 18
Settlement Date................................................. 18
Subsidiary...................................................... 18
Termination Event............................................... 19
Term Loan A..................................................... 19
Term Loan A Commitment.......................................... 19
Term Loan A Lender.............................................. 19
Term Loan A Note................................................ 19
Term Loan B..................................................... 19
Term Loan B Commitment.......................................... 19
Term Loan B Lender.............................................. 19
Term Loan B Note................................................ 19
Term Loan B Lender.............................................. 20
Term Loans...................................................... 20
Unused Line Fee................................................. 20
1.2 Accounting Terms and Determinations.................... 20
1.3 Other Terms; Headings................................. 20
ARTICLE 2. LOANS AND TERMS OF PAYMENT............................... 20
2.1 REVOLVING LOAN COMMITMENT.............................. 20
2.2 Term Loan A............................................ 22
2.3 Term Loan B............................................ 23
2.4 Interest............................................... 23
2.5 LIBOR Rate Loans....................................... 24
2.6 Principal and Interest Payments........................ 25
2.7 Fees and Expenses...................................... 28
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
2.8 Voluntary Termination of Revolving Loan Commitments;
Voluntary Prepayments of Term Loans; Mandatory
Prepayments............................................ 29
2.9 Method of Payment; Good Funds.......................... 33
2.10 Indemnification in Certain Events...................... 33
ARTICLE 3. LETTERS OF CREDIT......................................... 34
3.1 Issuance of Letters of Credit.......................... 34
3.2 Terms of Letters of Credit............................. 35
3.3 Notice of Issuance..................................... 35
3.4 Revolving Lenders' Participation....................... 35
3.5 Payments of Amounts Drawn Under Letters of Credit...... 35
3.6 Payment by Lenders..................................... 35
3.7 Obligations Absolute................................... 36
3.8 Issuing Bank Documentation; Reliance by Issuing Bank... 36
ARTICLE 4. RECORDKEEPING AND SETTLEMENT PROCEDURES................... 36
4.1 Maintenance of Loan Account; Statements of Account..... 36
4.2 Application of Payments................................ 36
4.3 Periodic Settlement; Interest and Fees; Statements..... 37
4.4 Sharing of Payments.................................... 38
4.5 Defaulting Lenders..................................... 38
4.6 Credit Parties' Obligations............................ 39
ARTICLE 5. CONDITIONS PRECEDENT...................................... 39
5.1 Conditions Precedent to Initial Loans.................. 39
5.2 Conditions Precedent to All Loans and Letters of
Credit................................................. 40
ARTICLE 6. REPRESENTATIONS AND WARRANTIES............................ 41
6.1 Organization and Qualification......................... 41
6.2 Authority.............................................. 41
6.3 Enforceability......................................... 41
6.4 No Conflict............................................ 41
6.5 Consents and Filings................................... 41
6.6 Government Regulation.................................. 42
6.7 Solvency............................................... 42
6.8 Rights in Collateral; Priority of Liens................ 42
6.9 Financial Data......................................... 42
6.10 Locations of Offices, Records and Inventory............ 43
6.11 Subsidiaries; Ownership of Stock....................... 43
6.12 No Judgments or Litigation............................. 44
6.13 No Defaults............................................ 44
6.14 Labor Matters.......................................... 44
6.15 Compliance with Law.................................... 44
6.16 ERISA.................................................. 44
6.17 Compliance with Environmental Laws..................... 44
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
6.18 Intellectual Property.................................... 45
6.19 Licenses and Permits..................................... 45
6.20 Taxes and Tax Returns.................................... 45
6.21 Material Contracts....................................... 46
6.22 Accuracy and Completeness of Information................. 46
6.23 No Change................................................ 46
ARTICLE 7. AFFIRMATIVE COVENANTS....................................... 46
7.1 Financial Reporting...................................... 46
7.2 Collateral Reporting..................................... 47
7.3 Notification Requirements................................ 48
7.4 Corporate Existence...................................... 49
7.5 Books and Records; Inspections........................... 49
7.6 Insurance................................................ 50
7.7 Taxes.................................................... 50
7.8 Compliance with Laws..................................... 50
7.9 Use of Proceeds.......................................... 50
7.10 Fiscal Year.............................................. 50
7.11 Maintenance of Property.................................. 51
7.12 ERISA Documents.......................................... 51
7.13 Environmental and Other Matters.......................... 51
7.14 Further Actions.......................................... 52
ARTICLE 8. NEGATIVE COVENANTS.......................................... 52
8.1 Minimum Net Worth........................................ 52
8.2 Minimum Current Ratio.................................... 53
8.3 Maximum Ratio of Total Debt to EBITDA.................... 53
8.4 Minimum EBITDA........................................... 53
8.5 Minimum Ratio of EBITDA to Interest Expense.............. 54
8.6 Minimum Fixed Charge Coverage Ratio...................... 54
8.7 Capital Expenditures..................................... 55
8.8 Additional Indebtedness.................................. 55
8.9 Liens.................................................... 56
8.10 Contingent Obligations................................... 57
8.11 Sale of Assets........................................... 57
8.12 Restricted Payments...................................... 58
8.13 Bank Accounts............................................ 58
8.14 Affiliate Transactions................................... 59
8.15 Additional Negative Pledges.............................. 59
8.16 Additional Subsidiaries.................................. 59
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES............................. 59
9.1 Events of Default........................................ 59
9.2 Acceleration and Termination of Commitments.............. 61
9.3 Rescission of Acceleration............................... 61
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
9.4 Remedies.............................................. 61
9.5 Right of Setoff....................................... 62
9.6 License of Use of Software and Other Intellectual
Property............................................. 62
9.7 Application of Proceeds; Surplus; Deficiencies........ 62
ARTICLE 10. AGENT................................................... 62
10.1 Appointment of Agent.................................. 62
10.2 Nature of Duties of Agent............................. 63
10.3 Lack of Reliance on Agent............................. 63
10.4 Certain Rights of Agent............................... 63
10.5 Reliance by Agent..................................... 64
10.6 Indemnification of Agent............................. 64
10.7 Agent in its Individual Capacity...................... 64
10.8 Holders of Notes...................................... 64
10.9 Successor Agent....................................... 65
10.10 Collateral Matters.................................... 65
10.11 Actions with Respect to Defaults...................... 66
10.12 Delivery of Information............................... 66
ARTICLE 11. MISCELLANEOUS........................................... 66
11.1 GOVERNING LAW......................................... 66
11.2 SUBMISSION TO JURISDICTION............................ 67
11.3 SERVICE OF PROCESS.................................... 67
11.4 JURY TRIAL............................................ 68
11.5 LIMITATION OF LIABILITY............................... 68
11.6 Delays................................................ 68
11.7 Notices............................................... 68
11.8 Assignments and Participations........................ 68
11.9 Confidentiality....................................... 70
11.10 Indemnification....................................... 70
11.11 Amendments and Waivers................................ 70
11.12 Counterparts and Effectiveness........................ 71
11.13 Severability.......................................... 71
11.14 Maximum Rate.......................................... 72
11.15 Entire Agreement; Successors and Assigns.............. 72
11.16 Joint and Several Liability of Credit Parties......... 72
ARTICLE 12. COMPLIANCE WITH APPLICABLE GAMING LAWS.................. 73
12.1 Licensing by Gaming Authorities....................... 73
12.2 Finding of Suitability of Lender...................... 73
12.3 Cooperation with Gaming Authorities................... 73
12.4 Further Limitations................................... 73
12.5 Stock Pledge Restrictions............................. 73
</TABLE>
vii
<PAGE>
ANNEXES
-------
ANNEX I List of Lenders; Commitment Amounts; Applicable
Lending Offices
SCHEDULES
---------
SCHEDULE A Closing Document List
SCHEDULE B Disclosure Schedules
SCHEDULE B, PART 6.1 States in which Qualified
SCHEDULE B, PART 6.9 Contingent Obligations and Other Liabilities
SCHEDULE B, PART 6.10 Chief Executive Offices; Locations of Collateral
SCHEDULE B, PART 6.11 Subsidiaries
SCHEDULE B, PART 6.12 Pending Judgements, Litigation and other Claims
SCHEDULE B, PART 6.14 Labor Contracts
SCHEDULE B, PART 6.16 Plans
SCHEDULE B, PART 6.17 Environmental Matters
SCHEDULE B, PART 6.20 Tax Matters; Tax Sharing Agreements
SCHEDULE B, PART 6.21 Material Contracts
SCHEDULE B, PART 8.8 Existing Indebtedness
SCHEDULE B, PART 8.9 Existing Liens
EXHIBITS
--------
EXHIBIT A Form of Borrowing Base Certificate
EXHIBIT B Form of Extension Request
EXHIBIT C Form of LIBOR Election Notice
EXHIBIT D Form Notice of Borrowing
EXHIBIT E Form of Revolving Note
EXHIBIT F Form of Term Loan A Note
EXHIBIT G Form of Term Loan B Note
EXHIBIT H Form of Compliance Certificate
EXHIBIT I Form of Assignment and Assumption Agreement
viii
<PAGE>
THIS CREDIT AGREEMENT ("CREDIT AGREEMENT") is entered into as of October
24, 1997, among MIKOHN GAMING CORPORATION, a Nevada corporation ("BORROWER"),
each financial institution identified on ANNEX I (together with its successors
and permitted assigns, hereinafter referred to individually as a "LENDER" and
collectively as "LENDERS"), and FIRST SOURCE FINANCIAL LLP, an Illinois
registered limited liability partnership (in its individual capacity,
hereinafter referred to as "FSFP"), acting in its capacity as agent for the
Lenders (in such capacity, together with its successors in such capacity,
hereinafter referred to as the "AGENT").
ARTICLE 1. DEFINITIONS.
-----------
1.1 GENERAL DEFINITIONS.
-------------------
ACCOUNT has the meaning set forth in the Security Agreement.
-------
AFFILIATE of a Person means another Person who directly or indirectly
---------
controls, is controlled by, is under common control with or is a director or
officer of, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a business.
AGENT see Preamble.
----- --------
AGENT ADVANCES has the meaning set forth in SECTION 2.1.4.
--------------
ANNUAL FEE means the annual fee payable by Borrower to Agent pursuant to
----------
SECTION 2.7.2.
APPLICABLE GAMING LAWS means those laws and regulations pursuant to which
----------------------
any Gaming Authority possesses regulatory, licensing or permit authority over
gaming activities or the manufacture or distribution of Gaming Equipment by
Borrower or any of its Subsidiaries within any Gaming Jurisdiction, as amended
from time to time.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such Lender's
-------------------------
LIBOR Lending Office in the case of a LIBOR Rate Loan, and such Lender's
Domestic Lending Office in the case of a Prime Rate Loan.
ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth in SECTION
-----------------------------------
11.8(B).
AUDITORS means a nationally recognized firm of independent public
--------
accountants selected by Borrower and reasonably satisfactory to Agent; PROVIDED,
THAT for purposes of this Credit Agreement, the firm of Deloitte & Touche L.L.P.
shall be deemed to be satisfactory to Agent.
BANKRUPTCY CODE means Title 11 of the U.S. Code (11 U.S.C. (S)(S) 101 et
---------------
seq.), as amended from time to time, and any successor statute.
<PAGE>
BENEFIT PLAN means a "defined benefit plan" (as defined in Section 3(35) of
------------
ERISA) for which Borrower, any Subsidiary of Borrower or any ERISA Affiliate has
been an "employer" (as defined in Section 3(5) of ERISA) within the past six (6)
years.
BORROWER see Preamble.
-------- --------
BORROWING BASE means, at any time, the sum at such time of (A) eighty-five
--------------
percent (85%) of Eligible Accounts Receivable, PLUS (B) sixty percent (60%) of
Eligible Inventory.
BORROWING BASE CERTIFICATE means a certificate of Borrower concerning the
--------------------------
Borrowing Base, in each case provided under SECTION 7.2 and substantially in the
form of EXHIBIT A.
BUSINESS DAY means any day that is neither a Saturday nor a Sunday nor a
------------
day on which commercial banks in Chicago, Illinois are required or permitted by
law to be closed and, when used in connection with LIBOR Rate Loans, this
definition will also exclude any day on which commercial banks are not open for
dealing in United States dollar deposits in the London (U.K.) interbank market.
CAPITAL EXPENDITURES means, for any Person for any period, the sum of all
--------------------
expenditures which have been, or should have been, capitalized by such Person
for financial statement purposes in accordance with GAAP during such period
(whether payable in cash or other property or accrued as a liability), including
the capitalized portion of capital leases and that portion of Investments made
by such Person allocable to property, plant or equipment (other than Proprietary
Gaming Equipment), without any deduction for trade-ins, salvage values, resales
or similar recoveries; PROVIDED that for purposes of this definition Capital
Expenditures shall exclude:
(A) expenditures made in connection with Proprietary Gaming Equipment;
(B) up to $2,500,000 in connection with the acquisition or improvement
of the JRY Property pursuant to the provisions of that certain Agreement
dated November 7, 1994, as amended, between Borrower and John Renton Young
et. al.;
-- --
(C) in the event Borrower elects to sell the JRY Property, up to
$2,500,000 to acquire and/or improve the JRY Replacement Property, provided
the JRY Property is sold within eighteen months after such amount is
expended to acquire and/or improve the JRY Replacement Property;
(D) in the event Borrower elects to sell the Gulfport Property, up to
$1,000,000 to acquire and/or improve the Gulfport Replacement Property; and
(E) proceeds of a casualty loss applied to the repair or replacement
of the property affected by the casualty loss.
"CASUALTY LOSS", as used herein, means, for any Person, (I) the loss, damage, or
destruction of any asset or property owned or used by such Person, (II) the
condemnation, confiscation, or
2
<PAGE>
other taking, in whole or in part, of any such asset or property, or (III) the
diminishment of the use of any such asset or property so as to render
impracticable or unreasonable the use thereof for its intended purpose.
CASH EQUIVALENTS means either of the following, so long as the same are
----------------
maintained in accounts in which Agent has a perfected security interest: (I)
securities issued, fully guaranteed or insured by the United States, or any of
its agencies or instrumentalities and having maturities of not more than one
year (provided that the full faith and credit of the United States is pledged in
support thereof); (II) time deposits, certificates of deposit and commercial
paper issued by the parent corporation of any domestic commercial bank of
recognized standing having capital and surplus in excess of $200,000,000 and
commercial paper issued by others rated at least A-1 or the equivalent thereof
by S&P or at least P-1 or the equivalent thereof by Moody's and in each case
having maturities of not more than one year, (III) investments in money market
funds substantially all of whose assets comprise securities of the types
described in clauses (I) and (II) above and (IV) repurchase obligations with a
term of not more than seven days for underlying securities of the type described
in clauses (I) and (II) above entered into with any financial institution
meeting the financial qualification specified in clause (II) above.
CEI means Casino Excitement, Inc., a Nevada corporation.
---
CHANGE OF CONTROL means, the occurrence or existence of any of the
-----------------
following events or conditions: (I) Borrower shall cease to maintain direct or
indirect voting control over each Guarantor and each of its other Subsidiaries,
including the right to elect a majority of the board of directors of each such
Person, or (II) the time that Borrower first determines or reasonably should
have known that any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a "person" shall
be deemed to have "beneficial ownership" of all shares that any such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly (including as a result of a
merger or consolidation), of more than 30% of the total voting power in the
aggregate of all classes of capital stock of Borrower then outstanding normally
entitled to vote in elections of directors (but excluding from the percentage of
voting power held by any group the voting power of shares owned by the
Management Holders and their Related Parties who are deemed to be members of the
group, provided that such Management Holders and Related Parties beneficially
own a majority of the total voting power of capital stock of Borrower held by
such group), if at such time the Management Holders and their Related Parties
together shall fail to beneficially own, directly or indirectly, securities
representing at least the same percentage of the combined voting power of such
capital stock as the percentage "beneficially owned" by such person or group or
(III) the individuals who on the Closing Date constituted the board of directors
of Borrower (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of Borrower was approved by a
vote of a majority of the directors still in office who were either directors on
the Closing Date or whose election or nomination for election was previously so
approved or who were elected by the vote of one or more of the Management
Holders or their Related Parties) cease for any reason to constitute a majority
of the Board of Directors of Borrower then in office.
3
<PAGE>
CHANGE OF CONTROL NOTICE has the meaning set forth in SECTION 2.6.4(B).
------------------------
CLOSING DATE means the date on which all conditions set forth in SECTIONS
------------
5.1 and 5.2 are satisfied.
CLOSING DOCUMENT LIST has the meaning set forth in SECTION 5.1.
---------------------
CLOSING FEE means the closing fee payable by Borrower to Agent, for the
-----------
account of the Revolving Lenders and the Term Loan A Lenders, pursuant to
SECTION 2.7.1.
CODE has the meaning set forth in SECTION 1.3.
----
COLLATERAL means the Accounts, Inventory, contract rights, machinery,
----------
equipment, chattel paper, instruments, documents, general intangibles, fixtures,
deposit accounts, books and records, stock of Borrower's Subsidiaries and other
real and personal property of Borrower and Guarantors identified in the
Collateral Documents as security for the Obligations, and the proceeds thereof.
COLLATERAL ACCESS AGREEMENT means an agreement in form and substance
---------------------------
reasonably satisfactory to Agent pursuant to which a mortgagee or lessor of real
property on which Collateral is stored or otherwise located, or a warehouseman,
processor or other bailee of Inventory, acknowledges the Liens of Agent and, in
the case of any such agreement with a mortgagee or lessor, permits Agent access
to and use of such real property for a reasonable amount of time following the
occurrence and during the continuance of an Event of Default to assemble,
complete and sell any Collateral stored or otherwise located thereon.
COLLATERAL DOCUMENTS means, collectively, the Security Agreement and all
--------------------
other stock pledge agreements, mortgages, documents, agreements and instruments
pursuant to which Liens are now or hereafter granted to Agent to secure any or
all of the Obligations.
COMMITMENTS means, collectively, the Revolving Loan Commitments, the Term
-----------
Loan A Commitments and the Term Loan B Commitments.
CONSOLIDATED ENTITY means Borrower and those of its Subsidiaries (including
-------------------
in any event each Guarantor) consolidated with it for purposes of financial
reporting.
CONTINGENT OBLIGATION means, with respect to any Person, any direct,
---------------------
indirect, contingent or non-contingent guaranty or obligation of such Person for
the Indebtedness of another Person, except for endorsements in the ordinary
course of business.
CREDIT DOCUMENTS means, collectively, this Credit Agreement, the Notes, the
----------------
Letters of Credit, the Guaranty, each of the Collateral Documents and all other
documents, agreements and instruments now or hereafter executed in connection
herewith or therewith in each case as modified, amended, extended, restated or
supplemented from time to time.
CREDIT PARTIES means, collectively, Borrower and Guarantors.
--------------
4
<PAGE>
CURRENT ASSETS means, at any date, the amount which, in conformity with
--------------
GAAP, would be set forth opposite the caption "total current assets" (or any
like caption) on a balance sheet of the Consolidated Entity at such date.
CURRENT LIABILITIES means, at any date, the amount which, in conformity
-------------------
with GAAP, would be set forth opposite the caption "total current liabilities"
(or any like caption) on a balance sheet of the Consolidated Entity at such
date, less any portion thereof attributable to the Notes, leases which have
been, or, in accordance with GAAP, should be, recorded as capitalized leases,
bank overdrafts (but only to the extent repaid in full on the Business Day
following creation thereof), or any other Indebtedness incurred hereunder.
CURRENT RATIO means, at any date, the ratio on such date of (A) Current
-------------
Assets (excluding Intangible Assets), less, without duplication, cash and Cash
Equivalents of the Consolidated Entity at such date, to (B) Current Liabilities,
less, without duplication, the aggregate amount of all customer deposits of the
Consolidated Entity at such date.
DEFAULT means an event, condition or default which with the giving of
-------
notice, the passage of time or both would be an Event of Default.
DEFAULTING LENDER has the meaning set forth in SECTION 4.5(A).
-----------------
DEFAULT RATE means with respect to any portion of the Principal Balance,
------------
the per annum interest rate specified in SECTION 2.4.1 with respect to such
portion of the Principal Balance plus 2.0% per annum.
DEFAULT RATE PERIOD means a period of time commencing on the date that an
-------------------
Event of Default has occurred and ending on the date that such Event of Default
is cured or waived.
DEPRECIATION AND AMORTIZATION EXPENSE means, for any period, the amount
-------------------------------------
which, in conformity with GAAP, would be set forth opposite the caption
"depreciation and amortization expenses" (or any like caption) on an income
statement of the Consolidated Entity for such period.
DOLLAR(S) and the sign "$" mean lawful money of the United States of
---------
America.
DOMESTIC LENDING OFFICE means, with respect to any Lender, the office of
-----------------------
such Lender specified as its "DOMESTIC LENDING OFFICE" on ANNEX I, as such annex
may be amended from time to time, which office shall in any event be located in
the United States.
EBITDA means, for any period, Net Income for such period, minus, to the
------ -----
extent included in determining such Net Income, Extraordinary Gains and Interest
Income for such period, plus the sum of the following, to the extent deducted in
----
determining such Net Income: (A) Interest Expense for such period, (B) Income
Tax Expense for such period and (C) Depreciation and Amortization Expense for
such period.
ELIGIBLE ACCOUNTS RECEIVABLE means Accounts (including Accounts arising
----------------------------
under contracts where payments are due over the term of such contracts) of any
Credit Party. In
5
<PAGE>
determining the amount to be so included, the face amount of such Accounts shall
be reduced by the amount of all returns, discounts, deductions, claims, credits,
charges, or other allowances. Unless otherwise approved in writing by Agent, no
Account of any Credit Party shall be deemed to be an Eligible Account Receivable
if:
(A) it arises out of a sale made by such Credit Party to an Affiliate of
such Credit Party or to any other Credit Party; or
(B) it is unpaid more than ninety (90) days after the original payment due
date; or
(C) it is from the same account debtor or its Affiliate and fifty percent
(50%) or more of all Accounts from that account debtor (and its
Affiliates) are ineligible under (b) above; or
(D) the account debtor for the Account is a creditor of such Credit Party,
has asserted in writing a right of setoff against such Credit Party,
has disputed in writing its liability or made any written claim with
respect to the Account or any other Account which has not been
resolved, but in each of the foregoing cases, solely to the extent of
the amount of such actual or asserted right of setoff, or the amount
of such dispute or claim, as the case may be and in all events as
evidenced or asserted in writing; or
(E) the account debtor is (or the assets of the account debtor are) the
subject of an Insolvency Event unless the account debtor has obtained
post-petition financing on terms reasonably acceptable to Agent; or
(F) the Account is not payable in United States dollars or Canadian
dollars or the account debtor for the Account is located outside the
continental United States and Canada, unless the Account is supported
by an irrevocable letter of credit satisfactory to Agent (as to form,
substance and issuer) and assigned to and directly drawable by Agent;
or
(G) the sale to the account debtor is on a guaranteed sale, sale-and-
return, sale on approval or consignment basis or made pursuant to any
other written agreement providing for repurchase or return; or
(H) the account debtor is the United States of America or any department,
agency or instrumentality thereof, unless such Credit Party duly
assigns its rights to payment of such Account to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. (S)(S) 3727 et
seq.); or
(I) except in the case of Accounts arising under contracts where payment
is due over the term of the contract, the goods giving rise to such
Account have not been shipped and delivered to and accepted by the
account debtor, the services giving rise to such Account have not been
performed and accepted or the Account otherwise does not represent a
final sale; or
6
<PAGE>
(J) the Account does not comply in all material respects with all
Requirements of Law; or
(K) the Account is not subject to a valid and perfected first priority
Lien in favor of Agent or does not otherwise conform to the
representations and warranties contained in the Credit Documents.
ELIGIBLE INVENTORY means the aggregate amount of Inventory (other than
------------------
Proprietary Gaming Equipment) of the respective Credit Parties. In determining
the amount to be so included, Inventory shall be valued at the lower of cost or
market on a basis consistent with the Credit Parties' current and historical
accounting practice. Unless otherwise approved in writing by Agent, no
Inventory of any Credit Party shall be deemed Eligible Inventory if:
(A) it is not owned solely by such Credit Party or such Credit Party does
not have good, valid and marketable title thereto; or
(B) it is not located in the United States or Canada; or
(C) it is not located on property owned by a Credit Party or by a third
party that has executed and delivered a Collateral Access Agreement
(other than Proprietary Gaming Equipment located on property owned by
a third party who has not executed and delivered a Collateral Access
Agreement to the extent such Proprietary Gaming Equipment is located
on such property solely for the purpose of a temporary field trial)
and, in the case of Inventory located on property owned by such a
third party, it is segregated or otherwise separately identifiable
from goods of others, if any, stored on such property; or
(D) it is not subject to a valid and perfected first priority Lien in
favor of Agent, except, with respect to such Inventory stored at
locations other than locations owned by a Credit Party, for Liens for
unpaid rent or normal and customary warehousing charges; or
(E) it is subject to a reserve for obsolescence established in accordance
with GAAP;
PROVIDED, however, that notwithstanding the foregoing, Inventory of any Credit
Party which has been sold and shipped to the applicable Account Debtor but with
respect to such Account Debtor has not yet been invoiced shall be deemed
Eligible Inventory until issuance of such invoice, PROVIDED, further that such
Inventory constituted Eligible Inventory immediately prior to such sale.
ERISA means the Employee Retirement Income Security Act of 1974, 29 U.S.C.
-----
(S)(S) 1000 et seq., amendments thereto, successor statutes, and regulations or
guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with Borrower or
---------------
any Subsidiary of Borrower under Sections 414 (b), (c), (m) or (o) of the
Internal Revenue Code.
7
<PAGE>
EUROCURRENCY RESERVE REQUIREMENTS means, for any day as applied to a LIBOR
---------------------------------
Loan, the aggregate (without duplication) of the 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 of Governors of the Federal Reserve System of the
United States or other Governmental Authority having jurisdiction with respect
thereto) prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member
bank of the Federal Reserve System.
EVENT OF DEFAULT has the meaning set forth in ARTICLE 9.
----------------
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, any
------------
successor statute thereto, and the rules, regulations and legally binding
policies of the Securities and Exchange Commission promulgated thereunder, as
amended and in effect from time to time.
EXPENSES means all reasonable costs and expenses of Agent incurred in
--------
connection with the Credit Documents and the transactions contemplated therein,
including, without limitation, (I) the costs of conducting record searches,
examining collateral and receiving and transferring funds, (II) the reasonable
fees and expenses of legal counsel and paralegals, accountants, appraisers and
other consultants, experts or advisors retained by Agent, (III) the cost of
title insurance premiums, real estate survey costs, and fees and taxes in
connection with the filing of financing statements, and (IV) the costs of
preparing and recording Collateral Documents, releases of Collateral, and
waivers, amendments, and terminations of any of the Credit Documents; provided,
however, that EXPENSES shall not include any costs or expenses incurred in
--------
connection with the assignments of or sales of participations in the Loans.
EXPENSES also means all reasonable costs and expenses (including the reasonable
- --------
fees and expenses of legal counsel and other professionals) paid or incurred by
Agent and any Lender (I) during the continuance of an Event of Default, (II) in
enforcing or defending its respective rights under or in respect of this Credit
Agreement, the Credit Documents or any other document or instrument now or
hereafter executed and delivered in connection herewith or therewith, (III)
collecting the Loans, (IV) foreclosing or otherwise collecting upon the
Collateral or any part thereof and (V) in obtaining any legal, accounting or
other advice in connection with any of the foregoing.
EXPIRATION DATE means October 31, 2002 or such later date as may be
---------------
established pursuant to SECTION 2.1.2.
EXTENSION REQUEST means a request by Borrower to Agent to extend the
-----------------
Expiration Date, in the form of EXHIBIT B.
EXTRAORDINARY GAINS means, for any period, the amount which, in conformity
-------------------
with GAAP, would be set forth opposite the caption "extraordinary gains" (or any
like captions), as applicable, on an income statement of the Consolidated Entity
for such period.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate per
------------------
annum for each day during such period equal to 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 for such day (or, if such
day is not a Business Day, for the next preceding Business
8
<PAGE>
Day) by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
such day on such transactions received by Agent from three Federal Funds brokers
of recognized standing selected by Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal Reserve
---------------------
System or any Governmental Authority succeeding to its functions.
FEE LETTER means that certain letter of even date herewith from Borrower to
----------
Agent.
FEES means, collectively, the Closing Fee, the Annual Fee, the Unused Line
----
Fee, the Letter of Credit Fees and the Issuing Bank Fees.
FINANCIAL STATEMENTS means the consolidated and consolidating balance
--------------------
sheets, statements of operations, statements of cash flows and statements of
changes in shareholder's equity of the Consolidated Entity for the period
specified, prepared in accordance with GAAP and consistently with prior
practices.
FIXED CHARGE COVERAGE RATIO means, for any period, the ratio of (A) EBITDA
---------------------------
for such period minus Capital Expenditures made during such period to (B) Fixed
-----
Charges for such period.
FIXED CHARGES means, for any period, the sum of (A) Interest Expense for
-------------
such period, (B) principal payments and fees, premiums and other charges on
Indebtedness of Borrower and its Subsidiaries for such period which are due and
payable during such period, (C) Income Tax Expense for such period and (D) all
dividends paid on the capital stock of Borrower during such period and all
amounts paid to redeem or purchase any of such capital stock during such period.
FOREIGN SUBSIDIARIES means the Subsidiaries of Borrower designated as
--------------------
"Foreign Subsidiaries" on SCHEDULE B, PART 6.11.
FSFP see Preamble.
---- --------
FUNDING DATE means the date of disbursement of all or any portion of a
------------
Loan.
GAAP means generally accepted accounting principles in the United States as
----
in effect from time to time.
GAMING AUTHORITIES means, collectively, all international, federal, state
------------------
and local regulatory and licensing agencies and bodies with authority over
gaming in any Gaming Jurisdiction.
GAMING EQUIPMENT means all casino equipment and supplies including, without
----------------
limitation, slot machines, gaming tables, cards, dice, gaming chips, player
tracking systems and all other gaming devices, cashless wagering systems and
associated equipment (as those terms are defined under Applicable Gaming Laws)
and related equipment and supplies used in the operation of a casino.
9
<PAGE>
GAMING JURISDICTION means all jurisdictions and their political
-------------------
subdivisions in which Borrower or any of its Subsidiaries conducts gaming
activities or manufactures or distributes Gaming Equipment.
GOOD FUNDS means United States dollars available in federal funds to Agent
----------
at or before 11:30 a.m., Chicago time, on a Business Day.
GOVERNING DOCUMENTS means certificates or articles of incorporation, by-
-------------------
laws and other similar organizational or governing documents.
GOVERNMENTAL AUTHORITY means any nation or government, any state or other
----------------------
political subdivision thereof and any other entity having and/or exercising
executive, legislative, judicial, regulatory or administrative authority and
performing functions of or pertaining to government, including without
limitation the NAIC and any Gaming Authority.
GUARANTORS means CEI, MGC and Mikohn Nevada.
----------
GUARANTY means the Guaranty of even date herewith executed by Guarantors in
--------
favor of Agent, as amended, restated, supplemented or otherwise modified from
time to time.
GULFPORT PROPERTY means the real property owned by Borrower housing
-----------------
Borrower's operations in Gulfport, Mississippi and commonly known as 4708 Hewes
Avenue, Gulfport, Mississippi.
GULFPORT REPLACEMENT PROPERTY means any real property acquired by Borrower
-----------------------------
in substitution for the Gulfport Property.
HIGHEST LAWFUL RATE means, at any given time during which any Obligations
-------------------
shall be outstanding hereunder, the maximum nonusurious interest rate that at
any time or from time to time may be contracted for, taken, reserved, charged or
received on such Obligations, under the laws of the State of Illinois (or the
law of any other jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Credit Agreement and any of the other
Credit Documents), or under applicable federal laws which may presently or
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than under the State of Illinois (or such other jurisdiction's) law, in any
case after taking into account, to the extent permitted by applicable law, any
and all relevant payments or charges under this Credit Agreement and any other
Credit Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
INCOME TAX EXPENSE means, for any period, the amount which, in conformity
------------------
with GAAP, would be set forth opposite the caption "income tax expense" (or any
like caption) on an income statement of the Consolidated Entity for such period.
INDEBTEDNESS of a Person means, without duplication, (A) indebtedness for
------------
borrowed money or for the deferred purchase price of property or services (other
than deferred compensation to employees and trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
whether on open account or evidenced by a
10
<PAGE>
note, bond, debenture or similar instrument, (B) obligations under capital
leases, (C) reimbursement obligations for letters of credit, banker's
acceptances or other credit accommodations, whether drawn or undrawn, (D)
liabilities, as determined by Agent, under any Interest Rate Agreement, (E)
Contingent Obligations and (F) Indebtedness secured by any Lien on any property
of that Person, even if that Person has not assumed such Indebtedness.
INSOLVENCY EVENT means, with respect to any Person, the occurrence of any
----------------
of the following: (A) such Person shall be adjudicated insolvent or bankrupt, or
generally fail to pay, or admit in writing its inability to pay, its debts as
they become due, (B) the voluntary commencement of any proceeding or the filing
of any petition under any bankruptcy, insolvency or similar law, (C) the seeking
of dissolution or reorganization or the appointment of a receiver, trustee,
custodian or liquidator for it or a substantial portion of its property, assets
or business or to effect a plan or other arrangement with its creditors, (D) the
filing of any answer admitting the jurisdiction of the court and the material
allegations of an involuntary petition filed against it in any bankruptcy,
insolvency or similar proceeding, (E) the making by such Person of a general
assignment for the benefit of its creditors, or the consent to, or acquiescence
in the appointment of, a receiver, trustee, custodian or liquidator for a
substantial portion of such Person's property, assets or business. INSOLVENCY
----------
EVENT shall also mean, with respect to any Person, the occurrence of any of the
- -----
following: an involuntary proceeding or involuntary petition shall be commenced
or filed against such Person under any bankruptcy, insolvency or similar law
seeking the dissolution or reorganization of it or the appointment of a
receiver, trustee, custodian or liquidator for it or of a substantial part of
its property, assets or business, or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied against a substantial
part of its property, assets or business, and such proceedings or petitions
shall not be dismissed, or such writ, judgment, warrant of attachment, execution
or similar process shall not be released, vacated or fully bonded, within thirty
(30) days after commencement, filing, or levy, as the case may be, or any order
for relief shall be entered in any such proceeding.
INTANGIBLE ASSETS means, with reference to the Consolidated Entity,
-----------------
licenses, franchises, patents, patent applications, trademarks, trademark
applications, tradenames, copyrights, copyright applications, computer software
rights, goodwill and research and development expense or other like intangibles
shown on the consolidated balance sheet of the Consolidated Entity.
INTEREST EXPENSE means, for any period, the amount which, in conformity
----------------
with GAAP, would be set forth opposite the caption "interest expense" (or any
like caption) on an income statement of the Consolidated Entity for such period,
after giving effect to any payments received by the Consolidated Entity under
Interest Rate Agreements during such period, PROVIDED that for purposes of this
definition Interest Expense shall exclude amortization of capitalized debt
issuance costs.
INTEREST INCOME means, for any period, the amount which, in conformity with
---------------
GAAP, would be set forth opposite the caption "interest income" (or any like
caption) on an income statement of the Consolidated Entity for such period.
11
<PAGE>
INTEREST PERIOD means a period (I) commencing (A) on the applicable Funding
---------------
Date, if Borrower prior thereto has elected pursuant to subsection 2.5.1 to have
all or a portion of the Loan to be disbursed on such date bear interest from
such date at a LIBOR Rate, (B) with respect to the conversion of all or a
portion of a Prime Rate Loan to a LIBOR Loan, on the Business Day specified by
Borrower in the applicable LIBOR Election Notice and (C) with respect to the
continuation as a LIBOR Loan of all or a portion of a then existing LIBOR Loan
after the expiration of the Interest Period applicable to such existing LIBOR
Loan, on the last day of the Interest Period applicable to such existing LIBOR
Loan, and (II) ending one, three or six months thereafter, as selected by
Borrower in its LIBOR Election Notice; provided, however, that:
(1) if any Interest Period otherwise would end on a day that is not a
Business Day, such Interest Period shall end on 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; and
(2) any Interest Period that otherwise would extend beyond the
Maturity Date shall end on the Maturity Date.
INTEREST RATE AGREEMENT means any interest rate protection or hedge
-----------------------
agreement, including, without limitation, interest rate future, option, swap,
and cap agreements.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, amendments
---------------------
thereto, successor statutes, and regulations or guidance promulgated thereunder.
INVENTORY has the meaning set forth in the Security Agreement.
---------
INVESTMENT means all expenditures made and all liabilities incurred
----------
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or similar
transfers of property to, or acquisition of substantially all the assets of, a
Person. In determining the aggregate amount of Investments outstanding at any
particular time, (I) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and outstanding; (II) there shall be deducted in respect of each such
Investment any amount received as a return of capital or repayment of a loan
(but only by repurchase, redemption, retirement, repayment, liquidating dividend
or liquidating distribution); (III) there shall not be deducted in respect of
any Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise; and (IV) there shall not be deducted from the
aggregate amount of Investments any decrease in the market value thereof.
ISSUING BANK means U.S. Bank, Bank of America or any other financial
------------
institution that is acceptable to Agent and Borrower which may at any time issue
or be requested to issue a Letter of Credit for the account of Borrower.
ISSUING BANK FEES has the meaning set forth in SECTION 2.7.4(B).
-----------------
12
<PAGE>
JRY PROPERTY means the real property used in connection with Borrower's
------------
outdoor lighting and sign business, which real property is commonly known as
3665 West Diablo Drive, Las Vegas, Nevada.
JRY REPLACEMENT PROPERTY means any real property acquired by Borrower in
------------------------
substitution for the JRY Property, which may or may not be acquired prior to any
disposition of the JRY Property.
LENDER(S) see Preamble.
--------- --------
LENDER ADVANCES has the meaning set forth in SECTION 2.1.4.
---------------
LETTER OF CREDIT FEE has the meaning set forth in SECTION 2.7.4(A).
--------------------
LETTER OF CREDIT OBLIGATIONS means, without duplication, the sum of the
----------------------------
aggregate undrawn face amount of all Letters of Credit outstanding, PLUS the
aggregate amount of all drawings under Letters of Credit for which Borrower has
not reimbursed the Issuing Bank, PLUS the aggregate amount of all payments made
by Revolving Lenders to the Issuing Bank for their participations in Letters of
Credit, for which Borrower has not reimbursed such Revolving Lenders.
LETTER OF CREDIT REQUEST has the meaning set forth in SECTION 3.3.
------------------------
LETTERS OF CREDIT means all letters of credit, issued for the account of
-----------------
Borrower under ARTICLE 3 and all amendments, renewals, extensions or
replacements thereof.
LIBOR LENDING OFFICE means, with respect to any Lender, the office of such
--------------------
Lender specified as its "LIBOR LENDING OFFICE" opposite its name on ANNEX I, as
such annex may be amended from time to time (or, if no such office is specified,
its Domestic Lending Office).
LIBOR ELECTION NOTICE means a notice by Borrower to Agent to have a portion
---------------------
of the Principal Balance of the Revolving Loans or Term Loan A bear interest at
a LIBOR Rate, in the form of EXHIBIT C.
LIBOR LOAN means each portion of the Principal Balance of the Revolving
----------
Loans or Term Loan A which bears interest determined by reference to a LIBOR
Rate.
LIBOR RATE DETERMINATION DATE means the date for determining a LIBOR Rate,
-----------------------------
which shall be one Business Day prior to the date of commencement of the
applicable Interest Period.
LIBOR RATE means, for any Interest Period, an interest rate per annum
----------
obtained by dividing (I) the rate of interest published in The Wall Street
Journal on the applicable LIBOR Rate Determination Date under the caption "Money
Rates; London Interbank Offered Rates (LIBOR)," with respect to a time period
equal to such Interest Period by (II) 1.00 minus the Eurocurrency Reserve
-----
Requirements, if any, in effect on the applicable LIBOR Rate Determination Date;
provided, however, that if such publication is not available or such rate is
- -------- -------
13
<PAGE>
not set forth therein, the LIBOR Rate shall be determined on the basis of any
other source reasonably acceptable to the Majority Lenders.
LIBOR RATE LOAN means a Loan that bears interest determined by reference to
---------------
a LIBOR Rate in accordance with the terms and provisions of this Credit
Agreement.
LIEN means any lien, claim, charge, pledge, security interest, assignment,
----
hypothecation, deed of trust, mortgage, lease, conditional sale, retention of
title, or other preferential arrangement having substantially the same economic
effect as any of the foregoing, whether voluntary or imposed by law.
LOAN ACCOUNT has the meaning set forth in SECTION 4.1.
------------
LOANS means the Revolving Loans, Term Loan A and Term Loan B.
-----
LOAN YEAR means a period of time from the Closing Date or any anniversary
---------
of the Closing Date to the immediately succeeding anniversary of the Closing
Date.
MAJORITY LENDERS means, at any time, those Lenders holding in the aggregate
----------------
more than fifty percent (50%) of the sum of (I) the Principal Balance at such
time PLUS (II) the Letter of Credit Obligations outstanding at such time.
MAKE-WHOLE AMOUNT has the meaning set forth in SECTION 2.8.3(B).
-----------------
MANAGEMENT HOLDERS means the executive officers and directors of Borrower
------------------
on the Closing Date.
MATERIAL ADVERSE EFFECT means a material adverse effect on (I) the
-----------------------
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Credit Parties taken as a whole, (II)
the ability of any Credit Party to perform its obligations under the Credit
Documents to which it is a party, or on the ability of Agent or the Lenders to
enforce the Obligations or realize upon the Collateral, or (III) the value of
the Collateral or the amount which Agent or the Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral.
MATERIAL CONTRACT means any contract or other arrangement to which a Credit
-----------------
Party or any Subsidiary of a Credit Party is a party (other than the Credit
Documents) for which breach, nonperformance, cancellation or failure to renew
could reasonably be expected to have a Material Adverse Effect.
MATURITY DATE means the earlier of (I) October 1, 2004 or (II) or the date
-------------
on which the Obligations are accelerated and the Commitments are terminated
pursuant to SECTION 9.2 of this Credit Agreement.
MIKOHN NEVADA means Mikohn Nevada, a Nevada corporation.
-------------
14
<PAGE>
MGC means MGC, Inc., a Nevada corporation.
---
MOODY'S means Moody's Investors Services, Inc., or any successor thereto.
-------
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in Section
------------------
4001(a) (3) of ERISA) to which Borrower, any Subsidiary of Borrower or any ERISA
Affiliate has contributed within the past six years or with respect to which
Borrower or any Subsidiary of Borrower could reasonably be expected to incur any
liability.
NET CASH PROCEEDS means, with respect to any transaction involving a Credit
-----------------
Party, the gross proceeds thereof in the form of cash or Cash Equivalents, net
of the sum of the following (without duplication): (A) payments made to retire
obligations (other than to a Credit Party) that are attributable to or secured
by the properties that are the subject of a sale, assignment or other
disposition which is part of the transaction, (B) actual brokerage commissions
and other fees and expenses related to such transaction (including, without
limitation, in the case of a sale, assignment or other disposition of assets or
the issuance and sale of capital stock, all offering related expenses arising in
connection with such transaction including, without limitation, investment
banking or similar fees, underwriting discounts and commissions, legal and
accounting fees, transfer agent and registrar fees, and all other costs and
expenses required to be capitalized in accordance with GAAP) and (C) all taxes
actually paid or estimated in good faith to be or become payable as a result of
such transaction.
NET INCOME means, for any period, an amount equal to the net income or loss
----------
of the Consolidated Entity as it would appear on an income statement of the
Consolidated Entity for such period prepared in accordance with GAAP.
NET WORTH means, at any date, the amount which, in conformity with GAAP,
---------
would be set forth opposite the caption "shareholders' equity" (or any like
caption) on a balance sheet of the Consolidated Entity at such date.
NOTICE OF BORROWING means notice by Borrower to Agent requesting a
-------------------
Revolving Loan, in the form of EXHIBIT D.
NOTE means any Revolving Note, Term Loan A Note or Term Loan B Note.
----
OBLIGATIONS means the unpaid principal and interest hereunder (including
-----------
interest accruing on or after the occurrence of an Insolvency Event) in respect
of the Loans, reimbursement obligations under Letters of Credit, Fees, Expenses
and all other obligations and liabilities of Borrower to Agent, the Issuing Bank
or any of the Lenders under this Credit Agreement, the Revolving Notes, the Term
Notes or any of the other Credit Documents.
PERMITTED INVESTMENTS means any of the following:
---------------------
(A) Advances or loans (other than contract receivables) made in the
ordinary course of business not to exceed $350,000 outstanding at any time
to any one Person and $1,000,000 in the aggregate for all Credit Parties
outstanding at any one time;
15
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(B) Loans, investments and advances between a Credit Party and any
other Credit Party;
(C) Cash Equivalents;
(D) Investments in account debtors received in connection with the
bankruptcy or reorganization, or in settlement of delinquent obligations,
of customers, arising in the ordinary course of business and in accordance
with applicable collection and credit policies established by Borrower or
such Subsidiary, as the case may be;
(E) Investments existing as of the Closing Date by any Credit Party in
any of Borrower's Subsidiaries which is not a Credit Party disclosed on
SCHEDULE B, PART 6.11;
(F) Investments made with capital stock of Borrower; and
(G) such other Investments as the Majority Lenders may approve in
writing in the exercise of its sole discretion.
PERMITTED LIENS means the Liens referred to in CLAUSES (A) through (I) of
---------------
SECTION 8.9.
PERSON means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or government (including any
division, agency or department thereof), and its successors, heirs and assigns.
PLAN means any Benefit Plan, Multiemployer Plan, or Retiree Health Plan, or
----
any employee benefit plan, fund, program or arrangement, whether oral or
written, maintained or contributed to by Borrower or any Subsidiary of Borrower,
or with respect to which any of them could reasonably be expected to incur
liability.
POST-CLOSING AGREEMENT means the Post-Closing Agreement of even date
----------------------
herewith between Borrower and Agent.
PRIME LENDING RATE means at any time the rate per annum then most recently
------------------
announced by The First National Bank of Chicago, a national banking association,
as its corporate base rate at Chicago, Illinois (or if such rate is not being
quoted, the rate which is the successor to such rate, and if no successor is
being quoted, the rate conceptually equivalent to such rate which the domestic
commercial bank having the highest combined capital and surplus of any bank
having its principal office in Chicago, Illinois is quoting). The Prime Lending
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. The First National Bank of Chicago and
each of the Lenders may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
PRIME RATE LOAN means each portion of the Principal Balance of the
---------------
Revolving Loans and Term Loan A other than any portion thereof consisting of
LIBOR Loans.
16
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PRINCIPAL BALANCE means the unpaid principal balance of the Loans or any
-----------------
specified portion thereof outstanding from time to time.
PROPRIETARY GAMING EQUIPMENT means equipment owned by Borrower or any of
----------------------------
its Subsidiaries which is the subject of an operating lease, license or revenue
sharing or participation agreement under which Borrower or its Subsidiary is the
lessor, licensor or vendor.
PRO RATA SHARE means (I) with respect to a Revolving Lender, a fraction
--------------
(expressed as a percentage), the numerator of which is the amount of such
Revolving Lender's Revolving Loan Commitment and the denominator of which is the
sum of all Revolving Loan Commitments, (II) with respect to a Term Loan A
Lender, a fraction (expressed as a percentage), the numerator of which is the
amount of such Term Loan A Lender's Term Loan A Commitment and the denominator
of which is sum of all Term Loan A Commitments and (III) with respect to a Term
Loan B Lender, a fraction (expressed as a percentage), the numerator of which is
the amount of such Term Loan B Lender's Term Loan B Commitment and the
denominator of which is the sum of all Term Loan B Commitments.
PURCHASE MONEY LIENS has the meaning set forth in SECTION 8.8(E).
--------------------
REGISTER has the meaning set forth in SECTION 11.8(C).
--------
REGULATION D means Regulation D of the Federal Reserve Board, as in effect
------------
from time to time.
REGULATION G means Regulation G of the Federal Reserve Board, as in effect
------------
from time to time.
REGULATION Z means Regulation Z of the Federal Reserve Board, as in effect
------------
from time to time.
RELATED FUND means with respect to any Lender that is a fund that invests
------------
in loans, any other fund that invests in loans and is managed by the same
investment advisor as such Lender or by an Affiliate of such investment advisor.
RELATED PARTIES means (I) any spouse or immediate family member of a
---------------
Management Holder or (II) any trust set up for the benefit of a Management
Holder or any of the Persons specified in clause (I).
REPORTABLE EVENT means any of the events described in Section 4043 of ERISA
----------------
and the regulations thereunder.
REQUIREMENT OF LAW means, with respect to any Person, (A) the Governing
------------------
Documents of such Person, (B) any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority binding on
such Person, or (C) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval binding
on a Person or any of its property.
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<PAGE>
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
-------------------
meaning of Section 3(1) of ERISA, and any other plan, program or arrangement,
whether oral or written, that provides benefits to persons after termination of
employment, other than as required by Section 601 of ERISA.
REVOLVING LENDER means any Lender having a Revolving Loan Commitment.
----------------
REVOLVING LOAN means any revolving loan to be made by Revolving Lenders
--------------
pursuant to SECTION 2.1.
REVOLVING LOAN COMMITMENT means, with respect to any Lender, such Lender's
-------------------------
commitment, on the terms and subject to the conditions set forth herein, to make
Revolving Loans and to participate in Letters of Credit, up to the amount set
forth below its name on ANNEX I (as amended from time to time pursuant to
SECTION 11.8(B)) opposite the heading "Revolving Loan Commitment Amount," as
such amount may be reduced from time to time in accordance with the terms and
provisions of this Credit Agreement.
REVOLVING LOAN COMMITMENT TERMINATION DATE means the earliest to occur of
------------------------------------------
(A) the Expiration Date, (B) the date upon which a Change of Control shall occur
and (C) the date on which the Obligations are accelerated and the Commitments
are terminated pursuant to SECTION 9.2 of this Credit Agreement.
REVOLVING NOTE means a promissory note of Borrower payable to the order of
--------------
a Revolving Lender, substantially in the form of EXHIBIT E, as amended,
restated, supplemented or otherwise modified from time to time, and including
all notes issued in replacement of, or in substitution or exchange for, such
Revolving Note.
S&P means Standard & Poor's Ratings Services, a division of The McGraw-Hill
---
Companies, Inc., or any successor thereto.
SECURITY AGREEMENT means the Security Agreement of even date herewith
------------------
executed by the Credit Parties in favor of Agent, as amended, restated,
supplemented or otherwise modified from time to time.
SETTLEMENT DATE has the meaning set forth in SECTION 4.3(A).
---------------
SUBSIDIARY of a Person means a corporation or other entity in which that
----------
Person directly or indirectly owns or controls the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or appoint other managers of such corporation or other
entity.
TERMINATION EVENT means (I) a Reportable Event with respect to any Benefit
-----------------
Plan or Multiemployer Plan; (II) the withdrawal of Borrower, any Subsidiary of
Borrower or any ERISA Affiliate from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a) (2) of ERISA);
(III) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041 (c) of ERISA); (IV) the
18
<PAGE>
institution by the Pension Benefit Guaranty Corporation of proceedings to
terminate a Benefit Plan or Multiemployer Plan; (V) any event or condition (A)
which could reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan or Multiemployer Plan, or (B) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (VI) the partial or
complete withdrawal, within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower, any Subsidiary of Borrower or any ERISA Affiliate from a Multiemployer
Plan.
TERM LOAN A means the term loan to be made by Term Loan A Lenders pursuant
-----------
to SECTION 2.2.
TERM LOAN A COMMITMENT means, with respect to any Lender, such Lender's
----------------------
commitment, on the terms and subject to the conditions set forth herein, to make
Term Loan A, up to the amount set forth below its name on ANNEX I (as amended
from time to time pursuant to SECTION 11.8(B)) opposite the heading "Term Loan A
Commitment Amount," as such amount may be reduced from time to time in
accordance with the terms and provisions of this Credit Agreement.
TERM LOAN A LENDER means any Lender having a Term Loan A Commitment.
------------------
TERM LOAN A NOTE means a promissory note of Borrower payable to the order
----------------
of a Term Loan A Lender or its nominee, substantially in the form of EXHIBIT F,
as amended, restated, supplemented or otherwise modified from time to time, and
including all notes issued in replacement of, or in substitution or exchange
for, such Term Loan A Note.
TERM LOAN B means the term loan to be made by Term Loan B Lenders pursuant
-----------
to SECTION 2.3.
TERM LOAN B COMMITMENT means, with respect to any Lender, such Lender's
----------------------
commitment, on the terms and subject to the conditions set forth herein, to make
Term Loan B, up to the amount set forth below its name on ANNEX I (as amended
from time to time pursuant to SECTION 11.8(B)) opposite the heading "Term Loan B
Commitment Amount," as such amount may be reduced from time to time in
accordance with the terms and provisions of this Credit Agreement.
TERM LOAN B LENDER means any Lender having a Term Loan B Commitment.
------------------
TERM LOAN B NOTE means a promissory note of Borrower payable to the order
----------------
of a Term Loan B Lender or its nominee, substantially in the form of EXHIBIT G,
as amended, restated, supplemented or otherwise modified from time to time, and
including all notes issued in replacement of, or in substitution or exchange
for, such Term Loan B Note.
TERM LOAN LENDER means a Term Loan A Lender or a Term Loan B Lender.
----------------
TERM LOANS means, collectively, Term Loan A and Term Loan B.
----------
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UNUSED LINE FEE means the unused line fee payable by Borrower to Revolving
---------------
Lenders pursuant to SECTION 2.7.3.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise defined or
-----------------------------------
specified herein, all accounting terms used in this Credit Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the Financial Statements referred to in SECTION 6.9. All
accounting determinations for purposes of determining compli ance with the
financial covenants contained in ARTICLE 8 shall be made in accordance with GAAP
as in effect on the Closing Date and applied on a basis consistent in all
material respects with the audited Financial Statements delivered to Agent on or
before the Closing Date. The Financial Statements required to be delivered
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. If GAAP shall change from the basis used in
preparing the audited Financial Statements delivered to Agent on or before the
Closing Date, the certificates required to be delivered pursuant to SECTION 7.1
demonstrating compliance with the covenants contained herein shall include, at
the election of Borrower or upon the request of the Majority Lenders,
calculations setting forth the adjustments necessary to demonstrate that
Borrower is in compliance with the financial covenants based upon GAAP as in
effect on the Closing Date.
1.3 OTHER TERMS; HEADINGS. Terms used herein and not otherwise defined in
---------------------
ARTICLE 1 that are defined in the Uniform Commercial Code in effect in the State
of Illinois (the "CODE") shall have the meanings given in the Code. Each of the
words "hereof," "herein," and "hereunder" refer to this Credit Agreement as a
whole. An Event of Default shall "continue" or be "continuing" until such Event
of Default has been waived in accordance with SECTION 11.11 hereof. References
to Articles, Sections, Annexes, Schedules, and Exhibits are internal references
to this Credit Agreement, and to its attachments, unless otherwise specified.
The headings and the Table of Contents are for convenience only and shall not
affect the meaning or construction of any provision of this Credit Agreement.
ARTICLE 2. LOANS AND TERMS OF PAYMENT.
--------------------------
2.1 REVOLVING LOAN COMMITMENT.
-------------------------
2.1.1 AMOUNT AND DISBURSEMENT OF REVOLVING LOANS. Subject to the
------------------------------------------
terms and conditions set forth in this Credit Agreement, and in reliance on
the representations and warranties of Borrower set forth herein, after the
Closing Date and to but excluding the Revolving Loan Commitment Termination
Date, each Revolving Lender severally agrees to make revolving loans to
Borrower in an amount not to exceed at any time its Pro Rata Share of the
lesser at such time of (A) $10,000,000 and (B) the Borrowing Base MINUS, in
each case, the then outstanding Letter of Credit Obligations. The proceeds
of Revolving Loans shall be disbursed by Agent directly to the Issuing Bank
in the circum stances described in SECTION 3.5, and in all other
circumstances by Agent or the Revolving Lenders, as the case may be, to or
as directed by Borrower.
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<PAGE>
2.1.2 EXTENSION OF EXPIRATION DATE. Borrower, pursuant to an
----------------------------
Extension Request delivered to Agent not more than 120, nor less than 30,
Business Days prior to the then scheduled Expiration Date, may request the
Revolving Lenders to extend all or part (as specified in such Extension
Request) of the Revolving Loan Commitment for up to two additional one year
periods, each expiring on the anniversary of the then scheduled Expiration
Date (or, if such date is not a Business Day, on the next succeeding
Business Day). If no Default or Event of Default has occurred and is
continuing on the then scheduled Expiration Date, the Revolving Loan
Commitment shall be extended for an additional one year period as so
requested, but in no event beyond October 31, 2004. On the Expiration
Date, the Revolving Loan Commitment of each Revolving Lender automatically
shall reduce to zero and may not be reinstated.
2.1.3 CONDITIONS OF DISBURSEMENT. The obligation of each Revolving
--------------------------
Lender to disburse its Pro Rata Share of each Revolving Loan is subject to
the satisfaction of the conditions set forth in SECTION 5.2 and the
following conditions:
(A) each Revolving Loan shall be in a minimum amount of $200,000
and integral multiples of $50,000 in excess of such amount; and
(B) Agent shall have received a Notice of Borrowing with respect
to each requested Revolving Loan no later than 12:00 p.m., Chicago
time (I) on the proposed Funding Date (which Funding Date shall be on
a Business Day) with respect to Revolving Loans constituting Prime
Rate Loans and (II) three Business Days in advance of the proposed
Funding Date (which Funding Date shall be on a Business Day) with
respect to Revolving Loans constituting LIBOR Rate Loans.
Any Notice of Borrowing received by Agent shall be irrevocable. Agent and
Lenders shall have the right without further confirmation to assume that
any Notice of Borrowing received by Agent has been given by a Person duly
authorized to act on behalf of Borrower.
2.1.4 MANNER OF FUNDING. Revolving Loans may be made available to
-----------------
Borrower directly by the Revolving Lenders ("LENDER ADVANCES") or, in the
circumstances described in SUBSECTION 2.1.4(B), from Agent acting on behalf
of the Revolving Lenders ("AGENT ADVANCES").
(A) LENDER ADVANCES. Subject to the determination by Agent and
the Revolving Lenders that the conditions for borrowing contained in
this SECTION 2.1 and in SECTION 5.2 are satisfied, upon receipt of a
Notice of Borrowing from Borrower received by Agent before 12:00 noon
Chicago time on a Business Day, Lender Advances of Revolving Loans
shall be made to the extent of each Revolving Lender's Pro Rata Share
of the requested Revolving Loan.
(B) AGENT ADVANCES. Agent is authorized by the Revolving
Lenders, but is not obligated, to make Agent Advances upon a receipt
of any Notice of Borrowing received by Agent before 3:00 P.M. Chicago
time on a Business Day. Agent Advances shall be subject to periodic
settlement with the Revolving
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<PAGE>
Lenders under SECTION 4.3. Agent Advances may be made only in the
following circumstances:
(I) NORMAL COURSE AGENT ADVANCES. For administrative
convenience, Agent may, but is not obligated, to make Agent
Advances up to the amount available for borrowing under SECTION
2.1.1 in reliance upon the actual or deemed representations of
Borrower under SECTION 5.2 that the conditions for borrowing are
satisfied.
(II) OTHER AGENT ADVANCES. When the conditions for
borrowing under SECTION 5.2 cannot be fulfilled, and
notwithstanding the Borrowing Base limitation of SECTION 2.1.1,
Agent may, but is not obligated, to continue to make Agent
Advances for seven (7) Business Days or until sooner instructed
by the Majority Lenders to cease, in an aggregate amount at any
time not to exceed $1,000,000.
2.1.5 NOTICE OF REQUEST FOR LENDER ADVANCES. Subject to the last
-------------------------------------
sentence of this SECTION 2.1.5, Agent shall give each Revolving Lender
prompt notice by telephone or facsimile transmission of a Notice of
Borrowing that is received pursuant to SECTION 2.1.3 and is to be satisfied
by Lender Advances. No later than 3:00 P.M. Chicago time on the date of
receipt of such notice, each Revolving Lender shall make available for the
account of its Applicable Lending Office to Agent at Agent's address for
deposit into such account as Borrower may direct, its Pro Rata Share of
such Revolving Loan in immediately available funds. Unless Agent receives
contrary written notice prior to any such Revolving Loan, it is entitled to
assume that each Revolving Lender will make available its Pro Rata Share of
the Revolving Loan and in reliance upon that assumption, but without any
obligation to do so, may advance such Pro Rata Share on behalf of the
Revolving Lender, without the necessity of giving daily notice to each
Revolving Lender of the receipt of a Notice of Borrowing.
2.1.6 REVOLVING NOTE. The Revolving Loans of each Revolving Lender
--------------
shall be evidenced by a Revolving Note dated as of the Closing Date and
executed by Borrower in favor of such Revolving Lender in the amount of
such Revolving Lender's Revolving Loan Commitment.
2.1.7 REBORROWING. Subject to the conditions set forth in this
-----------
Credit Agreement, Borrower from time to time may reborrow all or any
portion of any Revolving Loan which is repaid.
2.2 TERM LOAN A.
-----------
2.2.1 AMOUNT AND DISBURSEMENT. Term Loan A shall consist of a term
-----------------------
loan from the Term Loan A Lenders to Borrower in the aggregate amount of
$15,000,000. Subject to the terms and conditions set forth in this Credit
Agreement, and in reliance on the representations and warranties of
Borrower set forth herein, on the Closing Date each Term Loan A Lender
severally agrees to disburse its Pro Rata Share of Term Loan A to or as
directed by Borrower.
22
<PAGE>
2.2.2 TERM NOTE A. Term Loan A shall be evidenced by a Term Loan A Note
-----------
dated as of the Closing Date and executed by Borrower in favor of each Term
Loan A Lender in the amount of such Term Loan A Lender's Term Loan A
Commitment.
2.2.3 REBORROWING. Borrower shall not be entitled to reborrow any
-----------
portion of Term Loan A which is repaid or prepaid.
2.3 TERM LOAN B.
-----------
2.3.1 AMOUNT AND DISBURSEMENT. Term Loan B shall consist of a term
-----------------------
loan from the Term Loan B Lenders to Borrower in the aggregate amount of
$15,000,000. Subject to the terms and conditions set forth in this Credit
Agreement, and in reliance on the representations and warranties of
Borrower set forth herein, on the Closing Date each Term Loan B Lender
severally agrees to disburse its Pro Rata Share of Term Loan B to or as
directed by Borrower.
2.3.2 TERM NOTE B. Term Loan B shall be evidenced by a Term Loan B
-----------
Note dated as of the Closing Date and executed by Borrower in favor of each
Term Loan B Lender in the amount of such Term Loan B Lender's Term Loan B
Commitment.
2.3.3 REBORROWING. Borrower shall not be entitled to reborrow any
-----------
portion of Term Loan B which is repaid or prepaid.
2.4 INTEREST.
--------
2.4.1 INTEREST RATES. Except as provided in subsection 2.4.2, the
--------------
Principal Balance of:
(A) Revolving Loans consisting of (I) Prime Rate Loans shall bear
interest at a rate per annum equal to the Prime Lending Rate PLUS
1.50% per annum and (II) LIBOR Rate Loans shall bear interest at a
rate per annum equal to the LIBOR Rate applicable to such LIBOR Rate
Loans PLUS 2.50% per annum;
(B) Term Loan A consisting of (I) Prime Rate Loans shall bear
interest at a rate per annum equal to the Prime Lending Rate PLUS
2.00% per annum and (II) LIBOR Rate Loans shall bear interest at a
rate per annum equal to the LIBOR Rate applicable to such LIBOR Rate
Loans PLUS 3.00% per annum; and
(C) Term Loan B shall bear interest at a fixed rate equal to
10.00% per annum.
2.4.2 DEFAULT RATE. During a Default Rate Period, the Principal
------------
Balance shall bear interest at the applicable Default Rate.
2.4.3 INTEREST COMPUTATION. Interest on the Principal Balance of
--------------------
Revolving Loans and Term Loan A shall be computed on the basis of a year
consisting of 360 days
23
<PAGE>
and charged for the actual number of days during the period for which
interest is being charged. Interest on the Principal Balance of Term Loan
B shall be computed and charged on the basis of a year consisting of 360
days comprised of twelve months of thirty days each. In computing
interest, the date of funding of a Loan shall be included and the date of
payment shall be excluded.
2.5 LIBOR RATE LOANS.
----------------
2.5.1 ELECTION BY BORROWER. Subject to the provisions of this
--------------------
SECTION 2.5 and provided no Default or Event of Default then exists,
Borrower from time to time may elect to have all or a portion of the
Principal Balance of the Revolving Loans and/or Term Loan A bear or
continue to bear interest determined by reference to a LIBOR Rate, such
election to be exercised by delivery of a LIBOR Election Notice to Agent
c/o Loan Administration, First Source Financial, Inc., 2850 West Golf Road,
5th Floor, Rolling Meadows, Illinois 60008, Telecopy No. (847) 734-7912,
by facsimile transmission not less than three Business Days prior to the
commencement of the applicable Interest Period. Agent shall determine
(which determination shall, absent manifest error, be presumptively
correct) the LIBOR Rate applicable to the relevant LIBOR Loan on the
applicable LIBOR Rate Determination Date and promptly shall give notice
thereof to Borrower. Agent and Lenders shall have the right without
further confirmation to assume that any LIBOR Election Notice received by
Agent has been given by a Person duly authorized to act on behalf of
Borrower. Any LIBOR Election Notice received by Agent shall be
irrevocable. Upon the expiration of an Interest Period the applicable
LIBOR Loan shall be converted to and become a Prime Rate Loan unless such
LIBOR Loan has been continued as a LIBOR Loan in accordance with this
SECTION 2.5.1. Agent shall give each Revolving Lender and Term Loan A
Lender prompt notice by telephone or facsimile transmission of each LIBOR
Election Notice.
2.5.2 LIBOR AND INTEREST PERIOD LIMITATIONS. Each LIBOR Loan shall
-------------------------------------
be in the amount of not less than $1,000,000 or in integral multiples of
$100,000 in excess thereof. At no time shall more than five Interest
Periods be in effect.
2.5.3 EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
------------------------------------------------
UNASCERTAINABLE. If prior to the commencement of any Interest Period Agent
---------------
determines that dollar deposits of the relevant amount for the relevant
Interest Period are not available in the London Interbank Market or the
rate at which such dollar deposits are being offered will not adequately
and fairly reflect the cost to the Revolving Lenders or the Term Loan A
Lenders, as applicable, of maintaining a LIBOR Rate for such Interest
Period, or that by reason of circumstances affecting such market, adequate
and reasonable means do not exist for ascertaining the LIBOR Rate
applicable to such Interest Period, Agent promptly shall give notice of
such determination to Borrower and any LIBOR Election Notice previously
given by Borrower which has not yet become effective shall be deemed to be
cancelled and the right of Borrower to select or maintain LIBOR Rate Loans
shall be suspended until Agent shall notify Borrower, the Revolving Loan
Lenders and the Term Loan A Lenders that the circumstances causing such
suspension no longer exists.
24
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2.5.4 TAX AND OTHER LAWS. In the event that by reason of any law,
------------------
regulation or requirement or interpretation thereof by any Governmental
Authority, or the imposition of any requirement of any such Governmental
Authority, whether or not having the force of law, including the imposition
of any reserve and/or special deposit requirement (other than reserves
included in the Eurocurrency Reserve Requirements), any Revolving Lender or
Term Loan A Lender shall be subjected to any tax, levy, impost, charge,
fee, duty, deduction or withholding of any kind whatsoever (other than any
tax imposed upon the total net income of such Lender) and if any such
measures or any other similar measure shall result in an increase in the
cost to any such Lender of maintaining its share of any LIBOR Loan or in a
reduction in the amount of principal or interest receivable by any such
Lender in respect thereof, then Borrower shall pay to the affected Lender
within 10 days after receipt of a notice from such Lender (which notice
shall be accompanied by a statement in reasonable detail setting forth the
basis for the calculation thereof, which calculation, in the absence of
demonstrable error, shall be conclusive and binding), an amount equal to
such increased cost or reduced amount. At any time after receipt of such
notice Borrower may convert all LIBOR Loans to Prime Rate Loans, and such
conversion shall be effective three Business Days after Agent has received
notice from Borrower of such conversion.
2.5.5 CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time
---------------------------------------------
any law, treaty or regulation, or any interpretation thereof by any
Governmental Authority shall make it unlawful for any Lender to fund or
maintain its share of any LIBOR Loan with monies obtained in the London
Interbank Market, such Lender, upon the occurrence of such event, shall
notify Borrower thereof and thereupon the (i) right of Borrower to make any
LIBOR Election shall be suspended for the duration of such illegality and
(ii) if required by such law, regulation or interpretation, on such date as
shall be specified in such notice all Interest Periods then in effect shall
be terminated, and thereafter all LIBOR Loans shall be deemed converted to
Prime Rate Loans.
2.5.6 INDEMNITY. In addition to any other payments payable by
---------
Borrower to Lenders pursuant to the Credit Documents, Borrower shall
indemnify and reimburse each Revolving Lender and each Term Loan A Lender
on demand for any loss or expense which such Lender may sustain as a
consequence of any prepayment of any LIBOR Loan prior to the expiration of
the Interest Period applicable thereto and/or any failure by Borrower to
make any payment when due of any amount payable with respect to any LIBOR
Loan or borrow the amount set forth in any LIBOR Election Notice on the
date specified therefor, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by such
Lender to fund or maintain the LIBOR Loan to be made or maintained by such
Lender.
2.6 PRINCIPAL AND INTEREST PAYMENTS.
-------------------------------
2.6.1 INTEREST. Except as otherwise provided in SECTIONS 2.6.2(A),
--------
2.6.3, 2.6.4, 2.8.1(B), 2.8.2(C) and 2.8.3(C), interest on the Principal
Balance of:
25
<PAGE>
(A) Revolving Loans shall be payable quarterly in arrears on the
first Business Day of each quarter beginning with the first Business
Day of January, 1998;
(B) Term Loan A shall be payable quarterly in arrears on the
first Business Day of each quarter beginning with the first Business
Day of January, 1998; and
(C) Term Loan B shall be payable semi-annually in arrears on the
first Business Day of the second and fourth quarters of each year
beginning with the first Business Day of April, 1998.
2.6.2 REVOLVING LOAN COMMITMENTS.
--------------------------
(A) REVOLVING LOAN COMMITMENT TERMINATION DATE. On the Revolving
------------------------------------------
Loan Commitment Termination Date, Borrower shall (I) pay to the
Revolving Lenders the Principal Balance of the Revolving Loans
together with all accrued and unpaid interest thereon to the date on
which Agent is in receipt of Good Funds, and any other sums which are
then due and payable to the Revolving Lenders pursuant to terms of any
of the Credit Documents, and (II) subject to the provisions of SECTION
4.2, deposit with Agent for each Letter of Credit then outstanding,
cash or Cash Equivalents in an amount equal to 110% of the greatest
amount drawable thereunder. Such deposit shall be held by Agent and
used to reimburse the Issuing Bank for the amount of each drawing made
under such Letter of Credit, and all other sums owing to the Issuing
Bank with respect to such drawing, as and when each such drawing is
made. Any amounts remaining on deposit with Agent with respect to any
Letter of Credit shall be returned to Borrower upon the earlier to
occur of (i) the expiration of such Letter of Credit or (ii) the date
such Letter of Credit is fully drawn.
(B) OVERADVANCE. If at any time the Principal Balance of the
-----------
Revolving Loans PLUS the Letter of Credit Obligations at such time
exceeds the lesser at such time of (I) $10,000,000 and (II) the
Borrowing Base, Borrower immediately shall pay to the Revolving
Lenders the amount of such excess without the necessity of any demand.
(C) PERMITTED REPAYMENTS. The amount of any other payment of the
--------------------
Principal Balance of the Revolving Loans shall not be less than
$200,000 or integral multiples of $50,000 in excess thereof. Borrower
shall provide not less than one Business Day's prior written notice to
Agent of any such payment of the Principal Balance of the Revolving
Loans.
2.6.3 PRINCIPAL BALANCE OF TERM LOAN A.
--------------------------------
(A) SCHEDULED INSTALLMENTS. The Principal Balance of Term Loan A
----------------------
shall be payable in consecutive semi-annual installments on the first
Business Day
26
<PAGE>
of the second and fourth quarters of each year commencing with the
first Business Day of April, 2002 as follows:
<TABLE>
<CAPTION>
Payment Date Amount of Installment
------------ ---------------------
<S> <C>
April 1, 2002 $2,500,000
October 1, 2002 $2,500,000
April 1, 2003 $2,500,000
October 1, 2003 $2,500,000
April 1, 2004 $2,500,000
</TABLE>
The remaining Principal Balance of Term Loan A, together with all
accrued and unpaid interest thereon, shall be due and payable in full
on the Maturity Date.
(B) CHANGE OF CONTROL. The Principal Balance of Term Loan A,
-----------------
together with all accrued and unpaid interest thereon (and, if
applicable, a prepayment premium in the amount which would be payable
under Section 2.8.2(b) in the event of a voluntary prepayment of such
Principal Balance), shall be due and payable in full upon a Change of
Control. No such prepayment premium shall be payable if no Event of
Default exists and is continuing at the time of such Change of
Control.
2.6.4 PRINCIPAL BALANCE OF TERM LOAN B.
--------------------------------
(A) SCHEDULED INSTALLMENTS. The Principal Balance of Term Loan B
----------------------
shall be payable in consecutive semi-annual installments on the first
Business Day of the second and fourth quarters of each year commencing
with the first Business Day of April, 2002 as follows:
<TABLE>
<CAPTION>
Payment Date Amount of Installment
------------ ---------------------
<S> <C>
April 1, 2002 $2,500,000
October 1, 2002 $2,500,000
April 1, 2003 $2,500,000
October 1, 2003 $2,500,000
April 1, 2004 $2,500,000
</TABLE>
The remaining Principal Balance of Term Loan B, together with all
accrued and unpaid interest thereon, shall be due and payable in full
on the Maturity Date.
(B) CHANGE OF CONTROL. Upon a Change of Control, if any Term
-----------------
Loan B Lender so elects, the Principal Balance of Term Loan B owing to
such Term Loan B Lender, together with all accrued and unpaid interest
thereon and a Make-Whole Premium, if applicable, shall be due and
payable in full. If at the time of such Change of Control no Event of
Default exists and is continuing, the successor to Borrower, if any,
has assumed all of the Obligations and Borrower or such successor
would be permitted to incur at least $1.00 of additional
27
<PAGE>
Indebtedness under SECTION 8.8, then no Make-Whole Premium shall be
payable. Borrower shall give to Agent and each Term Loan B Lender
prompt notice (a "CHANGE OF CONTROL NOTICE") of a Change of Control.
No repayment of the Principal Balance of Term Loan B or any other
amount under this CLAUSE (B) owing to a Term Loan B Lender shall be
required unless the such Term Loan B Lender affirmatively elects in
writing to require such repayment within 10 Business Days after the
Change of Control Notice is given.
2.7 FEES AND EXPENSES.
-----------------
2.7.1 CLOSING FEE. Borrower shall pay to Agent, for the account of
-----------
the Revolving Lenders and the Term Loan A Lenders, the non-refundable
closing fees described in the Fee Letter. Such closing fees shall be fully
earned and payable on the Closing Date.
2.7.2 ANNUAL FEE. Borrower shall pay to Agent, for its own account,
----------
a non-refundable annual fee of $25,000 on the Closing Date and on October 1
of each year thereafter. Such fee shall be fully earned and payable on the
Closing Date and on October 1 of each year thereafter.
2.7.3 UNUSED LINE FEE. Borrower shall pay to Agent, for the account
---------------
of the Revolving Lenders, on a quarterly basis, a non-use fee for the
period from and including the date hereof to but excluding the Expiration
Date (or such earlier date on which the Revolving Loan Commitment shall be
terminated pursuant to SECTION 2.8.1 or 9.2 hereof) of one-half of one
percent (0.50%) per annum on the excess of (I) the daily average of the
then applicable Revolving Loan Commitments for the quarter then ending over
(II) the daily average principal amount of outstanding Revolving Loans and
Letter of Credit Obligations for the quarter then ending. Such non-use fee
shall be payable in arrears on the first Business Day of each January,
April, July and October (commencing on January 2, 1998) and on the
Expiration Date (or such earlier date on which the Revolving Loan
Commitments shall terminate) for any period then ending for which such fee
shall not theretofore have been paid.
2.7.4 LETTER OF CREDIT FEES.
---------------------
(A) Agent, for the ratable benefit of the Revolving Lenders,
shall be entitled to charge to the account of Borrower, on the first
Business Day of each quarter, a fee (the "LETTER OF CREDIT FEE") in an
amount equal to two and one-half percent (2.50%) per annum of the
daily weighted average undrawn amount of Letters of Credit outstanding
during the immediately preceding quarter.
(B) Agent also shall be entitled to charge to the account of
Borrower, as and when incurred by Agent or any Revolving Lender, the
customary charges, fees, costs and expenses charged to Agent or any
Revolving Lender for Borrower's account by any Issuing Bank (the
"ISSUING BANK FEES") in connection with the issuance, transfer,
drawing, amendment or negotiation of any Letters of Credit by the
Issuing Bank. Each determination by Agent of Letter of Credit
28
<PAGE>
Fees, Issuing Bank Fees and other fees, costs and expenses charged
under this Section shall be conclusive and binding for all purposes,
absent manifest error.
2.7.5 EXPENSES. Borrower shall reimburse the Expenses of Agent or
--------
any Lender, as the case may be, promptly upon demand.
2.8 VOLUNTARY TERMINATION OF REVOLVING LOAN COMMITMENTS; VOLUNTARY
--------------------------------------------------------------
PREPAYMENTS OF TERM LOANS; MANDATORY PREPAYMENTS FROM ASSET SALES AND EQUITY
- ----------------------------------------------------------------------------
SALES. Borrower may terminate the Revolving Loan Commitments and may prepay the
- -----
Principal Balance of the Term Loans only in accordance with the terms and
conditions of this SECTION 2.8.
2.8.1 TERMINATION OF REVOLVING LOAN COMMITMENTS. Borrower may not
-----------------------------------------
voluntarily reduce the Revolving Loan Commitments in part at any time.
Borrower may terminate the Revolving Loan Commitments in whole, but not in
part, at any time prior to the Expiration Date, subject to the following
conditions:
(A) NOTICE OF TERMINATION. Not less than five (5) Business Days
---------------------
prior to the date upon which Borrower desires to terminate the
Revolving Loan Commitments, Borrower shall deliver to Agent notice of
Borrower's intention to terminate, which notice shall be irrevocable
and shall state the termination date.
(B) PAYMENTS. Concurrently with any voluntary termination of the
--------
Revolving Loan Commitments pursuant to this SECTION 2.8.1, Borrower
shall (I) pay to the Revolving Lenders the Principal Balance of the
Revolving Loans together with all accrued and unpaid interest thereon
to the date on which Agent is in receipt of Good Funds, and any other
sums which are due and payable to the Revolving Lenders pursuant to
terms of any of the Credit Documents, and (II) deposit with Agent for
each Letter of Credit then outstanding, cash or Cash Equivalents in an
amount equal to 110% of the greatest amount drawable thereunder. Such
deposit shall be held by Agent and used to reimburse the Issuing Bank
for the amount of each drawing made under such Letters of Credit, as
and when each such drawing is made.
(C) TERMINATION FEE. If any payment of the Principal Balance of
---------------
the Revolving Loans as a result of a voluntary termination of the
Revolving Loan Commitments pursuant to this SECTION 2.8.1 is made from
the proceeds of any refinancing of such Principal Balance, Borrower
shall pay to the Revolving Lenders concurrently with such voluntary
termination a termination fee equal to (I) $300,000 if such payment is
made during the first Loan Year, (II) $200,000 if such payment is made
during the second Loan Year and (III) $100,000 if such payment is made
during the third Loan Year.
2.8.2 VOLUNTARY PREPAYMENTS OF TERM LOAN A. Borrower may at any time
------------------------------------
voluntarily prepay in whole or in part the Principal Balance of Term Loan
A, subject to the following conditions:
29
<PAGE>
(A) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF PREPAYMENTS. Not
------------------------------------------------------
less than 20 Business Days prior to the date upon which Borrower
desires to make any voluntary prepayment of Term Loan A, Borrower
shall deliver to Agent notice of Borrower's intention to prepay, which
notice shall be irrevocable and shall state the prepayment date and
the amount of the Principal Balance of Term Loan A to be prepaid. The
amount of any voluntary partial prepayment of the Principal Balance of
Term Loan A shall be not less than $1,000,000 or integral multiples of
$100,000 in excess thereof. A voluntary partial prepayment of the
Principal Balance of Term Loan A shall not be made more frequently
than once a month.
(B) PREPAYMENT PREMIUM. If any payment of the Principal Balance
------------------
of Term Loan A pursuant to SECTION 2.8.2(A) is made from the proceeds
of any refinancing of such Principal Balance, Borrower shall pay to
the Term Loan A Lenders a prepayment premium equal to a percentage of
the amount of the Principal Balance of Term Loan A prepaid, determined
in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of
Principal
Period of Prepayment Balance Prepaid
-------------------- ---------------
<S> <C>
First Loan Year 3.0%
Second Loan Year 2.0%
Third Loan Year 1.0%
Thereafter 0.0%
</TABLE>
(C) ADDITIONAL PAYMENTS. Concurrently with any voluntary
-------------------
prepayment of the Principal Balance of Term Loan A pursuant to this
SECTION 2.8.2, Borrower shall pay to the Term Loan A Lenders accrued
and unpaid interest on the portion of the Principal Balance of Term
Loan A which is being prepaid to the date on which Agent is in receipt
of Good Funds, and any other sums which are due and payable to the
Term Loan A Lenders pursuant to the terms of any of the Credit
Documents.
(D) APPLICATION OF PARTIAL PREPAYMENTS. Any voluntary partial
----------------------------------
prepayment of the Principal Balance of Term Loan A pursuant to this
SECTION 2.8.2 shall be applied to the installments of the Principal
Balance of Term Loan A in the direct order of maturity on a pro rata
basis in accordance with the relative Principal Balance of Term Loan A
held by each Term Loan A Lender.
2.8.3 VOLUNTARY PREPAYMENTS OF TERM LOAN B. Borrower may at any time
------------------------------------
voluntarily prepay in whole or in part the Principal Balance of Term Loan
B, subject to the following conditions:
(A) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF PREPAYMENTS. Not
------------------------------------------------------
less than 20 Business Days prior to the date upon which Borrower
desires to
30
<PAGE>
make any voluntary prepayment of Term Loan B, Borrower shall deliver
to Agent notice of Borrower's intention to prepay, which notice shall
be irrevocable and shall state the prepayment date and the amount of
the Principal Balance of Term Loan B to be prepaid. The amount of any
voluntary partial prepayment of the Principal Balance of Term Loan B
shall be not less than $1,000,000 or integral multiples of $100,000 in
excess thereof. A voluntary prepayment of the Principal Balance of
Term Loan B shall not be made more frequently than once a month.
(B) PREPAYMENT PREMIUM. Concurrently with any voluntary
------------------
prepayment or acceleration of all or any part of the Principal Balance
of Term Loan B, Borrower shall pay to the Term Loan B Lenders the
Make-Whole Amount. As used herein,
"MAKE-WHOLE AMOUNT" means, in connection with any voluntary
prepayment or acceleration of Principal Balance of Term Loan B or, if
applicable, any early repayment of the Principal Balance of Term Loan
B pursuant to SECTION 2.6.4(B), the excess, if any, of (I) the
aggregate present value as of the date of such prepayment of each
dollar of principal being prepaid and the amount of interest
(exclusive of interest accrued to the date of prepayment) that would
have been payable in respect of such dollar if such prepayment had not
been made, determined by discounting such amounts at the Reinvestment
Rate from the respective dates on which they would have been payable,
over (II) 100% of the Principal Balance of Term Loan B. If the
Reinvestment Rate is equal to or higher than 10.00%, the Make-Whole
Amount shall be zero.
"REINVESTMENT RATE" means 1.00% plus the yield to maturity of the
United States Treasury obligations with a maturity (as compiled by and
published on Bloomberg PX1 or its successor not more than five
Business Days immediately preceding the payment date) most nearly
equal to the remaining Weighted Average Life to Maturity of the
Principal Balance of Term Loan B being prepaid. If such rate shall
not have been so published, the Reinvestment Rate in respect of such
payment date shall mean the mean of the yields to maturity of United
States Treasury obligations (as complied by and published in the
United States Federal Reserve Bulletin or its successor publication
for each of the two weeks immediately preceding the payment date) with
a constant maturity most nearly equal to the Weighted Average Life to
Maturity of the Principal Balance of Term Loan B being prepaid. If no
maturity exactly corresponding to the Weighted Average Life to
Maturity shall appear therein, yields for the next longer and the next
shorter published maturities shall be calculated pursuant to the
foregoing sentence and the Reinvestment Rate shall be interpolated
from such yields on a straight-line basis (rounding to the nearest
month). If such rates shall not have been so published, the
Reinvestment Rate in respect of such determination date shall be
calculated pursuant to the next preceding sentence on the basis of the
arithmetic mean of the arithmetic means of the secondary market ask
rates, as of approximately 3:30 p.m., Eastern Standard Time, on the
last Business Days of each of the two weeks preceding the payment
date, for the actively traded U.S. Treasury security or securities
with a
31
<PAGE>
maturity or maturities most closely corresponding to the remaining
Weighted Average Life to Maturity, as reported by three primary United
States Government securities dealers in New York City of national
standing selected in good faith by Borrower.
"WEIGHTED AVERAGE LIFE TO MATURITY" of the Principal Balance of
Term Loan B being prepaid means, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining
Dollar-Years of such Principal Balance by the aggregate amount of such
Principal Balance. "REMAINING DOLLAR-YEARS" of such Principal Balance
means the amount obtained by (I) multiplying (X) the remainder of (1)
the amount of principal that would have become due on each scheduled
payment date if such prepayment had not been made, less (2) the amount
of the Principal Balance of Term Loan B scheduled to become due on
such date after giving effect to such prepayment by (Y) the number of
years (calculated to the nearest one-twelfth) which will elapse
between the date of determination and such scheduled payment date, and
(II) totalling the products obtained in (I).
(C) ADDITIONAL PAYMENTS. Concurrently with any voluntary
-------------------
prepayment of the Principal Balance of Term Loan B pursuant to this
SECTION 2.8.3, Borrower shall pay to the Term Loan B Lenders accrued
and unpaid interest on the portion of the Principal Balance of Term
Loan B which is being prepaid to the date on which Agent is in receipt
of Good Funds, and any other sums which then are due and payable to
the Term Loan B Lenders pursuant to the terms of any of the Credit
Documents.
(D) APPLICATION OF PARTIAL PREPAYMENTS. Any voluntary partial
----------------------------------
prepayment of the Principal Balance of Term Loan B pursuant to this
SECTION 2.8.3 shall be applied to the installments of the Principal
Balance of Term Loan B in the direct order of maturity on a pro rata
basis in accordance with the relative Principal Balance of Term Loan B
held by each Term Loan B Lender.
2.8.4 MANDATORY PREPAYMENTS.
---------------------
(A) PROCEEDS OF ASSET SALES AND EQUITY SALES. Subject to the
----------------------------------------
provisions of SECTION 2.8.4(C), Borrower shall prepay, without
premium, the Term Loans in an amount equal to (I) the Net Cash
Proceeds in excess of $1,000,000 in any fiscal year of asset
dispositions permitted under SECTION 8.11(E), concurrently upon
receipt by Borrower or its applicable Subsidiary of such Net Cash
Proceeds and (II) the Net Cash Proceeds in excess of $5,000,000 in the
aggregate prior to the date the Principal Balance of the Term Loans is
paid in full arising from any sales of capital stock of Borrower
(other than in connection with any management stock options or
incentive plans or any merger, acquisition or other Investment
permitted hereunder), concurrently upon receipt by Borrower of such
Net Cash Proceeds.
32
<PAGE>
(B) APPLICATION OF MANDATORY PREPAYMENTS. Subject to the
------------------------------------
provisions of SECTION 2.8.4(C), mandatory prepayments of the Term
Loans pursuant to SECTION 2.8.4(A) shall be applied ratably to reduce
each of the remaining scheduled installments of the Principal Balance
of the Term Loans in accordance with the relative aggregate principal
amounts thereof held by each Term Loan Lender.
(C) TERM LOAN B OPT-OUT. With respect to any mandatory
-------------------
prepayments of the Term Loans pursuant to SECTION 2.8.4(A), Agent
shall ratably pay the Term Loan A Lenders and the Term Loan B Lenders,
as the case may be, as required under SECTION 2.8.4(B) unless, within
two Business Days after notifying the Term Loan Lenders of such
prepayment, Agent shall have received written notice from any Term
Loan B Lender that such Term Loan B Lender (a "TERM LOAN B OPT-OUT
LENDER") elects not to receive any such prepayment. Any such
prepayment which would have been remitted to a Term Loan B Opt-Out
Lender but for its election not to receive such prepayment shall be
retained by Borrower.
2.9 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made pursuant to
-----------------------------
the Credit Documents by Borrower shall be made by wire transfer of Good Funds to
the account of Agent at LaSalle National Bank, ABA #071000505, Account No.
2358830 (or such other account as Agent may specify from time to time),
Reference: Mikohn, not later than 11:30 A.M., Chicago time, on the date due; and
funds received after that hour shall be deemed to have been received by Agent on
the next following Business Day provided Borrower receives notice from Agent
that funds were received after that hour. Borrower hereby authorizes Agent to
charge the Loan Account with the amount of all payments to be made hereunder and
under the other Credit Documents, including all Fees and Expenses, as and when
such payments become due. The obligations of Borrower to the Lenders with
respect to such payments shall be discharged by making such payments to Agent
pursuant to this Section or by the charging of the Loan Account by Agent.
2.10 INDEMNIFICATION IN CERTAIN EVENTS.
---------------------------------
(A) INCREASED COSTS. If after the Closing Date, either (I) any change
in or in the interpretation of any law or regulation is introduced,
including, without limitation, with respect to reserve requirements
applicable to Agent, to any of the Lenders or any other affiliated banking
or financial institution from whom any of the Lenders borrows funds or
obtains credit (a "FUNDING BANK"), or (II) Agent, a Funding Bank or any of
the Lenders complies with any future guideline or request from any central
bank or other Governmental Authority proposed or promulgated after the date
of the Agreement or (III) Agent, a Funding Bank or any of the Lenders
determines that the adoption of any applicable law, rule or regulation
regarding capital adequacy or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof announced after the date of this Credit Agreement
has or would have the effect described below, or Agent, a Funding Bank or
any of the Lenders complies with any request or directive regarding capital
adequacy (whether or not having
33
<PAGE>
the force of law) of any such authority, central bank or comparable agency
announced after the date of this Credit Agreement and in the case of any
event set forth in this clause (III), such adoption, change or compliance
has or would have the direct or indirect effect of reducing the rate of
return on any of such Person's capital as a consequence of its obligations
hereunder to a level below that which such Person could have achieved but
for such adoption, change or compliance (taking into consideration such
Person's policies with respect to capital adequacy) by an amount deemed by
such Person to be material, and any of the foregoing events described in
CLAUSES (I), (II) OR (III) increases the cost to Agent, or any of the
Lenders of (A) funding or maintaining any Loan or Commitment or (B)
issuing, causing the issuance of making or maintaining any Letter of Credit
or of purchasing or maintaining any participation therein, or reduces the
amount receivable in respect thereof by Agent or any Lender, then Borrower
shall upon demand by Agent at any time within one hundred eighty (180) days
after the date on which an officer of Agent, such Funding Bank or such
Lender, as the case may be, responsible for overseeing this Credit
Agreement knows or has reason to know of its right to additional
compensation under this SECTION 2.10, pay to Agent, for the account of such
Lender or, as applicable, Agent or a Funding Bank, additional amounts
sufficient to reimburse Agent, such Funding Bank and such Lender against
such increase in cost or reduction in amount receivable; PROVIDED, HOWEVER,
that if Agent or any such Lender or Funding Bank, as the case may be, fails
to deliver such demand within such 180 day period, such entity shall only
be entitled to additional compensation for any such costs incurred from and
after the date that is one hundred eighty (180) days prior to the date
Borrower received such demand; and PROVIDED FURTHER, HOWEVER, that before
making any such demand, Agent and each Lender agree to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such a designation would avoid the need for, or reduce the amount
of, such increased cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. A certificate as to
the amount of such increased cost, and setting forth in reasonable detail
the calculation thereof, shall be submitted to Borrower by Agent, or the
applicable Lender or Funding Bank, and shall be conclusive absent
demonstrable error.
(B) Each Lender will promptly notify Agent, and Agent will promptly
notify Borrower, of any event of which it has knowledge that would entitle
such entity to additional compensation under this SECTION 2.10. Neither
Agent nor any Lender shall request any additional compensation under this
SECTION 2.10 unless it is generally making similar requests of other
borrowers similarly situated, and Agent and each Lender agrees to use a
reasonable basis for calculating amounts allocable to its commitment to
lend or its Loans and Letter of Credit Obligations, if any, hereunder.
ARTICLE 3. LETTERS OF CREDIT.
-----------------
3.1 ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and conditions
-----------------------------
hereof and in reliance on the representations and warranties of Borrower set
forth herein, after the Closing Date, at the request of Borrower, as more
specifically described below, Agent shall instruct the
34
<PAGE>
Issuing Bank to issue Letters of Credit. Agent shall not be obligated to cause
the Issuing Bank to issue any Letter of Credit if:
(A) issuance of the requested Letter of Credit (I) would cause the
Letter of Credit Obligations then outstanding to exceed $5,000,000 or (II)
would cause the sum of the Revolving Loans PLUS the Letter of Credit
Obligations then outstanding to exceed the lesser of (X) $10,000,000 and
(Y) the Borrowing Base, in each case then in effect; or
(B) issuance of the Letter of Credit is enjoined, restrained or
prohibited by any Governmental Authority, Requirement of Law or any request
or directive of any Governmental Authority (whether or not having the force
of law) or would impose upon Agent or the Issuing Bank any material
restriction, reserve, capital requirement, loss, cost or expense (for which
Agent or the Issuing Bank is not otherwise compensated) not in effect or
known as of the Closing Date.
3.2 TERMS OF LETTERS OF CREDIT. The proposed amount, terms and
--------------------------
conditions, and form of each Letter of Credit (and of any drafts or acceptances
thereunder) shall be subject to approval by the Issuing Bank. The term of each
standby Letter of Credit shall not exceed 360 days, but may be subject to annual
renewal. The term of each documentary Letter of Credit shall not exceed 120
days. No Letter of Credit shall have an expiry date later than five (5)
Business Days prior to the Expiration Date.
3.3 NOTICE OF ISSUANCE. A request for issuance of a Letter of Credit (a
------------------
"LETTER OF CREDIT REQUEST") shall be given in writing. A Letter of Credit
Request must be received by Agent no later than 1:00 P.M. Chicago time at least
ten (10) Business Days (or such shorter period as may be agreed to by the
Issuing Bank) in advance of the proposed date of issuance.
3.4 REVOLVING LENDERS' PARTICIPATION. Immediately upon issuance or
--------------------------------
amendment of any Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Bank,
without recourse or warranty, an undivided interest and participation in all
rights and obligations under such Letter of Credit (other than fees and other
amounts owing to the Issuing Bank) in accordance with such Revolving Lender's
Pro Rata Share.
3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. Agent shall notify
-------------------------------------------------
Borrower of the receipt by Agent of notice from the Issuing Bank of a draft or
other presentation for payment or drawing under a Letter of Credit not later
than 11:00 A.M. Chicago time on the Business Day immediately prior to the date
on which the Issuing Bank intends to honor such drawing. Unless the procedures
set forth in SECTION 2.6.2(A) shall be applicable, Borrower shall be deemed to
have concurrently given a Notice of Borrowing to Agent to make a Revolving Loan
in the amount of and at the time of such drawing (which Revolving Loan shall be
a Prime Rate Loan), the proceeds of which shall be applied directly by Agent to
reimburse the Issuing Bank for the amount of such drawing.
3.6 PAYMENT BY LENDERS. If a Revolving Loan is not made in an amount
------------------
sufficient to reimburse the Issuing Bank in full for the amount of any draw
under a Letter of Credit, Agent shall promptly notify each Revolving Lender of
the unreimbursed amount of such drawing and
35
<PAGE>
of such Revolving Lender's respective participation therein. Each Revolving
Lender shall make available to Agent, for the account of the Issuing Bank, the
amount of its participation in immediately available funds not later than 1:00
P.M. Chicago time on the next Business Day after such Revolving Lender receives
notice from Agent of the amount of such Lender's participation in such
unreimbursed amount. If any Revolving Lender fails to make available to Agent
the amount of such Revolving Lender's participation, Agent shall be entitled to
recover such amount on demand from such Revolving Lender together with interest
at the Federal Funds Rate for the first three Business Days and thereafter at
the Prime Lending Rate. For each Letter of Credit, Agent shall promptly
distribute to each Lender which has funded the amount of its participation its
Pro Rata Share of all payments subsequently received by Agent from Borrower in
reimbursement of honored drawings.
3.7 OBLIGATIONS ABSOLUTE. The obligations of Borrower to reimburse the
--------------------
Revolving Lenders under SECTION 3.5 hereof shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Credit Agreement under all circumstances including, without limitation, upon the
occurrence and during the continuance of an Event of Default.
3.8 ISSUING BANK DOCUMENTATION; RELIANCE BY ISSUING BANK. Agent shall be
----------------------------------------------------
authorized to execute, deliver and perform on behalf of the Revolving Lenders
such letter of credit applications, shipping indemnities, letter of credit
modifications and consents and other undertakings for the benefit of the Issuing
Bank as may be reasonably necessary or appropriate in connection with the
issuance or modification of Letters of Credit requested by Borrower hereunder.
The Revolving Lenders, Agent and Borrower all expressly agree that the terms of
this ARTICLE 3 and various other provisions of this Credit Agreement identifying
the Issuing Bank are also intended to benefit the Issuing Bank and the Issuing
Bank shall be entitled to enforce the provisions hereof which are for its
benefit.
ARTICLE 4. RECORDKEEPING AND SETTLEMENT PROCEDURES.
---------------------------------------
4.1 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT. Agent shall
--------------------------------------------------
maintain an account on its books in the name of Borrower (the "LOAN ACCOUNT") in
which Borrower will be charged with all loans and advances made by the Lenders
to Borrower or for the account of Borrower, including the Revolving Loans and
all Letter of Credit Obligations, Term Loan A and Term Loan B, all accrued and
unpaid interest on the Principal Balance, the Fees, the Expenses and any other
Obligations, as and when such amounts are incurred by Borrower. The Loan
Account will be credited with all payments received by Agent from Borrower or
for the account of Borrower. After the end of each month, Agent shall send
Borrower a monthly statement accounting for the charges, loans, advances and
other transactions occurring among and between Agent, the Lenders and Borrower
during that month, PROVIDED, THAT the failure of Agent to send such statement to
Borrower shall not relieve Borrower of any Obligations. Absent demonstrable
error, each monthly statement shall be an account stated and shall be final,
conclusive and binding on Borrower.
4.2 APPLICATION OF PAYMENTS. All payments and other amounts received by
-----------------------
Agent from Borrower shall be credited to the Loan Account; provided, however,
that if an Event of Default has occurred and is continuing, all payments and
other amounts received by Agent shall
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be distributed and applied in the following order: FIRST, to the payment of any
-----
Fees, Expenses or other Obligations due and payable to Agent under any of the
Credit Documents, including Agent Advances and any other amounts advanced by
Agent on behalf of the Lenders; SECOND, to the payment of any Fees, Expenses or
------
other Obligations due and payable to the Issuing Bank under any of the Credit
Documents; THIRD, to the ratable payment of any Fees, Expenses, prepayment
-----
premium, if applicable, or other Obligations due and payable to the Lenders
under any of the Credit Documents other than those Obligations specifically
referred to in this Section; FOURTH, to the ratable payment of interest due on
------
the Loans; FIFTH, to the ratable payment of principal due on the Loans and
-----
outstanding Letter of Credit Obligations; and, SIXTH, any remainder, to Borrower
-----
or such other Person or Person(s) legally entitled thereto. Any such ratable
payment on account of outstanding Letter of Credit Obligations pursuant to the
preceding clause FIFTH shall be held by Agent in a cash collateral account to
-----
secure each Letter of Credit then outstanding until the amount on deposit in
such cash collateral account is equal to 110% of the greatest amount drawable
under all such Letters of Credit, and any such amount so held by Agent shall be
applied in accordance with the procedures set forth in Section 2.6.2(a).
4.3 PERIODIC SETTLEMENT; INTEREST AND FEES; STATEMENTS.
--------------------------------------------------
(A) THE SETTLEMENT DATE; ALLOCATION OF INTEREST AND FEES. The amount
of each Lender's Loans shall be computed weekly (or more frequently in
Agent's discretion) and shall be adjusted upward or downward based on all
Revolving Loans (including Agent Advances) made and repayments received by
Agent as of 5:00 P.M. Chicago time on the last Business Day of the period
specified by Agent (such date, the "SETTLEMENT DATE").
(B) SUMMARY STATEMENTS; SETTLEMENTS. Agent shall deliver to each of
the Lenders promptly after the Settlement Date a summary statement of the
account of outstanding Loans (including Agent Advances) for the period, the
amount of repayments received for the period, and the amount allocated to
each Lender of the interest and, in the case of Revolving Lenders, Unused
Line Fee for the period. After application of payments under SECTION 4.2,
as reflected on the summary statement, (i) Agent shall transfer to each
Lender its allocated share of interest, its ratable share of repayments of
the Principal Balance received by Agent in respect of the period covered by
such summary statement and, in the case of the Revolving Lenders, Unused
Line Fee; and (ii) each Revolving Lender shall transfer to Agent, or Agent
shall transfer to each Revolving Lender, such amounts as are necessary to
insure that, after giving effect to all such transfers, the amount of
Revolving Loans made by each Revolving Lender shall be equal to such
Revolving Lender's Pro Rata Share of the aggregate amount of Revolving
Loans outstanding as of such Settlement Date. If the summary statement
requires transfers to be made to Agent by the Revolving Lenders and is
received by the Revolving Lenders prior to 12:00 noon Chicago time on a
Business Day, such transfers shall be made in immediately available funds
no later than 3:00 P.M. Chicago time that day; and, if received after 12:00
noon Chicago time, then no later than 3:00 P.M. Chicago time on the next
Business Day. The obligation of each Revolving Lender to transfer such
funds is irrevocable, unconditional and without recourse to or warranty by
Agent.
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(C) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on the
Loans (including Agent Advances) and the Unused Line Fee shall be allocated
by Agent to each Lender (i) in the case of interest, in accordance with the
Loans actually advanced by such Lender and (ii) in the case of the Unused
Line Fee, in accordance with the excess of (x) the daily average of the
then applicable Pro Rata Share of each Revolving Lender for the applicable
quarter over (y) the daily average Principal Balance of outstanding
Revolving Loans actually made by such Revolving Lender for the applicable
quarter. Promptly after the end of each month, Agent shall distribute to
each Lender its portion, allocated as provided above, of the interest and
Unused Line Fee which has been received by Agent during such month.
4.4 SHARING OF PAYMENTS. If any Lender shall obtain any payment (whether
-------------------
made voluntarily or involuntarily, or through the exercise of any right of set-
off, or otherwise) on account of the Loans made by it or its participation in
the Letter of Credit Obligations in excess of its ratable share of payments on
account of the Loans or Letter of Credit Obligations obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans made by them or in their participation in Letters of
Credit as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; PROVIDED, THAT if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each other Lender shall be rescinded and each such other Lender
shall repay to the purchasing Lender the purchase price to the extent of such
recovery, together with an amount equal to such other Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
to the total amount so recovered. Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this SECTION 4.4, to the fullest
extent permitted by law, may exercise all of its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.
4.5 DEFAULTING LENDERS.
------------------
(A) A Revolving Lender who fails to pay Agent its Pro Rata Share of
any Revolving Loans (including Agent Advances) made available by Agent on
such Revolving Lender's behalf, or who fails to pay any other amounts owing
by it to Agent, is a "DEFAULTING LENDER." Agent is entitled to recover
from such Defaulting Lender all such amounts owing by such Defaulting
Lender on demand. If the Defaulting Lender does not pay such amounts on
Agent's demand, Agent shall promptly notify the Borrower and Borrower shall
pay such amounts to Agent (to the extent Agent has made such amounts
available to or for the account of Borrower) within five (5) Business Days
of the receipt by the Borrower of such notice. In addition, the
Defaulting Lender or Borrower shall pay to Agent for its own account
interest on such amount for each day from the date it was made available by
Agent to Borrower to the date it is recovered by Agent at a rate per annum
equal to (I) the overnight Federal Funds Rate if paid by the Defaulting
Lender, or (II) the then applicable rate of interest calculated under
SECTION 2.4.1, if paid by Borrower; plus, in each case, the Expenses and
losses, if any, incurred as a result of the Defaulting Lenders' failure to
perform its obligations. Nothing herein shall be
38
<PAGE>
deemed to relieve any Revolving Lender of its obligation to fulfill its
commitments hereunder or to prejudice any rights which Borrower may have
against any Revolving Lender as a result of any default by such Revolving
Lender hereunder, including, without limitation, the right of Borrower to
seek reimbursement from any Defaulting Lender for any amounts paid by
Borrower under CLAUSE (i) above on account of such Defaulting Lender's
default.
(B) The failure of any Revolving Lender to fund its Pro Rata Share of
a Revolving Loan shall not relieve any other Revolving Lender of its
obligation to fund its Pro Rata Share of a Revolving Loan. Conversely, no
Revolving Lender shall be responsible for the failure of another Revolving
Lender to fund its Pro Rata Share of a Revolving Loan.
(C) Agent shall not be obligated to transfer to a Defaulting Lender
any payments made by Borrower to Agent for the Defaulting Lender's benefit;
nor shall a Defaulting Lender be entitled to the sharing of any payments
hereunder. Amounts payable to a Defaulting Lender shall instead be paid to
or retained by Agent. Agent may hold and, in its discretion, relend to
Borrower the amount of all such payments received by it for the account of
such Defaulting Lender. For purposes of voting or consenting to matters
with respect to the Credit Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "LENDER" and such Defaulting
Lender's Commitment shall be deemed to be zero. This section shall remain
effective with respect to such Defaulting Lender until (i) the Obligations
shall have been declared or shall have become immediately due and payable
or (ii) the Majority Lenders, Agent and Borrower shall have waived such
Defaulting Lender's default in writing. The operation of this Section
shall not be construed to increase or otherwise affect the Commitment of
any Revolving Lender, or relieve or excuse the performance by Borrower of
their respective duties and obligations hereunder.
4.6 CREDIT PARTIES' OBLIGATIONS. The Credit Parties maintain an
---------------------------
integrated cash management system reflecting their interdependence on one
another and the mutual benefits shared among them as a result of their
respective operations. In order to fund and operate their respective businesses
efficiently and to minimize the number of borrowings which Borrower will make
under this Credit Agreement and thereby reduce the administrative costs and
record keeping required in connection therewith, including the necessity to
enter into and maintain separately identified and monitored borrowing
facilities, Borrower has requested, and Agent and the Lenders have agreed that,
subject to SECTION 11.16, (i) all Loans will be advanced to and for the account
of Borrower and (ii) all Letters of Credit will be issued pursuant to an
application therefor executed by Borrower on its own behalf. Borrower, on its
own behalf and on behalf of each Guarantor, hereby acknowledges that each Credit
Party will be receiving a direct benefit from each Loan made and each Letter of
Credit issued pursuant to this Credit Agreement.
ARTICLE 5. CONDITIONS PRECEDENT.
--------------------
5.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of each Lender
-------------------------------------
to fund its Pro Rata Share of Term Loan A, Term Loan B and the Revolving Loans
on the Closing Date
39
<PAGE>
is in each case subject to the prior or contemporaneous satisfaction or waiver
of the following conditions precedent on or before October 31, 1997:
(A) MINIMUM AVAILABILITY. After giving effect to the funding of Term
Loan A and Term Loan B, as the case may be, Borrower shall be entitled to
borrow Revolving Loans in an aggregate amount of not less than $10,000,000.
(B) CLOSING DOCUMENTS. Agent and the Lenders shall have received each
of the agreements, opinions, reports, approvals, consents, certificates and
other documents set forth on the List of Closing Documents attached hereto
as SCHEDULE A (the "CLOSING DOCUMENT LIST"), other than those items
described in the Post-Closing Agreement.
(C) FEES AND EXPENSES. All Fees and Expenses payable by Borrower
hereunder on or before the Closing Date shall have been paid in full.
(D) OTHER DOCUMENTS. Borrower shall have delivered or caused to be
delivered to Agent, in each case in form and substance satisfactory to
Agent, (i) all information required pursuant to SECTION 7.2 and (ii) such
other business and/or financial and data and other information as Agent
shall reasonably request.
(E) OFFICER'S CERTIFICATE. Agent shall have received a certificate
dated the Closing Date signed on behalf of Borrower by the Chairman or
President of Borrower stating that all of the conditions set forth in
SECTION 5.1(a), and SECTIONS 5.2(a) through (c), inclusive, have been
satisfied on and as of such date.
(F) CUSIP NUMBERS. Borrower shall have obtained "CUSIP" numbers for
each of the Notes.
5.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The
-------------------------------------------------------
obligation of each Lender to fund its Pro Rata Share of any requested Loan (or
of Agent to cause the Issuing Bank to issue any requested Letter of Credit and
of each Lender to purchase a participation therein) is in each case subject to
the satisfaction of the conditions precedent set forth below. Each Notice of
Borrowing and each Letter of Credit Request shall constitute a representation
and warranty to Agent and each Lender by Borrower that such conditions are
satisfied.
(A) All representations and warranties contained in this Credit
Agreement and the other Credit Documents shall be true and correct in all
material respects on and as of the date of such Notice of Borrowing or
Letter of Credit Request, both before and after giving effect thereto and
to the application of the proceeds thereof (but subject to compliance with
the terms of the Post-Closing Agreement), in each case as if then made,
other than representations and warranties that expressly relate solely to
an earlier date (in which case such representations and warranties shall
have been true and accurate in all material respects on and as of such
earlier date);
(B) No Default or Event of Default shall have occurred or could
reasonably be expected to result from the making of the requested Loan or
the issuance of the requested Letter of Credit, which has not been waived;
and
40
<PAGE>
(C) Since December 31, 1996 no event shall have occurred which has had or
could reasonably be expected to have a Material Adverse Effect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES.
------------------------------
To induce Agent and the Lenders to enter into this Credit Agreement and to
induce the Lenders to make the Loans and other financial accommodations
described herein, Borrower hereby represents and warrants to Agent and the
Lenders that the representations and warranties contained in this ARTICLE 6 are
true and correct in all material respects. Such representations and warranties,
and all other representations and warranties made by any Credit Party in any
other Credit Documents, shall survive the execution and delivery of this Credit
Agreement and such other Credit Documents.
6.1 ORGANIZATION AND QUALIFICATION. Borrower and each of its Subsidiaries
------------------------------
(i) are corporations duly organized, validly existing and in good standing under
the laws of the respective states or other jurisdictions of their incorporation,
(ii) have the power and authority to own their respective properties and assets
and to transact their respective businesses in which they presently are, or
propose to be, engaged and (iii) are duly qualified and are authorized to do
business and are in good standing in each of the respective jurisdictions where
they presently are, or propose to be, engaged in business, in each case, except
where any failures to do so could not reasonably be expected singly or in the
aggregate to have a Material Adverse Effect. SCHEDULE B, PART 6.1 lists all
jurisdictions in which Borrower and each of its Subsidiaries are qualified to do
business as foreign corporations.
6.2 AUTHORITY. Borrower and each of its Subsidiaries has the requisite
---------
corporate power and authority to execute, deliver and perform the respective
Credit Documents to which it is a party. All corporate action necessary for the
execution, delivery and performance of any of the Credit Documents by each
Credit Party which is a party thereto has been taken.
6.3 ENFORCEABILITY. This Credit Agreement and each of the other Credit
--------------
Documents are the legal, valid and binding obligations of each Credit Party
which is a party thereto, enforceable in accordance with their respective terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally, (ii) general principles of
equity and (iii) Applicable Gaming Laws.
6.4 NO CONFLICT. The execution, delivery and performance of each Credit
-----------
Document by each Credit Party which is a party thereto are not in contravention
of (i) the Governing Documents of such Persons, or (ii) any Requirement of Law,
or (iii) any indenture, contract, agreement or instrument or other commitment to
which any or all of such Persons are parties or by which any of such Persons or
any of their properties are bound, and will not, except as contemplated herein,
result in the imposition of any Liens upon any of the properties of any of such
Persons.
6.5 CONSENTS AND FILINGS. No consent, authorization, permit or filing is
--------------------
required in connection with the execution, delivery and performance of this
Credit Agreement or any Credit Document by any Credit Party which is a party
thereto, or in connection with the continuing
41
<PAGE>
operations of such Persons, except (i) those that have been obtained or made,
(ii) those to be obtained in accordance with the terms of the Post-Closing
Agreement, (iii) those described in ARTICLE 12 and (iv) filings necessary to
create, perfect or retain the perfection of Liens against the Collateral.
6.6 GOVERNMENT REGULATION. Neither Borrower nor any Subsidiary of
---------------------
Borrower is subject to regulation under the Public Utility Holding Company Act
of 1935, the Investment Company Act of 1940, the Federal Power Act or any other
similar Requirement of Law other than Applicable Gaming Laws that limits the
respective abilities of such Persons to incur indebtedness or consummate the
transactions contemplated in this Credit Agreement and the other Credit
Documents.
6.7 SOLVENCY. The fair saleable value of the consolidated assets of the
--------
Credit Parties exceeds all probable consolidated liabilities of the Credit
Parties, including those to be incurred pursuant to this Credit Agreement and
the other Credit Documents. No Credit Party (i) has unreasonably small capital
in relation to the business in which it is or proposes to be engaged and (ii)
has incurred and believes that it will incur, after giving effect to the
transactions contemplated by this Credit Agreement, debts beyond its ability to
pay as such debts become due.
6.8 RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All property constituting
---------------------------------------
Collateral is owned or leased by the respective Credit Parties, free and clear
of any and all Liens in favor of third parties, other than Permitted Liens.
Subject to compliance with the Post-Closing Agreement, and assuming the proper
filing of the UCC financing and termination statements, deeds of trust, the
patent security agreement and the trademark security agreement, in each case
listed in the Closing Document List, all filings and other actions necessary to
cause the security interests granted pursuant to the Credit Documents to
constitute valid and enforceable first, prior (subject to Permitted Liens) and
perfected Liens on the Collateral, to the extent such Liens can be perfected by
the filing of such financing statements, deeds of trust, mortgages, patent
security agreement and trademark security agreement, will have been made and
taken.
6.9 FINANCIAL DATA. Borrower has provided or caused to be provided to
--------------
Agent and each of the Lenders complete and accurate copies of the following
Financial Statements:
(A) Annual Report dated December 31, 1996 certified by Deloitte &
Touche L.L.P. (including Annual Report on Form 10-K, for the year ended
December 31, 1996); and
(B) Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1997.
All such Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
respective consolidated financial positions, results of operations and cash
flows of Persons indicated for each of the periods covered subject, in the case
of interim Financial Statements, to normal year-end audit adjustments. The
Consolidated Entity has no Contingent Obligation (or any other material
liabilities which were not incurred by the Credit Parties in the ordinary course
of business) which is not reflected in
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<PAGE>
such Financial Statements or the footnotes thereto, or is not otherwise
disclosed on SCHEDULE B, PART 6.9.
6.10 LOCATIONS OF OFFICES, RECORDS AND INVENTORY.
-------------------------------------------
(A) The address of the principal place of business and, if there is
more than one principal place of business, the chief executive office, of
each Credit Party is set forth on SCHEDULE B, PART 6.10(a), as the same may
be amended after the Closing Date in accordance with SECTION 11.11. The
books and records of each Credit Party, and all its chattel paper, if any,
and records of Accounts, are maintained exclusively at one or more of such
locations.
(B) There is no location in which any Credit Party has any Collateral
(except for vehicles and Inventory in transit) other than those locations
identified on SCHEDULE B, PART 6.10(b), as the same may be amended after
the Closing Date in accordance with SECTION 11.11. A complete list of the
legal name and address of each warehouse at which Inventory of any Credit
Party is stored is set forth on SCHEDULE B, PART 6.10(b), as the same may
be amended after the Closing Date in accordance with SECTION 11.11. None
of the receipts received and to be received by any Credit Party from any
warehouseman state that the Inventory covered thereby is to be delivered to
bearer or to the order of a named Person or to a named Person and such
named Person's assigns, in each case other than such Credit Party.
6.11 SUBSIDIARIES; OWNERSHIP OF STOCK. As of the Closing Date, (i) the
--------------------------------
only direct or indirect Subsidiaries of Borrower are those listed on SCHEDULE B,
PART 6.11, and no Subsidiary of Borrower (other than Guarantors and the Foreign
Subsidiaries) conducts any business or has any assets having a fair market value
in excess of $50,000), (ii) except as described on SCHEDULE B, PART 6.11, each
Credit Party is the record and beneficial owner of all of the respective shares
of capital stock of each of its Subsidiaries listed on SCHEDULE B, PART 6.11,
(iii) there are no proxies, irrevocable or otherwise, with respect to such
shares, and no equity securities of any of such Subsidiaries are or may become
required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of any such Subsidiary, and (iv) there are no contracts, commitments,
understandings or arrangements by which any such Subsidiary is or may become
bound to issue additional shares of its capital stock or securities convertible
into or exchangeable for such shares to any Person other than Borrower, except
that in the event Borrower elects to proceed with the second closing specified
in that certain Agreement dated November 7, 1994, as amended, between Borrower
and John Renton Young et. al, Borrower will be obligated to cause CEI to issue
-- --
to the successor in interest to John Renton Young (who is deceased) not more
than 66,666 shares of the common stock of CEI, which shares at the option of
such successor in interest to John Renton Young will be exchangeable at or after
such second closing for an equal number of shares of the common stock of
Borrower. All of such shares so owned by any Credit Party are owned by such
Credit Party free and clear of any Liens.
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6.12 NO JUDGMENTS OR LITIGATION. No judgments, orders, writs or decrees
--------------------------
are outstanding against any Credit Party or any Subsidiary of any Credit Party,
nor, to any Credit Party's knowledge, is there now any pending or threatened
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against any Credit Party or any Subsidiary of any Credit Party
other than (i) as set forth on SCHEDULE B, PART 6.12, or (ii) with respect to
matters arising after the Closing Date, that singly or in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
6.13 NO DEFAULTS. Neither Borrower nor any of its Subsidiaries is in
-----------
default under any term of any other indenture, contract, lease, agreement,
instrument or commitment to which any of them is a party or by which any of them
is bound, the default under which, singly or in the aggregate, could reasonably
be expected to have a Material Adverse Effect. No Credit Party knows of any
dispute regarding any such indenture, contract, lease, agreement, instrument or
other commitment.
6.14 LABOR MATTERS. SCHEDULE B, PART 6.14 accurately sets forth all labor
-------------
union contracts to which Borrower or any of its Subsidiaries is a party as of
the Closing Date (including their dates of expiration). There are no existing
strikes or, to the knowledge of Borrower, threatened strikes, lockouts or other
disputes relating to any collective bargaining or similar agreement to which
Borrower or any of its Subsidiaries is a party that singly or in the aggregate
could reasonably be expected to have a Material Adverse Effect.
6.15 COMPLIANCE WITH LAW. Neither Borrower nor any of its Subsidiaries has
-------------------
violated or failed to comply with any Requirements of Law the violation of which
reasonably could be expected to have a Material Adverse Effect.
6.16 ERISA. Neither Borrower nor any of its Subsidiaries nor any ERISA
-----
Affiliate maintains or contributes to any Plan other than those listed on
SCHEDULE B, PART 6.16. Each Plan has been and is maintained and funded in
accordance with its terms and in compliance with all applicable provisions of
ERISA and the Internal Revenue Code. Borrower, each of its Subsidiaries and
each ERISA Affiliate has fulfilled all contribution obligations for each Plan
(including obligations related to the minimum funding standards of ERISA and the
Internal Revenue Code). No Termination Event has occurred nor has any other
event occurred that may result in a Termination Event. Neither Borrower, nor
any of its Subsidiaries nor any ERISA Affiliate, and no fiduciary of any Plan,
is subject to any direct or indirect liability with respect to any Plan under
any Requirement of Law or agreement. Neither Borrower, nor any of its
Subsidiaries nor any ERISA Affiliate, is required to provide security to any
Plan under Section 401(a)(29) of the Internal Revenue Code.
6.17 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on SCHEDULE
----------------------------------
B, PART 6.17 or, with respect to matters arising after the Closing Date, as
could not singly or in the aggregate reasonably be expected to have a Material
Adverse Effect, (I) the operations of Borrower and each of its Subsidiaries
comply with all applicable federal, state and local environmental, health and
safety statutes, regulations, directions, ordinances, criteria and guidelines;
(II) no Credit Party has received notice that any of the operations of Borrower
or any of its Subsidiaries is the subject of any judicial or administrative
proceeding alleging the violation of any federal, state or local environmental,
health or safety statute, regulation,
44
<PAGE>
direction, ordinance, criteria or guideline; (iii) none of the operations of
Borrower or any of its Subsidiaries is the subject of any federal or state
investigation evaluating whether Borrower or any of its Subsidiaries disposed of
any hazardous or toxic waste, substance or constituent or other substance at any
site that may require remedial action, or any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent or other substance into the
environment; (iv) neither Borrower nor any of its Subsidiaries has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a hazardous or toxic waste, substance or constituent or
reporting a spill or release of a hazardous or toxic waste, substance or
constituent or other substance into the environment; and (v) neither Borrower
nor any of its Subsidiaries has any contingent liability of which Borrower or
such Subsidiary has knowledge, or reasonably should have knowledge, in
connection with any release or potential release of any hazardous or toxic
waste, substance or constituent or other substance into the environment, nor has
Borrower or any of its Subsidiaries received any notice, letter or other
indication of potential liability arising from the disposal of any hazardous or
toxic waste, substance or constituent or other substance into the environment.
6.18 INTELLECTUAL PROPERTY. Borrower and each of its Subsidiaries
---------------------
possesses such assets, licenses, patents, patent applications, copyrights,
service marks, trademarks and trade names as are necessary or advisable to
continue to conduct their respective present business activities, except for
those the absence of which could not reasonably be expected to have a Material
Adverse Effect.
6.19 LICENSES AND PERMITS. Borrower and each of its Subsidiaries has
--------------------
obtained and holds in full force and effect, all franchises, licenses, leases,
permits, certificates, authorizations, qualifications, easements, rights of way
and other rights and approvals which are necessary or advisable for the
operation of its business as presently conducted, except for those the absence
of which could not reasonably be expected to have a Material Adverse Effect.
6.20 TAXES AND TAX RETURNS.
---------------------
(A) Except as set forth on SCHEDULE B, PART 6.20, all income tax
returns required to be filed by Borrower and each of its Subsidiaries have
been timely filed after giving effect to any legally permitted extensions.
The information filed is complete and accurate in all material respects.
All deductions taken in such income tax returns are appropriate and in
accordance with applicable laws and regulations, except deductions that may
have been disallowed but are being challenged in good faith and for which
adequate reserves have been made in accordance with GAAP.
(B) All taxes, assessments, fees and other governmental charges for
periods beginning prior to the date hereof, other than such taxes,
assessments, fees and other governmental charges that are not yet due and
payable, have been timely paid and to the knowledge of Borrower neither
Borrower nor any of its Subsidiaries has any liability for taxes in excess
of the amounts so paid or reserves so established.
(C) Except as set forth in SCHEDULE B, PART 6.20, no material
deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental
45
<PAGE>
Authority against Borrower or any of its Subsidiaries and no tax liens have
been filed. Except as set forth in SCHEDULE B, PART 6.20, to the knowledge
of Borrower there are no pending or threatened audits, investigations or
claims for or relating to any liability for taxes and there are no matters
under discussion with any Governmental Authority which could reasonably be
expected to result in a material additional liability for taxes. As of the
Closing Date, either the federal income tax returns of each Credit Party
have been audited by the Internal Revenue Service and such audits have been
closed, or the period during which any assessments may be made by the
Internal Revenue Service has expired without waiver or extension for all
years up to and including the fiscal year of the Credit Parties ended
December 31, 1993. Except as set forth in SCHEDULE B, PART 6.20, as of the
Closing Date, no extension of a statute of limitations relating to taxes,
assessments, fees or other governmental charges is in effect with respect
to Borrower or any of its Subsidiaries.
(D) Except as set forth on SCHEDULE B, PART 6.20, neither Borrower nor
any of its Subsidiaries has any obligation under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
6.21 MATERIAL CONTRACTS. SCHEDULE B, PART 6.21, contains a true, correct
------------------
and complete list of all the Material Contracts in effect on the Closing Date.
Except as described on SCHEDULE B, PART 6.21, no Material Contract contains any
unduly burdensome restrictions on Borrower or any of its Subsidiaries or any of
their respective properties that could prevent in any material respect Borrower
or such Subsidiary from conducting its business as conducted on the Closing
Date. As of the Closing Date, all of the Material Contracts are in full force
and effect, and no defaults currently exist thereunder by Borrower or any of its
Subsidiaries that is a party thereto, or to the knowledge of Borrower, any other
party thereto, the effect of which defaults could reasonably be expected to have
a Material Adverse Effect.
6.22 ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
----------------------------------------
furnished by or on behalf of Borrower or any of its Subsidiaries in writing to
Agent or any Lender for purposes of or in connection with this Credit Agreement
or any Credit Documents, or any transaction contemplated hereby or thereby, is
or will be true and accurate in all material respects on the date as of which
such information is dated or certified and, taken as a whole, is not incomplete
by omitting to state any material fact necessary to make such information not
misleading at such time.
6.23 NO CHANGE. Since December 31, 1996, no event has occurred which has
---------
had or could reasonably be expected to have a Material Adverse Effect.
ARTICLE 7. AFFIRMATIVE COVENANTS.
---------------------
Until termination of this Credit Agreement and payment and satisfaction of
all Obligations due hereunder:
7.1 FINANCIAL REPORTING. Borrower shall timely deliver to each Lender the
-------------------
following information:
46
<PAGE>
(A) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not later
than 90 days after each fiscal year end: (I) the annual audited
consolidated, and unaudited consolidating, Financial Statements of the
Consolidated Entity; (II) a comparison in reasonable detail to the prior
year annual audited and unaudited Financial Statements; (III) the Auditors'
unqualified opinion, "Management Letter" (if any) and statement indicating
whether the Auditors have obtained knowledge of the existence of any
Default or Event of Default during their audit; (IV) a narrative discussion
of the consolidated financial condition and results of operations and the
consolidated liquidity and capital resources of the Consolidated Entity for
such fiscal year, prepared by the chief financial officer of Borrower; and
(V) a compliance certificate substantially in the form of EXHIBIT H with an
attached schedule of calculations demonstrating compliance with the
financial covenants set forth in SECTIONS 8.1 through 8.7.
(B) ANNUAL PROJECTIONS. Not later than 45 days after each fiscal year
end, beginning with the fiscal year ended December 31, 1997, an annual
projection of the financial condition and results of operations of the
Consolidated Entity for the succeeding fiscal year, in each case containing
projected consolidating balance sheets, statements of operations,
statements of cash flows and statements of changes in shareholders equity.
(C) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but not
later than 45 days after each end of each of the first three fiscal
quarters, and 90 days after the end of the last fiscal quarter: (I)
Financial Statements of the Consolidated Entity as of the fiscal quarter
then ended, and for the fiscal year to date; (II) a comparison in
reasonable detail to the Financial Statements for the corresponding periods
of the prior fiscal year; (III) the certification of the chief executive
officer or chief financial officer of Borrower that such Financial
Statements have been prepared in accordance with GAAP (subject to year-end
audit adjustments); (IV) a narrative discussion of the consolidated
financial condition and results of operations and the consolidated
liquidity and capital resources of the Consolidated Entity for such fiscal
quarter and fiscal year to date, prepared by the chief financial officer of
Borrower; and (V) a compliance certificate substantially in the form of
EXHIBIT H with an attached schedule of calculations demonstrating
compliance with the financial covenants set forth in SECTIONS 8.1 through
8.7.
(D) PUBLIC REPORTING. Promptly upon their becoming available, copies
of all regular and periodic reports, proxy statements and other materials,
if any, filed by Borrower with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of
such Commission, or with any national securities exchange, or distributed
to the stockholders of Borrower.
7.2 COLLATERAL REPORTING. Borrower shall timely deliver or cause to be
--------------------
delivered to Agent the following certificates and reports:
(A) QUARTERLY BORROWING BASE CERTIFICATES. As soon as available, but
not later than 45 days after the end of each fiscal quarter, and at any
other time reasonably requested by Agent, a Borrowing Base Certificate,
which shall be: (I) substantially in the form of EXHIBIT A, detailing the
Eligible Accounts Receivable and Eligible Inventory,
47
<PAGE>
in each case of each Credit Party, as of the last day of the immediately
preceding quarter, or as of such other date as Agent may request; and (II)
prepared by or under the supervision of the chief executive officer or
chief financial officers of each Credit Party and certified by such officer
subject only to adjustment upon completion of the normal annual audit of
physical inventory. Each Borrowing Base Certificate shall have attached to
it such additional schedules and other information as Agent may reasonably
request, including, without limitation, an aging of Accounts.
(B) FURTHER ASSURANCES. When requested by Agent, any further
information regarding the Collateral, business affairs and financial
condition of Borrower, any other Credit Party or any Subsidiary of any
Credit Party which may be developed or obtained without unreasonable effort
or expense.
7.3 NOTIFICATION REQUIREMENTS. Borrower shall timely give to Agent and
-------------------------
each of the Lenders the following notices:
(A) NOTICE OF DEFAULTS. Promptly, and in any event within two (2)
Business Days after becoming aware of the occurrence of a Default or Event
of Default, a certificate of the chief executive officer or chief financial
officer of Borrower specifying the nature thereof and the proposed response
of the Credit Parties with respect thereto, each in reasonable detail.
(B) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event within
five (5) Business Days after any Credit Party becomes aware of (I) any
proceedings being instituted or threatened to be instituted by or against
such Credit Party or any of its Subsidiaries in any federal, state, local
or foreign court or before any commission or other regulatory body
(federal, state, local or foreign) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, (II) any order,
judgment or decree in excess of $250,000 being entered against such Credit
Party or any of its Subsidiaries or any of their respective properties or
assets or (III) any actual or prospective change, development or event
which has had or could reasonably be expected to have a Material Adverse
Effect, a written statement describing such proceeding, order, judgment,
decree, change, development or event and any action being taken with
respect thereto by such Credit Party or such Subsidiary.
(C) ERISA NOTICES. (I) Promptly, and in any event within ten (10)
Business Days after Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the chief financial officer of Borrower
describing such Termination Event and any action that is being taken with
respect thereto by Borrower, such Subsidiary or such ERISA Affiliate, and
any action taken or threatened by the Internal Revenue Service, Department
of Labor or Pension Benefit Guaranty Corporation. Borrower, each
Subsidiary of Borrower and each ERISA Affiliate shall be deemed to know all
facts known by the administrator of any Benefit Plan of which it is the
plan sponsor; (II) promptly, and in any event within three (3) Business
Days after the filing thereof with the Internal Revenue Service, a copy of
each funding waiver request filed with respect to any Benefit Plan and all
communications received by Borrower, any Subsidiary of Borrower or any
ERISA
48
<PAGE>
Affiliate with respect to such request; and (III) promptly, and in any
event within three (3) Business Days after receipt by Borrower, any
Subsidiary of Borrower or any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice.
(D) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES. Promptly, and in any
event within ten (10) Business Days after receipt by any Credit Party or
any Subsidiary of any Credit Party of any notice, complaint or order
alleging any actual or prospective material violation of any environmental,
health or safety Requirement of Law or alleging responsibility for costs of
a cleanup, together with a copy of such notice, complaint, or order and a
written statement describing any action being taken with respect thereto by
such Credit Party or Subsidiary.
(E) MATERIAL CONTRACTS. Promptly, and in any event within ten (10)
Business Days after any Material Contract of any Credit Party or any
Subsidiary of any Credit Party is terminated or amended or any new Material
Contract is entered into, a written statement describing such event, with
copies of amendments or new contracts, and an explanation of any actions
being taken with respect thereto.
(F) COLLATERAL MATTERS. At least thirty (30) Business Days prior
written notice to Agent of any additional location of any Collateral of any
Credit Party (other than Proprietary Gaming Equipment, vehicles and
inventory in transit) or in the location of the chief executive office or
places of business of any Credit Party or any Subsidiary of any Credit
Party from the respective locations specified in SCHEDULE B, PART 6.10. At
least twenty (20) Business Days prior to any such change, Borrower shall
cause to be executed and delivered to Agent any financing statements or
other lien perfection documents reasonably required by Agent, all in form
and substance reasonably satisfactory to Agent.
7.4 CORPORATE EXISTENCE. Borrower shall, and shall cause each of its
-------------------
Subsidiaries to, (I) maintain its corporate existence (except that Subsidiaries
of Borrower may merge with each other and with Borrower and that Borrower may
liquidate or dissolve Games of Nevada, Inc., a Nevada corporation, and Mikohn
International, Inc., a Nevada corporation, PROVIDED, THAT Agent receives five
(5) Business Days prior written notice thereof), (II) maintain in full force and
effect all licenses, bonds, franchises, leases, trademarks and qualifications to
do business, and all patents, contracts and other similar rights necessary or
advisable for the profitable conduct of their businesses, the loss of which
could reasonably be expected to have a Material Adverse Effect, (III) continue
in, and limit their operations to, the same general lines of business as
presently conducted by them and (IV) maintain all material terms and provisions
of its corporate charter and bylaws in the form in effect on the Closing Date.
7.5 BOOKS AND RECORDS; INSPECTIONS. Borrower agrees to maintain, and to
------------------------------
cause each of its Subsidiaries to maintain, books and records pertaining to the
Collateral in such detail, form and scope as is consistent with good business
practice. Borrower agrees that Agent, or its agents, may enter upon the
premises of Borrower or any of its Subsidiaries at any time and from time to
time, during normal business hours and upon reasonable notice under the
circumstances, and at any time at all upon the occurrence and during the
continuance of an Event of Default,
49
<PAGE>
for the purposes of (I) inspecting and verifying the Collateral, (II) inspecting
and/or copying (at the expense of Borrower) any and all records pertaining
thereto, and (III) discussing the affairs, finances and business of Borrower and
its Subsidiaries with the Auditors or any officers, employees and directors of
Borrower or its Subsidiaries.
7.6 INSURANCE. Borrower agrees to maintain, and to cause each of its
---------
Subsidiaries to maintain, public liability insurance, fire and extended coverage
insurance and replacement value insurance on the Collateral under such policies
of insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to Agent in its commercially reasonable
judgment. All policies covering the Collateral are to name Agent as an
additional insured and/or the loss payee in case of loss, and are to contain
such other provisions as Agent may reasonably require to fully protect Agent's
interest in the Collateral and to any payments to be made under such policies.
7.7 TAXES. Borrower agrees to pay, when due, and to cause each of its
-----
Subsidiaries to pay when due, all taxes lawfully levied or assessed against
Borrower, such Subsidiary or any of the Collateral before any penalty or
interest accrues thereon; PROVIDED, THAT, unless such taxes have become a
federal tax or ERISA Lien on any of the assets of such Credit Party or such
Subsidiary, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be in conformity with GAAP.
7.8 COMPLIANCE WITH LAWS. Borrower agrees to comply, and to cause each of
--------------------
its Subsidiaries to comply, in all respects with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of its
business or its assets generally, unless Borrower or such Subsidiary contests
any such Requirements of Law in a reasonable manner and in good faith or the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect.
7.9 USE OF PROCEEDS. Borrower shall use the proceeds of Term Loan A and
---------------
Term Loan B to repay all Indebtedness of the Credit Parties not permitted to
exist under this Credit Agreement, to pay the costs and expenses of the
transactions contemplated by this Credit Agreement, including without limitation
the Fees and Expenses payable pursuant to ARTICLE 2 hereof, and any remainder
for working capital and other general corporate purposes. The proceeds of
Revolving Loans and other extensions of credit made hereunder shall be used by
Borrower solely for ongoing working capital requirements and other general
corporate purposes. Borrower shall not use, or permit any of its Subsidiaries
to use, any portion of the proceeds of any Revolving Loans for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation G) in any
manner which violates the provisions of Regulation G or X or of the terms and
conditions of this Credit Agreement or any other Credit Document. Borrower has
not utilized the services of any broker/dealer in violation of Regulation T.
7.10 FISCAL YEAR. Borrower agrees to maintain, and to cause each of its
-----------
Subsidiaries to maintain, its fiscal year as a year ending December 31st.
50
<PAGE>
7.11 MAINTENANCE OF PROPERTY. Borrower agrees to keep, and to cause each
-----------------------
of its Subsidiaries to keep, all property useful and necessary to their
respective businesses in good working order and condition (ordinary wear and
tear excepted) in accordance with their past operating practices and not to
commit or suffer any waste with respect to any of their properties.
7.12 ERISA DOCUMENTS. Borrower will cause to be delivered to Agent, upon
---------------
Agent's request, each of the following: (I) a copy of each Plan (or, where any
such plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Borrower or any
of its Subsidiaries; (II) the most recent determination letter issued by the
Internal Revenue Service with respect to each Benefit Plan; (III) for the three
most recent plan years, Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Benefit Plan; (IV) all actuarial reports
prepared for the last three plan years for each Benefit Plan; (V) a listing of
all Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by Borrower or any ERISA Affiliate to each
such plan and copies of the collective bargaining agreements requiring such
contributions; (VI) any information that has been provided to Borrower or any
ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan; and
(VII) the aggregate amount of the most recent annual payments made to former
employees of Borrower or any ERISA Affiliate under any Retiree Health Plan.
7.13 ENVIRONMENTAL AND OTHER MATTERS.
-------------------------------
(A) Borrower shall, and shall cause each of its Subsidiaries to,
conduct their businesses so as to comply in all respects with all
environmental, land use, occupational, safety or health laws, regulations,
directions, ordinances, criteria and guidelines in all jurisdictions in
which any of them is or may at any time be doing business, except to the
extent that the failure to so comply reasonably could be expected to have a
Material Adverse Effect or to the extent that Borrower or such Subsidiary
is contesting, in good faith by appropriate legal proceedings, any such
law, regulation, direction, ordinance, criteria, guideline, or
interpretation thereof or application thereof; PROVIDED, THAT Borrower and
each of its Subsidiaries shall comply with the order of any court or other
Governmental Authority relating to such laws unless Borrower or such
Subsidiary shall currently be prosecuting an appeal or proceedings for
review and shall have secured a stay of enforcement or execution or other
arrangement postponing enforcement or execution pending such appeal or
proceedings for review.
(B) If Agent reasonably believes, or the Majority Lenders reasonably
believe, that the facts or circumstances evidence or suggest that Borrower
or any Subsidiary of Borrower is in material non-compliance with any
environmental law and that such non-compliance could reasonably be expected
to have a Material Adverse Effect, then at the written request of Agent or
the Majority Lenders, which request shall specify in reasonable detail the
basis therefor, at any time and from time to time, Borrower will provide at
its sole cost and expense a Phase I or Phase II environmental site
assessment report or update report concerning the site owned, operated or
leased by Borrower or such Subsidiary in respect of which such material
non-compliance is believed to have occurred and be continuing, such report
to be prepared by an environmental consulting
51
<PAGE>
firm approved by Agent and the Majority Lenders, indicating the presence,
release or absence of hazardous materials on or from such site and the
potential cost of any removal, remedial or corrective action in connection
with any such hazardous materials on such site.
7.14 FURTHER ACTIONS. Borrower shall take, and shall cause each of its
---------------
Subsidiaries to take, all such further actions and execute all such further
documents and instruments as Agent may at any time determine in its reasonable
judgment to be necessary or desirable to further carry out and consummate the
transactions contemplated by the Credit Documents, to cause the execution,
delivery and performance of the Credit Documents to be duly authorized and to
perfect or protect the Liens (and the priority status thereof) of Agent on the
Collateral (subject to Permitted Liens).
ARTICLE 8. NEGATIVE COVENANTS.
------------------
Until termination of this Credit Agreement and payment and satisfaction of
all Obligations due hereunder, Borrower shall comply with, and, where required,
shall cause each of its Subsidiaries to comply with, the following covenants:
8.1 MINIMUM NET WORTH. Borrower shall not permit Net Worth (excluding the
-----------------
effect of foreign currency adjustments) on the last day of each quarter set
forth below to be less than the amount set forth below opposite such day:
<TABLE>
<CAPTION>
Minimum
Quarter Ending Net Worth
-------------------- ----------------
<S> <C>
December 31, 1997 $47,500,000
March 31, 1998 $47,600,000
June 30, 1998 $48,000,000
September 30, 1998 $48,200,000
December 31, 1998 $48,900,000
March 31, 1999 $49,300,000
June 30, 1999 $49,800,000
September 30, 1999 $50,300,000
December 31, 1999 $51,200,000
March 31, 2000 $51,600,000
June 30, 2000 $52,400,000
September 30, 2000 $53,000,000
December 31, 2000 $54,200,000
March 31, 2001 $54,700,000
June 30, 2001 $55,700,000
September 30, 2001 $56,500,000
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
December 31, 2001 $57,900,000
March 31, 2002 $58,600,000
June 30, 2002 $59,900,000
September 30, 2002 $60,800,000
December 31, 2002 $62,400,000
Last Day of Each
Quarter Thereafter $63,400,000
</TABLE>
8.2 MINIMUM CURRENT RATIO. Borrower shall not permit the Current Ratio
---------------------
on the last day of any quarter to be less than 2.50 to 1.00.
8.3 MAXIMUM RATIO OF TOTAL DEBT TO EBITDA. Borrower shall not permit
-------------------------------------
the ratio of the Indebtedness of the Consolidated Entity as of the last day of
each quarter during each period set forth below to EBITDA for the twelve month
period ending on such last day to be greater than the amount set forth below
opposite such period:
<TABLE>
<CAPTION>
Maximum
Period Ratio
------ -------------
<S> <C>
Closing Date - December 31, 1997 3.80 to 1.00
January 1, 1998 - December 31, 1998 3.50 to 1.00
January 1, 1999 - December 31, 1999 3.25 to 1.00
January 1, 2000 - December 31, 2000 3.00 to 1.00
January 1, 2001 - December 31, 2001 2.75 to 1.00
January 1, 2002 - September 30, 2004 2.50 to 1.00
</TABLE>
8.4 MINIMUM EBITDA. Borrower shall not permit EBITDA for the twelve month
--------------
period ending on the last day of each quarter set forth below (or in the case of
twelve month periods ending on or before September 30, 1998, for the period from
the Closing Date to the end of such period, treated as a single accounting
period) to be less than the amount set forth below opposite such day:
<TABLE>
<CAPTION>
Minimum
Quarter Ending EBITDA
-------------- -----------
<S> <C>
December 31, 1997 $ 9,000,000
March 31, 1998 $ 9,250,000
June 30, 1998 $ 9,500,000
September 30, 1998 $ 9,750,000
December 31, 1998 $10,000,000
March 31, 1999 $10,250,000
June 30, 1999 $10,500,000
September 30, 1999 $10,750,000
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
December 31, 1999 $11,000,000
March 31, 2000 $11,250,000
June 30, 2000 $11,500,000
September 30, 2000 $11,750,000
December 31, 2000 $12,000,000
March 31, 2001 $12,250,000
June 30, 2001 $12,500,000
September 30, 2001 $12,750,000
December 31, 2001 $13,000,000
March 31, 2002 $13,250,000
June 30, 2002 $13,500,000
September 30, 2002 $13,750,000
December 31, 2002 $14,000,000
Last Day of Each
Quarter Thereafter $14,000,000
</TABLE>
8.5 MINIMUM RATIO OF EBITDA TO INTEREST EXPENSE. Borrower shall not
-------------------------------------------
permit the ratio of EBITDA for the twelve month period ending on the last day of
each quarter during each period set forth below (or in the case of twelve month
periods ending on or before September 30, 1998, for the period from the Closing
Date to the end of such period, treated as a single accounting period) to
Interest Expense for such twelve month period (or in the case of twelve month
periods ending on or before September 30, 1998, for the period from the Closing
Date to the end of such period, treated as a single accounting period) to be
less than the amount set forth below opposite such period:
<TABLE>
<CAPTION>
Minimum
Period Ratio
------ ------------
<S> <C>
Closing Date - December 31, 1998 3.00 to 1.00
January 1, 1999 - December 31, 1999 3.25 to 1.00
January 1, 2000 - December 31, 2000 3.50 to 1.00
January 1, 2001 - December 31, 2001 3.75 to 1.00
January 1, 2002 - September 30, 2004 4.00 to 1.00
</TABLE>
8.6 MINIMUM FIXED CHARGE COVERAGE RATIO. Borrower shall not permit the
-----------------------------------
Fixed Charge Coverage Ratio for the twelve month period ending on the last day
of each quarter during each period set forth below (or in the case of twelve
month periods ending on or before September 30, 1998, for the period from the
Closing Date to the end of such period, treated as a single accounting period)
to be less than the amount set forth below opposite such period:
<TABLE>
<CAPTION>
Minimum
Period Ratio
------ ------------
<S> <C>
</TABLE>
54
<PAGE>
<TABLE>
<S> <C>
Closing Date - June 30, 1998 1.00 to 1.00
July 1, 1998 - December 31, 1999 1.25 to 1.00
January 1, 2000 - December 31, 2001 1.50 to 1.00
January 1, 2002 - September 30, 2004 1.00 to 1.00
</TABLE>
8.7 CAPITAL EXPENDITURES. Borrower shall not, and shall not permit any of
--------------------
its Subsidiaries to, make any Capital Expenditures during the fiscal year of the
Consolidated Entity ending December 31, 1997 in excess of $2,000,000, or during
any other fiscal year of the Consolidated Entity in excess of $4,000,000 plus
50% of the remainder, if any, of (A) the aggregate amount of all Capital
Expenditures permitted under this SECTION 8.7 for the preceding fiscal year of
the Consolidated Entity MINUS (B) the aggregate amount of all Capital
Expenditures of the Consolidated Entity actually made during such preceding
fiscal year.
8.8 ADDITIONAL INDEBTEDNESS. Borrower shall not, and shall not permit any
-----------------------
of its Subsidiaries to, directly or indirectly incur, create, assume or suffer
to exist any Indebtedness other than:
(A) Indebtedness under the Credit Documents;
(B) Indebtedness in the ordinary course of business under Interest
Rate Agreements, in each case in form and substance satisfactory to Agent;
(C) Indebtedness of any Subsidiary of Borrower to a Credit Party or
any Subsidiary of a Credit Party;
(D) Indebtedness described on SCHEDULE B, PART 8.8 and any refinancing
of such Indebtedness, so long as the aggregate principal amount of the
Indebtedness so refinanced shall not be increased, nor the maturity of such
principal amount reduced, and the refinancing shall be on terms and
conditions no more restrictive than the terms and conditions of the
Indebtedness to be refinanced;
(E) Indebtedness, other than the Obligations and Indebtedness
described on SCHEDULE B, PART 8.8, incurred to purchase tangible personal
property or Indebtedness incurred to lease tangible personal property
pursuant to capital leases, in an aggregate amount not in excess of
$3,000,000 in any fiscal year of the Consolidated Entity, so long as (I)
such Indebtedness is on customary terms and conditions, (II) each Lien
("PURCHASE MONEY LIEN") granted to secure such Indebtedness shall attach
only to the property to be acquired or leased, (III) a description shall
have been furnished to Agent for any item of equipment for which the
purchase price or fair market value is greater than $500,000 and (IV) the
Indebtedness incurred shall not exceed one hundred percent (100%) of the
lesser of the fair market value or the purchase price of the item or items
of equipment purchased or leased;
(F) Indebtedness incurred by any Foreign Subsidiary and each other
Subsidiary of Borrower hereafter incorporated or formed under the laws of
any foreign jurisdiction under one or more credit facilities in an
aggregate maximum amount not in excess of (I)
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$12,000,000 for all such credit facilities and (II) $2,000,000 for any such
Subsidiary, which may be secured by a Lien ("FOREIGN LIEN") on the assets
of such Subsidiary;
(G) provided the Principal Balance of the Revolving Loans is at least
$5,000,000 and is not repaid from the proceeds of such Indebtedness,
Indebtedness up to $5,000,000 in the aggregate for Borrower and its
Subsidiaries outstanding at any one time to a casino or other customer of
Borrower or any of its Subsidiaries in order to finance the development of
Proprietary Gaming Equipment for such casino or other customer, which
Indebtedness may be secured only by a Lien (a "PGE LIEN") on such
Proprietary Gaming Equipment and related Intangible Assets upon which such
Proprietary Gaming Equipment is based;
(H) Indebtedness in an aggregate amount not to exceed $2,500,000
incurred by Borrower and secured only by a Lien (the "JRY MORTGAGE LIEN")
on the JRY Property, provided such Indebtedness is repaid in full
concurrently with any sale of the JRY Property;
(I) Indebtedness in an aggregate amount not to exceed $2,500,000
incurred by Borrower and secured only by a Lien (the "JRY REPLACEMENT
MORTGAGE LIEN") on the JRY Replacement Property, provided such Indebtedness
(I) is repaid in full concurrently with any sale of the JRY Replacement
Property and (II) is not outstanding at the same time as any Indebtedness
permitted under CLAUSE (H) above is outstanding for more than eighteen
months;
(J) Indebtedness in an aggregate amount not to exceed $1,000,000
incurred by Borrower and secured only by a Lien (the "GULFPORT REPLACEMENT
MORTGAGE LIEN") on the Gulfport Replacement Property, provided such
Indebtedness is repaid in full concurrently with any sale of the Gulfport
Replacement Property; and
(K) other unsecured Indebtedness in an aggregate amount not in excess
of $5,000,000, provided that no Default or Event of Default exists at the
time such Indebtedness is incurred or would be created by the incurrence of
such Indebtedness.
8.9 LIENS. Borrower shall not, and shall not permit any of its
-----
Subsidiaries to, directly or indirectly create, incur, assume, or suffer to
exist any Lien on any of its property now owned or hereafter acquired except:
(A) Liens granted to Agent under the Credit Documents;
(B) Liens listed on SCHEDULE B, PART 8.9;
(C) Purchase Money Liens, Foreign Liens, any PGE Lien, the JRY
Mortgage Lien, the JRY Replacement Mortgage Lien and the Gulfport
Replacement Mortgage Lien, to the extent permitted under SECTION 8.8;
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(D) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, or landlords, liens for taxes, assessments or other
governmental charges, and other similar Liens arising by operation of law,
in each case for amounts that are not yet due and payable or that are being
diligently contested in good faith by Borrower or a Subsidiary of Borrower,
so long as Agent has been notified thereof and adequate reserves are
maintained by such Person for their payment in accordance with GAAP;
(E) Attachment or judgment Liens not to exceed an aggregate of
$250,000 for the Consolidated Entity, excluding amounts (I) bonded to the
reasonable satisfaction of Agent or (II) covered by insurance to the
reasonable satisfaction of Agent;
(F) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, under unemployment
insurance, or to secure public or statutory obligations not to exceed an
aggregate of $100,000 for the Consolidated Entity;
(G) Deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the
ordinary course of business not to exceed an aggregate of $100,000 for the
Consolidated Entity;
(H) Easements, rights-of-way, restrictions and other similar
encumbrances on title to, or restrictions on the use of, real property,
which, in the aggregate, do not materially detract from the value of the
item of property subject thereto or materially interfere with the ordinary
conduct of the business of Borrower or any of its Subsidiaries; and
(I) Extensions and renewals of any of the foregoing so long as the
aggregate amount of extended or renewed Liens are not increased, nor the
maturity of the Indebtedness secured thereby reduced, and are on terms and
conditions not materially more restrictive than the terms and conditions of
the Liens extended or renewed.
8.10 CONTINGENT OBLIGATIONS. Borrower shall not, and shall not permit any
----------------------
of its Subsidiaries to, directly or indirectly incur, assume, or suffer to exist
any Contingent Obligation, excluding Contingent Obligations for Indebtedness
permitted to be incurred under SECTION 8.8, and Investments permitted under
SECTION 8.12.
8.11 SALE OF ASSETS. Borrower shall not, and shall not permit any of its
--------------
Subsidiaries to, directly or indirectly, sell, lease, assign, transfer or
otherwise dispose of any assets other than (A) Inventory in the ordinary course
of business and Proprietary Gaming Equipment; (B) obsolete or worn out property
disposed of in the ordinary course of business; (C) the sale of the JRY Property
for cash consideration not less than that portion of the Indebtedness secured by
any JRY Mortgage Lien not assumed by the buyer thereof provided that at the time
of such sale Borrower is released from any and all liability in connection with
such assumed Indebtedness; (D) the Gulfport Property and (E) dispositions of
assets not otherwise permitted under this SECTION 8.11, PROVIDED, THAT (I) such
dispositions are for fair value, (II) at least 85% of the aggregate
consideration is paid in cash and/or the assumption by the buyer of Indebtedness
of
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Borrower at the time of disposition PROVIDED that at the time of disposition
Borrower is released from any and all liability in connection with any such
assumed Indebtedness, (III) the aggregate consideration for all such
dispositions does not exceed $2,000,000 in the aggregate for any fiscal year and
(IV) Borrower complies with the provisions of SECTION 2.8.4.
8.12 RESTRICTED PAYMENTS. Borrower shall not, and shall not permit any of
-------------------
its Subsidiaries to, directly or indirectly, (A) declare or pay any dividend
(other than dividends payable solely in capital stock of such Person) 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 shares of any class of capital stock of such Person or any
warrants, options or rights to purchase any such capital stock, 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 such
Person or any of its Subsidiaries; (B) make any optional payment or optional
prepayment on or optional redemption (including, without limitation, by making
payments to a sinking or analogous fund) or optional repurchase of any
Indebtedness (other than Indebtedness pursuant to this Credit Agreement); or (C)
make any Investment in any Person, whether in cash, securities, or other
property of any kind including, without limitation, any Subsidiary or Affiliate
of Borrower, other than Permitted Investments; PROVIDED, THAT, notwithstanding
the foregoing (I) any Subsidiary of Borrower may make payments on account of
Indebtedness owing to Borrower or any Subsidiary of Borrower, (II) any
Subsidiary of Borrower may declare and pay dividends to Borrower or distribute
assets to Borrower as a result of a dissolution of such Subsidiary permitted
under this Credit Agreement and (III) provided no Default or Event of Default
then exists or would be created by the payment of any such dividend or the
making of any such Investment, Borrower may declare and pay dividends on and
repurchase its capital stock and may make Investments other than Permitted
Investments (collectively, "RESTRICTED PAYMENTS") PROVIDED THAT prior to the
repayment in full of the Obligations and the termination of the Commitments, the
aggregate amount of all such Restricted Payments shall not exceed the sum of (A)
the Net Cash Proceeds of any issuance of capital stock by Borrower not required
to be used to prepay the Term Loans pursuant to SECTION 2.8.4(A) PLUS (B) the
greater of (1) $4,000,000 or (2) the remainder of (X) the product of 0.50
MULTIPLIED BY the positive Net Income for the period commencing on the Closing
Date through the date the proposed Restricted Payment is to be made MINUS (Y)
the negative Net Income for the period commencing on the Closing Date through
the date the proposed Restricted Payment is to be made.
8.13 BANK ACCOUNTS. Borrower shall not, and shall not permit any of its
-------------
Subsidiaries other than any Foreign Subsidiary to, maintain any depositary,
checking, investment or other account of any kind whatsoever with any financial
institution unless such financial institution has entered into a bank agency
agreement with Agent in form and substance satisfactory to Agent pursuant to
which such financial institution agrees to act as Agent's pledgee-in-possession
for purposes of perfection of Agent's security interest in such account, other
than (A) petty cash accounts PROVIDED the aggregate amount of funds on deposit
in each such petty cash account does not exceed $5,000 at any time and (B)
payroll accounts, PROVIDED the aggregate amount of funds on deposit in each such
payroll account at any time does not exceed the sum of all payroll and payroll
taxes then payable (or to become payable on the next payroll payment date)
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by Borrower or one of its Subsidiaries (other than any Foreign Subsidiaries) on
account of payroll obligations payable from such account.
8.14 AFFILIATE TRANSACTIONS. Borrower shall not, and shall not permit any
----------------------
of its Subsidiaries to, directly or indirectly, enter into any transaction with
(including, without limitation, the purchase, sale or exchange of property or
the rendering of any service to) any Subsidiary or Affiliate of Borrower, except
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Subsidiary's business, as the case may be, and upon fair and
reasonable terms no less favorable in any material respect to Borrower or such
Subsidiary than could be obtained in a comparable arm's-length transaction with
an unaffiliated Person, except for transactions otherwise permitted under
SECTION 8.12.
8.15 ADDITIONAL NEGATIVE PLEDGES. Subject to Section 12.5, Borrower shall
---------------------------
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective, (A) any
prohibition or restriction (including any agreement to provide equal and ratable
security to any other Person in the event a Lien is granted to or for the
benefit of Agent and the Lenders) on the creation or existence of any Lien upon
the assets of Borrower or any of its Subsidiaries; or (B) any contractual
obligation which may restrict or inhibit Agent's rights or ability to sell or
otherwise dispose of the Collateral or any part thereof after the occurrence of
an Event of Default.
8.16 ADDITIONAL SUBSIDIARIES. Borrower shall not, and shall not permit any
-----------------------
of its Subsidiaries to, directly or indirectly, form or acquire any new
Subsidiaries, unless (A) Borrower pledges, or causes its applicable Subsidiary
to pledge, all of the capital stock of each such new Subsidiary owned by
Borrower or the applicable Subsidiary to Agent as security for the Obligations
pursuant to a pledge agreement in form and substance satisfactory to Agent and
(B) each such new Subsidiary executes and delivers to Agent a joinder to the
Guaranty and the Security Agreement in form and substance satisfactory to Agent
and such other Collateral Documents and financing statements, in form and
substance satisfactory to Agent, as Agent may require. In the event any
Subsidiary of Borrower (other than Guarantors and the Foreign Subsidiaries)
existing on the Closing Date begins to conduct business or acquires any assets
with a fair market value in excess of $50,000, such Subsidiary shall be deemed a
new Subsidiary of Borrower for purposes of the preceding sentence.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
-----------------
shall constitute an event of default (each an "EVENT OF DEFAULT") hereunder:
(A) FAILURE TO PAY. Borrower shall fail to pay (I) the Principal
Balance, or any installment thereof, or any Letter of Credit Obligations,
when the same shall become due and payable, (II) any interest or fees due
hereunder within 5 days of the date the same are due and payable or (III)
any other Obligations due hereunder within 5 days after demand therefor by
Agent or the Majority Lenders.
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(B) BREACH OF CERTAIN COVENANTS. Borrower shall fail to comply with
any covenant contained in ARTICLE 7 or ARTICLE 8.
(C) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed to be made by any Credit Party in this Credit
Agreement or in any other Credit Document (and in any statement or
certificate given under this Credit Agreement or any other Credit
Document), shall be false or misleading in any material respect when made
or deemed to be made.
(D) BREACH OF OTHER COVENANTS. Any Credit Party shall fail to comply
with any covenant contained in this Credit Agreement or any other Credit
Document, other than as set forth in SECTION 9.1(B), and such failure shall
continue for thirty (30) days after its occurrence.
(E) DISSOLUTION. Any Credit Party shall dissolve, wind up or
otherwise cease its business.
(F) INSOLVENCY EVENT. Any Credit Party shall become the subject of an
Insolvency Event.
(G) CROSS DEFAULT. A default or event of default shall occur under
any note, agreement or instrument evidencing any other Indebtedness of any
Credit Party or any Subsidiary of any Credit Party, which default or event
of default permits the acceleration of its maturity, PROVIDED THAT the
aggregate principal amount of all such Indebtedness for which the default
or event of default has occurred exceeds $1,000,000.
(H) JUDGMENTS. The sum of all judgments, awards or decrees, or orders
of attachment, garnishment or any other writ, entered against Borrower or
any of its Subsidiaries exceeds $250,000 at any one time outstanding,
excluding judgments, awards, decrees, orders or writs (I) for which there
is full insurance and with respect to which the insurer has assumed
responsibility in writing, (II) for which there is full indemnification
(upon terms and by creditworthy indemnitors which are satisfactory to the
Majority Lenders) or (III) which have been in force for less than the
applicable period for filing an appeal so long as execution is not levied
thereunder (or in respect of which Borrower shall at the time in good faith
be prosecuting an appeal or proceeding for review and in respect of which a
stay of execution or appropriate appeal bond shall have been obtained
pending such appeal or review).
(I) ERISA. Except to the extent that any of the following is
expressly permitted hereunder or does not give rise to the incurrence by
Borrower, any of its Subsidiaries or any of ERISA Affiliate of any
liability in excess of $250,000 (in the aggregate), or except to the extent
any of the following is adequately reserved on the balance sheet of the
Consolidated Entity or an ERISA Affiliate, the institution of any steps by
Borrower or any other Person, including the PBGC, (I) to amend, modify or
terminate a Benefit Plan or to enter into any new Benefit Plan or (II) to
cause a complete or partial withdrawal from any Multiemployer Plan.
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(J) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS; SECURITY. Any
covenant, agreement or obligation of any Credit Party contained in or
evidenced by any of the Credit Documents shall cease to be enforceable, or
shall be determined to be unenforceable, in accordance with its terms; any
Credit Party shall deny or disaffirm its obligations under any of the
Credit Documents or any Liens granted in connection therewith; or, any
Liens granted on any of the Collateral shall be determined to be void,
voidable, invalid or unperfected, are subordinated or not given the
priority contemplated by this Credit Agreement.
9.2 ACCELERATION AND TERMINATION OF COMMITMENTS. Upon the occurrence and
-------------------------------------------
during the continuance of any Event of Default, without prejudice to the rights
of Agent or any Lender to enforce its claims against the Credit Parties:
(A) ACCELERATION. Upon the written request of the Majority Lenders
and by delivery of written notice to Borrower from Agent, all Obligations
shall be immediately due and payable (except with respect to any Event of
Default set forth in SECTION 9.1(F), in which case all Obligations shall
automatically become immediately due and payable without the necessity of
any request of the Majority Lenders or notice or other demand to Borrower
or any other Credit Party) without presentment, demand, protest or any
other action or obligation of Agent or any Lender.
(B) TERMINATION OF COMMITMENTS. Upon the written request of the
Majority Lenders, and by delivery of written notice to Borrower from Agent
(except with respect to any Event of Default set forth in SECTION 9.1(F)),
in which case all of the Commitments shall automatically and immediately
terminate without the necessity of any request of the Majority Lenders or
notice or other demand to Borrower or any other Credit Party) the
Commitments shall be immediately terminated and, at all times thereafter,
all Revolving Loans made by any Lender pursuant to this Credit Agreement
shall be at such Lender's sole discretion, unless such Event of Default is
waived in accordance with SECTION 11.11, in which case the Commitments
shall be automatically reinstated.
9.3 RESCISSION OF ACCELERATION. After acceleration of the maturity of all
--------------------------
or any part of the Obligations, if Borrower pays all accrued interest and all
principal due (other than by reason of the acceleration) and all Events of
Default are waived in accordance with SECTION 11.11, the Majority Lenders may
elect in their sole discretion, to rescind the acceleration and return to
Borrower any cash collateral, if any, deposited with Agent pursuant to SECTION
9.2(C). (This Section is intended only to bind all of the Lenders to a decision
of the Majority Lenders and not to confer any right on Borrower, even if the
described conditions for the Majority Lenders' election may be met.)
9.4 REMEDIES. Subject to Applicable Gaming Laws, upon the occurrence and
--------
during the continuance of an Event of Default, upon the written request and at
the direction of the Majority Lenders, Agent may exercise any rights and
remedies available to it under applicable law (including under the Code) and
under the Collateral Documents. The foregoing rights and remedies are not
intended to be exhaustive and the full or partial exercise of any right or
remedy
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shall not preclude the full or partial exercise of any other right or remedy
available under this Credit Agreement, any other Credit Document, at equity or
at law.
9.5 RIGHT OF SETOFF. In addition to and not in limitation of all rights
---------------
of offset that any Lender may have under applicable law, upon the occurrence and
during the continuance of any Event of Default, and whether or not any Lender
has made any demand or the Obligations of any Credit Party have matured, each
Lender shall have the right to appropriate and apply to the payment of the
Obligations of such Credit Party all deposits and other obligations then or
thereafter owing by such Lender to such Credit Party. Each Lender exercising
such rights shall notify Agent thereof and any amount received as a result of
the exercise of such rights shall be shared by the Lenders in accordance with
SECTION 4.4.
9.6 LICENSE OF USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY. Unless
----------------------------------------------------------
expressly prohibited by the licensor thereof, if any, Agent is hereby granted a
license to use all computer software programs, data bases, processes and
materials used by Borrower and its Subsidiaries in connection with their
respective businesses or in connection with any Collateral, except for those
which cannot reasonably be demonstrated to have any use other than in slot
machines or cashless wagering systems unless Agent obtains all required licenses
as a manufacturer and distributor pursuant to Applicable Gaming Laws. Agent
agrees not to use any such license prior to the occurrence of an Event of
Default, without giving Borrower prior notice.
9.7 APPLICATION OF PROCEEDS; SURPLUS; DEFICIENCIES. The net cash proceeds
----------------------------------------------
resulting from Agent's exercise of any of the foregoing rights against any
Collateral (after deducting all of Agent's Expenses related thereto) shall be
applied by Agent to the payment of the Obligations, whether due or to become
due, in the order set forth in SECTION 4.2. Borrower shall remain liable to
Agent and the Lenders for any deficiencies, and Agent and the Lenders in turn
agree to remit to Borrower or its successors or assigns, any surplus resulting
therefrom.
ARTICLE 10. AGENT.
-----
10.1 APPOINTMENT OF AGENT.
--------------------
(A) Each Lender hereby designates FSFP as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of
any Note, by the acceptance of such Note, shall be deemed irrevocably to
authorize Agent to take such action on its behalf under the provisions of
this Credit Agreement and the other Credit Documents and any other
instruments and agreements referred to herein and therein and to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. Agent
shall hold all Collateral and all payments of principal, interest, Fees
(other than Fees that are exclusively for the account of Agent), charges
and Expenses received pursuant to this Credit Agreement or any other Credit
Document for the ratable benefit of the Lenders. Agent may perform any of
its duties hereunder by or through its agents or employees.
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(B) Other than rights of the Credit Parties under SECTION 10.9, the
provisions of this ARTICLE 10 are for the benefit of Agent and the Lenders
only and none of the Credit Parties or any other Persons shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Credit Agreement and the
other Credit Documents, Agent shall act only for the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party.
10.2 NATURE OF DUTIES OF AGENT. Agent has no duties or responsibilities
-------------------------
except those expressly set forth in the Credit Documents. Neither Agent nor any
of its officers, directors, employees or agents shall be liable for any action
taken or omitted hereunder or in connection herewith, unless caused by its or
their gross negligence or willful misconduct. The duties of Agent shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Credit Agreement or any of the other Credit Documents a fiduciary relationship
in respect of any Lender or any participant of any Lender; and nothing in this
Credit Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Credit Agreement or any other Credit Document, except as expressly set
forth herein or therein.
10.3 LACK OF RELIANCE ON AGENT.
-------------------------
(A) Independently and without reliance upon Agent, each Lender, to the
extent it deems appropriate, has made and shall continue to make (I) its
own independent investigation of the financial or other condition and
affairs of each Credit Party in connection with the taking or not taking of
any action in connection herewith and (II) its own appraisal of the
creditworthiness of each Credit Party, and, except as expressly provided in
this Credit Agreement, Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times
thereafter.
(B) Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or any of
the other Credit Documents or the financial or other condition of any
Credit Party. Agent shall not be required to make any inquiry concerning
either the performance or observance of any other terms, provisions or
conditions of this Credit Agreement or any of the other Credit Documents,
or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
10.4 CERTAIN RIGHTS OF AGENT. Agent shall have the right to request
-----------------------
instructions from the Lenders by notice to each of such Lenders. If Agent shall
request instructions from the Lenders with respect to any act or action
(including the failure to act) in connection with this Credit Agreement, Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from such Lenders, and Agent shall
not incur
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liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting hereunder in accordance with
the instructions of the requisite Lenders required to give such instructions
hereunder. Agent may give any notice required under ARTICLE 9 hereof without
the consent of any of the Lenders unless otherwise directed by the Majority
Lenders in writing and will, at the direction of the Majority Lenders, give any
such notice required under ARTICLE 9.
10.5 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, facsimile or telephone message believed
by it to be genuine and correct and to have been signed, sent or made by the
proper person. Agent may consult with legal counsel (including counsel for the
Credit Parties with respect to matters concerning the Credit Parties),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
10.6 INDEMNIFICATION OF AGENT. To the extent Agent is not reimbursed and
------------------------
indemnified by Borrower, each Lender will reimburse and indemnify Agent, in
proportion to its respective Commitment, for and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
Agent in performing its duties hereunder, in any way relating to or arising out
of this Credit Agreement; PROVIDED, THAT no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct, and PROVIDED FURTHER THAT no Term Loan Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
relating solely to the administration and disbursement of any Revolving Loan.
10.7 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its obligation to
--------------------------------
lend under this Credit Agreement, the Loans made by it and the Notes issued to
it and its participation in Letters of Credit issued hereunder, Agent shall have
the same rights and powers hereunder as any other Lender or holder of a Note or
participation interests and may exercise the same as though it was not
performing the duties specified herein; and the terms "Lenders," "Lenders,"
"Majority Lenders," "holders of Notes," or any similar terms shall, unless the
context clearly otherwise indicates, include Agent in its individual capacity.
Agent may accept deposits from, lend money to, acquire equity interests in, and
generally engage in any kind of banking, trust, financial advisory or other
business with any Credit Party or any Affiliate of any Credit Party as if it
were not performing the duties specified herein, and may accept fees and other
consideration from any Credit Party for services in connection with this Credit
Agreement and otherwise without having to account for the same to the Lenders.
10.8 HOLDERS OF NOTES. Agent may deem and treat the payee of any Note as
----------------
the owner thereof for all purposes hereof unless and until a written notice of
the assignment or transfer thereof shall have been filed with Agent. Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any
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Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
10.9 SUCCESSOR AGENT.
---------------
(A) Agent may, and, in the event Agent has no further interest under
this Credit Agreement in its capacity as a Lender, shall, upon twenty (20)
Business Days' notice to the Lenders and Borrower, resign at any time
(effective upon the appointment of a successor Agent pursuant to the
provisions of this SECTION 10.9) by giving written notice thereof to the
Lenders and Borrower. Upon any such resignation, the Majority Lenders
shall have the right, upon five (5) days' notice and approval by the Credit
Parties (which approval shall not be unreasonably withheld or delayed) to
appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders and accepted such appointment, within
thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent, which shall be a bank or a trust company or other
financial institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of America or
of any State thereof, or any Affiliate of such bank or trust company or
other financial institution which is engaged in the banking business,
having a combined capital and surplus of at least $500,000,000.
(B) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Credit Agreement and the other Credit Documents.
After any retiring Agent's resignation hereunder as Agent, the provisions
of this ARTICLE 10 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under or in connection with
this Credit Agreement.
10.10 COLLATERAL MATTERS.
------------------
(A) Each Lender authorizes and directs Agent to enter into the
Collateral Documents for the benefit of the Lenders. Each Lender hereby
agrees, and each holder of any Note by the acceptance thereof will be
deemed to agree, that, except as otherwise set forth herein or in the other
Credit Documents, any action taken by the Majority Lenders in accordance
with the provisions of this Credit Agreement and the other Credit
Documents, and the exercise by the Majority Lenders of the powers set forth
herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the
Lenders. Agent is hereby authorized on behalf of all of the Lenders,
without the necessity of any notice to or further consent from any Lender,
from time to time so long as an Event of Default shall not then exist, to
take any action with respect to any Collateral or Collateral Documents
which may be necessary to perfect and maintain the perfection of the Liens
upon the Collateral granted pursuant to the Collateral Documents.
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(B) The Lenders hereby authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any
Collateral (I) upon termination of the Commitments and payment and
satisfaction of all of the Obligations at any time arising under or in
respect of this Credit Agreement or the other Credit Documents or the
transactions contemplated hereby or thereby or (II) if approved, authorized
or ratified in writing by the Majority Lenders, unless such release is
required to be approved by all of the Lenders pursuant to SECTION 11.11.
Upon request by Agent at any time, the Lenders will confirm in writing
Agent's authority to release particular types or items of Collateral
pursuant to this SECTION 10.10.
(C) Agent shall have no obligation whatsoever to the Lenders or to any
other Person to assure that the Collateral exists or is owned by any Credit
Party or is cared for, protected or insured or that the Liens granted to
Agent in or pursuant to any of the Collateral Documents have been properly
or sufficiently or lawfully created, perfected, protected or enforced or
are entitled to any particular priority, or to exercise or to continue
exercising at all or in any manner or under any duty of care, disclosure or
fidelity any of the rights, authorities and powers granted or available to
Agent in this SECTION 10.10 or in any of the Collateral Documents, it being
understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent's own interest in the
Collateral as one of the Lenders and that Agent shall have no duty or
liability whatsoever to the Lenders, except for its gross negligence or
willful misconduct.
10.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to Agent's right to
--------------------------------
take actions on its own accord as permitted under this Credit Agreement, Agent
shall take such action with respect to a Default or Event of Default as shall be
directed by the Majority Lenders; PROVIDED, THAT until Agent shall have received
such directions, 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 and in the best interests of the Lenders.
10.12 DELIVERY OF INFORMATION. Agent shall not be required to deliver to
-----------------------
any Lender originals or copies of any documents, instruments, notices,
communications or other information received by Agent from any of the Credit
Parties or any Subsidiary of any of the Credit Parties, the Majority Lenders,
any Lender or any other Person under or in connection with this Credit Agreement
or any other Credit Document except (I) as specifically provided in this Credit
Agreement or any other Credit Document and (II) as specifically requested from
time to time in writing by any Lender with respect to a specific document,
instrument, notice or other written communication received by and in the
possession of Agent at the time of receipt of such request and then only in
accordance with such specific request.
ARTICLE 11. MISCELLANEOUS.
-------------
11.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
CREDIT AGREEMENT AND EACH OF THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE
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INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT
OF LAWS PROVISIONS.
11.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE LENDERS AND THE
--------------------------
CREDIT PARTIES (OR AGENT OR BORROWER, RESPECTIVELY, ACTING ON THEIR BEHALF),
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT AGENT ON BEHALF
OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TO PROCEED AGAINST BORROWER OR ANY CREDIT PARTY OR THEIR RESPECTIVE PROPERTIES
IN ANY LOCATION REASONABLY SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO
REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF AGENT. BORROWER AND EACH OF THE OTHER CREDIT PARTIES AGREE THAT NONE OF SUCH
PERSONS WILL ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY AGENT OR ANY LENDER. BORROWER AND EACH OF THE OTHER
CREDIT PARTIES WAIVE ANY OBJECTION THAT ANY OF SUCH PERSONS MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH AGENT OR ANY LENDER HAS COMMENCED A PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
11.3 SERVICE OF PROCESS. EACH OF BORROWER AND THE OTHER CREDIT PARTIES
------------------
HEREBY WAIVES PERSONAL SERVICE UPON IT AND, AS ADDITIONAL SECURITY FOR THE
OBLIGATIONS, HEREBY IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM,
WITH AN OFFICE ON THE DATE HEREOF AT 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS
60604, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PERSON WHICH
IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF
SERVICE OF ALL PROCESS ISSUED BY ANY COURT IN ANY LEGAL ACTION OR OTHER
PROCEEDING WITH RESPECT TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO BORROWER AT ITS ADDRESS PROVIDED HEREIN EXCEPT
THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
BORROWER OR ANY OTHER CREDIT PARTIES REFUSES TO ACCEPT SERVICE, EACH SUCH PERSON
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE
AND EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO
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BRING PROCEEDINGS AGAINST BORROWER OR ANY OTHER CREDIT PARTY IN THE COURTS OF
ANY OTHER JURISDICTION.
11.4 JURY TRIAL. BORROWER, EACH OF THE OTHER CREDIT PARTIES, AGENT AND THE
----------
LENDERS HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL
BE RESOLVED IN A BENCH TRIAL.
11.5 LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY
-----------------------
LIABILITY TO BORROWER OR ANY OTHER CREDIT PARTY (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY SUCH PERSON IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS CREDIT AGREEMENT, OR ANY OF THE OTHER CREDIT DOCUMENTS, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON AGENT
OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 DELAYS. No delay or omission of Agent or the Lenders in exercising
------
any right or remedy hereunder shall impair any such right or operate as a waiver
thereof.
11.7 NOTICES. Except as otherwise provided herein, all notices and
-------
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to Agent or any of the Lenders, then c/o First
Source Financial, Inc., 2850 West Golf Road, 5th Floor, Rolling Meadows,
Illinois 60008 Attention: Contract Administration, if to Borrower or any other
Credit Party, then to Mikohn Gaming Corporation at 1045 Palms Airport Drive, Las
Vegas, Nevada 89119, Attention: President, or by facsimile transmission,
promptly confirmed in writing sent by first class mail, if to Agent, or any of
the Lenders, at (847) 734-7910 and if to Borrower or any other Credit Party at
(702) 896-2461. All such notices and correspondence shall be deemed given
(I) if sent by certified or registered mail, three Business Days after being
postmarked, (II) if sent by overnight delivery service, when received at the
above stated addresses or when delivery is refused and (III) if sent by telex or
facsimile transmission, when receipt of such transmission is acknowledged.
11.8 ASSIGNMENTS AND PARTICIPATIONS.
------------------------------
(A) BORROWER ASSIGNMENT. Neither Borrower nor any of the other Credit
Parties shall have any right to assign this Credit Agreement or any of the
other Credit Documents, or any rights or obligations hereunder or
thereunder, without the prior written consent of Agent and the Lenders.
(B) LENDER ASSIGNMENTS. Each Lender may assign to one or more banks
or other financial institutions or a Related Fund all or a portion of its
rights and obligations under this Credit Agreement, the Notes and the other
Credit Documents, with the consent of Agent in the event any such
assignment is to be made by any Revolving Lender, and
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<PAGE>
with the consent of Borrower in the event any such assignment is to be
made to any third party engaged in a similar business as Borrower
(including any gaming business, any business involving the manufacture of
Gaming Equipment or any related business); and upon execution and delivery
to Agent, for its acceptance and recording in the Register, of an agreement
in substantially the form of EXHIBIT I (an "ASSIGNMENT AND ASSUMPTION
AGREEMENT"), together with surrender of any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000, such assignment
shall be effective and ANNEX I hereto shall be deemed to be modified
accordingly. No such assignment shall be for less than $5,000,000 of the
Commitments unless it is to another Lender or a Related Fund or is an
assignment of all of such Lender's rights and obligations under this Credit
Agreement. (This Section does not apply to branches and Affiliates of a
Lender, it being understood that a Lender may make, carry or transfer Loans
at or for the account of any of its branch offices or Affiliates without
consent of Borrower, Agent or any other Lender.)
(c) AGENT'S REGISTER. Agent shall maintain a register of the names and
addresses of the Lenders, their Commitments, and the principal amount of
their Loans (the "REGISTER") at the address specified for Agent in SECTION
11.7. Agent shall also maintain a copy of each Assignment and Assumption
Agreement delivered to and accepted by it, and modify the Register to give
effect to each Assignment and Assumption Agreement. Upon its receipt of
each Assignment and Assumption Agreement and surrender of the affected Note
or Notes, Agent will give prompt notice thereof to Borrower and deliver to
Borrower a copy of the Assignment and Assumption Agreement and the
surrendered Note or Notes. Within five Business Days after its receipt of
such notice, Borrower shall execute and deliver to Agent a substitute Note
or Notes to the order of the assignee in the amount of the Commitment or
Commitments assumed by it and to the assignor in the amount of the
Commitment or Commitments retained by it, if any. Such substitute Note or
Notes shall re-evidence the Indebtedness outstanding under the surrendered
Note or Notes and shall be dated as of the Closing Date. Agent shall be
entitled to rely upon the Register exclusively for purposes of identifying
the Lenders hereunder. The Register shall be available for inspection by
the Credit Parties and the Lenders (or any of them) at any reasonable time
and from time to time upon reasonable notice to Agent.
(d) PARTICIPATIONS. Each Lender may sell participations (without the
consent of Agent, any Credit Party or any other Lender) to one or more
parties in or to all or a portion of its rights and obligations under this
Credit Agreement, the Notes and the other Credit Documents. Notwithstanding
a Lender's sale of a participation interest, its obligations hereunder
shall remain unchanged. The Credit Parties, Agent, and the other Lenders
shall continue to deal solely and directly with such Lender. No participant
shall have rights to approve any amendment or waiver of this Credit
Agreement or any of the other Credit Documents except to the extent such
amendment or waiver would (I) increase the participant's obligation in
respect of the Commitment of the Lender from whom the participant
purchased its participation interest; (II) reduce the principal of, or
stated rate or amount of interest on, the Loans subject to such
participation, (III) postpone any maturity date fixed for final payment of
principal of the Loans subject to the
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participation interest, and (IV) release any guarantor of the Obligations
or all or a substantial portion of the Collateral, other than when
otherwise permitted hereunder.
11.9 CONFIDENTIALITY. Each Lender agrees that it will use its best efforts
---------------
in accordance with its customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, not disclose to any Person, without the prior consent of the
Borrower, any information with respect to any of the Credit Parties or any
Subsidiary of any of the Credit Parties which is furnished pursuant to this
Credit Agreement and which is designated by the respective Credit Parties to the
Lenders in writing as confidential, PROVIDED, THAT, each Lender may disclose any
such information (A) to its employees, auditors, or counsel, or to another
Lender if the disclosing Lender or such disclosing Lender's holding or parent
company in its sole discretion determines that any such party should have
access to such information, (B) as has become generally available to the public,
(C) as may be required in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over such Lender,
(D) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (E) in order to comply with any Requirement
of Law, (F) to any actual or prospective transferee or participant in connection
with any contemplated transfer or participation of any of the Notes or
Commitments or any interest therein by such Lender or (G) to such Lender's own
funding sources, provided the Persons receiving such disclosures agree to
maintain the confidentiality of such disclosures on terms substantially the same
as the foregoing clauses (A) through (F).
11.10 INDEMNIFICATION. Borrower indemnifies and agrees to defend and hold
---------------
harmless Agent and each of the Lenders and their respective directors, officers,
agents, employees and counsel from and against any and all losses, claims,
damages, liabilities, deficiencies, judgments or expenses incurred by any of
them (except to the extent that it is finally judicially determined to have
resulted from their own gross negligence or willful misconduct) arising out of
or by reason of (A) any litigations, investigations, claims or proceedings which
arise out of or are in any way related to (I) this Credit Agreement or the
transactions contemplated hereby, (II) the issuance of the Letters of Credit,
(III) the failure of the Issuing Bank to honor a drawing under any Letter of
Credit, as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority, (IV)
any actual or proposed use by Borrower of the proceeds of the Loans or (V)
Agent's or the Lenders' entering into this Credit Agreement, the other Credit
Documents or any other agreements and documents relating hereto, including,
without limitation, amounts paid in settlement, court costs and the fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing and (B) any remedial or other action taken by Borrower or any
of the Lenders in connection with compliance by Borrower or any Subsidiary of
Borrower, or any of their respective properties, with any federal, state or
local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines.
11.11 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
----------------------
this Credit Agreement, any part of SCHEDULE B, or any other Credit Document
shall be effective unless in writing and signed by the Majority Lenders (or by
Agent on their behalf), except that:
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(A) the consent of all the Lenders is required to (I) increase the
Commitments, (II) reduce the principal of, or interest on, any Letter of
Credit reimbursement obligations or any Fees hereunder (other than Fees
that are exclusively for the account of Agent), (III) postpone any date
fixed for any payment in respect of principal of, or interest on, any Note,
any Letter of Credit reimbursement obligations or any Fees hereunder
(provided that the consent of the Majority Lenders only is required to
waive any mandatory prepayment of the Loans from the Net Cash Proceeds of
any disposition of assets under SECTION 2.8.4 to the extent the aggregate
amount of such mandatory prepayments is greater than $7,500,000 or from the
Net Cash Proceeds of any sales of capital stock under SECTION 2.8.4), (IV)
change the percentage of the Commitments, or any minimum requirement
necessary for the Lenders or the Majority Lenders to take any action
hereunder, (V) amend or waive this SECTION 11.11(A), or change the
definition of Majority Lenders, (VI) except as otherwise expressly provided
in this Credit Agreement, and other than in connection with the financing,
refinancing, sale or other disposition of any asset of a Credit Party
permitted under this Credit Agreement, release any Liens in favor of Agent
on any of the Collateral or release any Guarantor from its obligations
under the Credit Documents or (VII) AMEND, WAIVE OR MODIFY THE PROVISIONS
SET FORTH IN SECTION 2.8.4 except as permitted pursuant to the preceding
CLAUSE (III);
(B) the consent of those Revolving Lenders holding in the aggregate
more than fifty percent (50%) of all Revolving Loan Commitments shall be
required to the extent any such amendment or waiver would result in an
obligation to make any Revolving Loan or to purchase a participation in any
Letter of Credit; and
(C) the consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent under any Credit
Document, in addition to the consent of the Lenders otherwise required by
this Section.
Neither the consent of Borrower nor any other Credit Party shall be
required for any amendment, modification or waiver of the provisions of ARTICLE
10 (other than SECTION 10.9). Borrower, the other Credit Parties and the Lenders
each hereby authorize Agent to modify this Credit Agreement by unilaterally
amending or supplementing ANNEX I to reflect assignments of the Commitments.
Notwithstanding the foregoing, the Credit Parties may amend SCHEDULE B, PARTS
6.1, 6.10 and 6.14, without the consent of the Majority Lenders.
11.12 COUNTERPARTS AND EFFECTIVENESS. This Credit Agreement and any waiver
------------------------------
or amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Credit Agreement shall become
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to Agent and all conditions to the making of Loans have been satisfied in
full.
11.13 SEVERABILITY. In case any provision in or obligation under this
------------
Credit Agreement, the Notes or any of the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations,
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or of such provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
11.14 MAXIMUM RATE. Notwithstanding anything to the contrary contained
------------
elsewhere in this Credit Agreement or in any other Credit Document, Borrower,
Agent, and the Lenders hereby agree that all agreements among them under this
Credit Agreement and the other Credit Documents, whether now existing or
hereafter arising and whether written or oral, are expressly limited so that in
no contingency or event whatsoever shall the amount paid, or agreed to be paid,
to Agent or any Lender for the use, forbearance, or detention of the money
loaned to Borrower and evidenced hereby or thereby or for the performance or
payment of any covenant or obligation contained herein or therein, exceed the
Highest Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Credit Agreement or any of the other Credit Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance any Lender should ever receive anything
of value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied pursuant to the terms hereof to
the reduction of the principal amount then outstanding hereunder or on account
of any other then outstanding Obligations and not to the payment of interest, or
if such excessive interest exceeds the principal unpaid balance then outstanding
hereunder and such other then outstanding Obligations, such excess shall be
refunded to Borrower. All sums paid or agreed to be paid to Agent or any Lender
for the use, forbearance, or detention of the Obligations and other Indebtedness
of Borrower to Agent or any Lender, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread throughout the full term of
such Indebtedness, until payment in full thereof, so that the actual rate of
interest on account of all such Indebtedness does not exceed the Highest Lawful
Rate throughout the entire term of such Indebtedness. The terms and provisions
of this SECTION 11.14 shall control over every other provision of this Credit
Agreement, the other Credit Documents, and all agreements among Borrower, Agent
and the Lenders.
11.15 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit Agreement and
-----------------------------------------
the other Credit Documents constitute the entire agreement among the Credit
Parties, Agent and the Lenders, supersede any prior agreements among them, and
shall bind and benefit each of such Persons and their respective successors and
permitted assigns.
11.16 JOINT AND SEVERAL LIABILITY OF CREDIT PARTIES. Each Credit Party
----------------------------------------------
shall be jointly and severally liable hereunder and under each of the other
Credit Documents with respect to all Obligations, regardless of which Credit
Party actually receives the proceeds of the Loans or the benefit of any other
extensions of credit hereunder, or the manner in which Borrower, Agent or the
Lenders account therefor in their respective books and records. Notwithstanding
the foregoing, (A) each Credit Party's obligations and liabilities with respect
to proceeds of Loans which it receives or Letters of Credit issued for the
account of Borrower, and related fees, costs and expenses, and (B) each Credit
Party's obligations and liabilities arising as a result of the joint and several
liability of the Credit Parties hereunder with respect to proceeds of Loans it
receives or Letters of Credit issued for the account of Borrower, together with
the related fees, costs and expenses, shall be separate and distinct
obligations, both of which are primary obligations of such Credit Party.
Neither the joint and several liability of, nor the Liens granted
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to Agent under the Collateral Documents by, any Credit Party shall be impaired
or released by any action or inaction on the part of Agent or any Lender, or any
other event or condition with respect to any other Credit Party, including any
such action or inaction or other event or condition, which might otherwise
constitute a defense available to, or a discharge of, such Credit Party, or a
guarantor or surety of or for any or all of the Obligations.
ARTICLE 12. COMPLIANCE WITH APPLICABLE GAMING LAWS.
--------------------------------------
12.1 LICENSING BY GAMING AUTHORITIES. Borrower and Guarantors are
-------------------------------
registered or licensed by Gaming Authorities in the Gaming Jurisdictions and are
therefore subject to Applicable Gaming Laws. Each of Lender acknowledges and
understands that, as a result: (A) it may be subject to being called forward by
the Gaming Authorities, in their discretion, for licensing or a finding of
suitability as a lender, and (B) to the extent the prior approval of the Gaming
Authorities is required pursuant to Applicable Gaming Laws for the exercise,
operation and effectiveness of any remedy under this Credit Agreement or under
any other Credit Document, or the taking of any action that may be taken by
Lenders or Agent hereunder or under any other Credit Document, such remedy or
action shall be subject to such prior approval of the Gaming Authorities.
12.2 FINDING OF SUITABILITY OF LENDER. If the Gaming Authorities shall
--------------------------------
determine that any Lender does not meet the suitability standards under
Applicable Gaming Laws (a "FORMER LENDER"), Agent or Borrower shall have the
right to designate another bank or financial institution (a "SUBSTITUTE LENDER")
that has agreed to assume the rights and obligations of the Former Lender,
subject to receipt by Agent of evidence that such Substitute Lender is permitted
assignee pursuant to Section 11.8 hereof. The Former Lender shall be required
to execute any and all documents required pursuant to Section 11.8 to allow the
Substitute Lender to assume the Former Lender's rights and obligations
hereunder.
12.3 COOPERATION WITH GAMING AUTHORITIES. Agent and each Lender shall
-----------------------------------
cooperate with the Gaming Authorities in connection with the administration of
their regulatory jurisdiction over Borrower and its Subsidiaries, including the
provision of such documents or other information as may be requested by the
Gaming Authorities relating to Borrower or its Subsidiaries or to this Credit
Agreement or any other Credit Document.
12.4 FURTHER LIMITATIONS. All rights, remedies and powers provided in this
-------------------
Credit Agreement and the other Credit Documents may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
Applicable Gaming Laws, and all provisions of this Credit Agreement and the
other Credit Documents are intended to be subject to Applicable Gaming Laws and
to be limited to the extent necessary so that they will not render this Credit
Agreement or any of the other Credit Documents invalid or unenforceable, in
whole or in part.
12.5 STOCK PLEDGE RESTRICTIONS. Notwithstanding anything to the contrary
-------------------------
contained in this Credit Agreement or any other Credit Document, it is
understood and agreed that (A) the pledge of the capital stock or other equity
securities of any Subsidiary of Borrower that is registered or licensed under
Applicable Gaming Laws ("STOCK PLEDGES") and (B) any restrictions
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on the transfer of or agreements not to encumber such capital stock or other
equity restrictions on the transfer of or agreements not to encumber such
capital stock or other securities (collectively, "STOCK RESTRICTIONS"), require
the prior approval of the relevant Gaming Authorities ("STOCK APPROVALS") in
order to become effective. Notwithstanding anything to the contrary contained in
this Credit Agreement or in any other Credit Document, unless and until the
relevant Stock Approvals have been obtained, the Stock Pledges and the Stock
Restrictions shall not be effective. To the extent the relevant Stock Approvals
are obtained, the capital stock or other equity securities of the relevant
entity shall promptly be pledged pursuant to the relevant Credit Document.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the respective parties hereto have caused this Credit
Agreement to be executed and delivered by their duly authorized officers as of
the date first set forth above.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
---------------------------------------------
Name: Don W. Stevens
-------------------------------------------
Title: EVP
------------------------------------------
FIRST SOURCE FINANCIAL LLP, an Illinois
registered limited liability partnership,
individually and in its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Gary L. Francis
---------------------------------------
Name: Gary L. Francis
-------------------------------------
Title: Senior Vice President
-----------------------------------
THE TRAVELERS INSURANCE COMPANY,
a Connecticut corporation
By: /s/ Signature Illegible
---------------------------------------------
Name: Illegible
------------------------------------------
Title: Illegible
-----------------------------------------
ALLSTATE INSURANCE COMPANY, an
Illinois corporation
By: /s/ Signature Illegible
---------------------------------------------
By: /s/ Signature Illegible
---------------------------------------------
Authorized Signatories
<PAGE>
HARTFORD LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Hartford Investment Services, Inc., its
agent and attorney in fact
Name: /s/ Betsy Roberts
--------------------------------------
Title: Senior Vice President
-------------------------------------
FIDELITY & GUARANTY LIFE INSURANCE CO.,
a Maryland corporation
By: Falcon Asset Management
/s/ Signature Illegible
Name: Illegible
--------------------------------------
Title: Vice President
-------------------------------------
UNITED STATES FIDELITY & GUARANTY COMPANY,
a Maryland corporation
By: Falcon Asset Management
/s/ Signature Illegible
Name: Illegible
--------------------------------------
Title: Vice President
-------------------------------------
<PAGE>
ANNEX I
TO
CREDIT AGREEMENT
DATED AS OF OCTOBER 24, 1997
LIST OF LENDERS; COMMITMENT
AMOUNTS; APPLICABLE LENDING OFFICES
1. FIRST SOURCE FINANCIAL LLP
c/o First Source Financial, Inc.
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Revolving Loan Commitment Amount: $10,000,000
Term Loan A Commitment Amount: $10,000,000
Term Loan B Commitment Amount: $0
Domestic Lending Office: 2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
LIBOR Lending Office: 2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
2. THE TRAVELERS INSURANCE COMPANY
One Tower Square, Plaza Building
10th Floor
Hartford, Connecticut 06183
Revolving Loan Commitment Amount: $0
Term Loan A Commitment Amount: $0
Term Loan B Commitment Amount: $5,000,000
Domestic Lending Office: One Tower Square, Plaza Building
10th Floor
Hartford, Connecticut 06183
LIBOR Lending Office: One Tower Square, Plaza Building
10th Floor
Hartford, Connecticut 06183
<PAGE>
3. ALLSTATE INSURANCE COMPANY
Private Placements
3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
Revolving Loan Commitment Amount: $0
Term Loan A Commitment Amount: $5,000,000
Term Loan B Commitment Amount: $0
Domestic Lending Office: 3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
LIBOR Lending Office: 3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
4. HARTFORD LIFE INSURANCE COMPANY
Life Inv. Group A-4
200 Hop Meadow Street
Simsbury, Connecticut 06070
Revolving Loan Commitment Amount: $0
Term Loan A Commitment Amount: $0
Term Loan B Commitment Amount: $5,000,000
Domestic Lending Office: Life Inv. Group A-4
200 Hop Meadow Street
Simsbury, Connecticut 06070
LIBOR Lending Office: Life Inv. Group A-4
200 Hop Meadow Street
Simsbury, Connecticut 06070
<PAGE>
5. FIDELITY & GUARANTY LIFE INSURANCE CO.
C/O FALCON ASSET MANAGEMENT
6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
Revolving Loan Commitment Amount: $0
Term Loan A Commitment Amount: $0
Term Loan B Commitment Amount: $3,000,000
Domestic Lending Office: 6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
LIBOR Lending Office: 6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
6. UNITED STATES FIDELITY & GUARANTY COMPANY
c/o Falcon Asset Management
6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
Revolving Loan Commitment Amount: $0
Term Loan A Commitment Amount: $0
Term Loan B Commitment Amount: $2,000,000
Domestic Lending Office: 6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
LIBOR Lending Office: 6225 Smith Avenue, LBO102
Baltimore, Maryland 21209-3653
<PAGE>
SCHEDULE A
TO
CREDIT AGREEMENT
DATED AS OF OCTOBER 24, 1997
CLOSING DOCUMENT LIST
Attached
<PAGE>
CLOSING DOCUMENT LIST
$40,000,000 Secured Credit Facility
from
FIRST SOURCE FINANCIAL LLP,
as Agent
to
MIKOHN GAMING CORPORATION,
as Borrower
with
MIKOHN NEVADA
MGC, INC.,
and
CASINO EXCITEMENT, INC.,
as Guarantors
Closing Date: October 24, 1997
ITEMS IN BOLD ARE TO BE PROVIDED BY BORROWER
- -------------------------------------------------------------------------------
A. PRINCIPAL LOAN DOCUMENTS
1. Credit Agreement
Annex I - List of Lenders; Commitment Amounts;
Applicable Lending Offices
Schedule A - Closing Document List
Schedule B - Disclosure Schedules
<PAGE>
Schedule B, Part 6.1 - States in which Qualified
Schedule B, Part 6.9 - Contingent Obligations and Other
Liabilities
Schedule B, Part 6.10(a) - Chief Executive Offices
Schedule B, Part 6.10(b) - Locations of Collateral
Schedule B, Part 6.11 - Subsidiaries
Schedule B, Part 6.12 - Pending Judgments, Litigation and
other Claims
Schedule B, Part 6.14 - Labor Contracts
Schedule B, Part 6.16 - Plans
Schedule B, Part 6.17 - Environmental Matters
Schedule B, Part 6.20 - Tax Matters; Tax Sharing Agreements
Schedule B, Part 6.21 - Material Contracts
Schedule B, Part 8.8 - Existing Indebtedness
Schedule B, Part 8.9 - Existing Liens
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Form of Extension Request
Exhibit C - Form of LIBOR Election Notice
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Revolving Note
Exhibit F - Form of Term Loan A Note
Exhibit G - Form of Term Loan B Note
Exhibit H - Form of Compliance Certificate
Exhibit I - Form of Assignment and Assumption
Agreement
-2-
<PAGE>
2. Assignment from FSFP to Eaton Vance
3. $10,000,000 Revolving Note - First Source Financial LLP
4. Term Loan Note A
a. $5,000,000 - First Source Financial LLP
b. $5,000,000 - Allstate Insurance Co.
c. $5,000,000 - Senior Debt Portfolio
5. Term Loan Note B
a. $3,000,000 - Hartford Life Insurance Co.
b. $2,000,000 - Hartford Life Insurance Co.
c. $5,000,000 - TRAL & CO
d. $3,000,000 - Falcon Asset Management
e. $2,000,000 - Falcon Asset Management
6. Guaranty executed by each Guarantor
B. PERSONAL PROPERTY SECURITY DOCUMENTS
7. Security Agreement executed by Borrower and each Guarantor
Schedule I - Trademarks and Trademark Licenses
Schedule II - Patents and Patent Licenses
Schedule III - Copyrights/Mask Works and Mask Work Licenses
Schedule IV - Trade Secrets or Know-How Licenses
Schedule V - Locations of Collateral; Location of
Chief Executive Office
Schedule VI - Third Party Locations of Borrower's and each
Guarantor's Goods
Schedule VII - Trade Names of Each Debtor
Schedule VIII- Non-Assignable Contracts and Agreements
-3-
<PAGE>
Exhibit A - Form of Landlord's Consent
Exhibit B - Form of Bailee Waiver
Exhibit C - Agreement (Patent)
Exhibit D - Agreement (Trademark)
Exhibit E - Agreement (Copyright)
8. Trademark Security Agreement
Schedule I - Trademarks and Trade Licenses
9. Patent Security Agreement
Schedule I - Patents
10. Stock Pledge Agreement executed by Mikohn
Schedule I - Casino Excitement, Inc. Capital Stock, Mikohn
Europe B.V. Capital Stock, Mikohn Gaming
Australasia Pty. Ltd. Capital Stock, Mikohn South
America, S.A. Capital Stock
a. Stock Certificates - Casino Excitement, Inc.
b. Stock Powers
i. Casino Excitement, Inc.
ii. Mikohn Europe B.V.
iii. Mikohn Gaming Australasia Pty. Ltd.
iv. Mikohn South America, S.A.
11. Bank Agency Agreement(s)
a. Bank of America
b. U.S. Bank
C. REAL ESTATE SECURITY DOCUMENTS
12. Assignment of Leases
Schedule I - Description of Leases
-4-
<PAGE>
13. Landlord's Consents
a. The Howard Hughes Corp.
6700 Paradise Road, Suites D and E, Las Vegas, NV
b. MEDIQ/PRN Life Support Services, Inc.
1045 Palms Airport Drive, Las Vegas, NV
c. JEMCO Properties
6065 Polaris Avenue, Suite C, Las Vegas, NV
d. Pilot Company
840 Pilot Road, Las Vegas, NV
e. Dermody Properties
4835 Longley Lane, Reno, NV
14. Owned Real Estate - 4181 West Oquendo Road, Las Vegas, Nevada 89118
a. Mortgage
Schedule I - Legal Description
b. Title Commitment
c. Appraisal
d. Copies of Recorded Documents
e. Phase I Environmental Assessments
15. Owned Real Estate - 405 12th Street, Rapid City, South Dakota 57701
a. Mortgage
Schedule I - Legal Description
b. Title Commitment
c. Appraisal
d. Copies of Recorded Documents
e. Phase I Environmental Assessments
16. Owned Real Estate - 4708 Hewes Avenue, Gulfport, MS 39507
-5-
<PAGE>
a. Mortgage
Schedule I - Legal Description
b. Title Commitment
c. Appraisal
d. Copies of Recorded Documents
e. Phase I Environmental Assessments
D. ANCILLARY DOCUMENTS
17. Solvency Certificate
Schedule I - Pro Forma Balance Sheet
Schedule II - Projections
18. Notice of Initial Borrowings
Schedule I - Payment Instructions
19. Initial Borrowing Base Certificate
20. Confirmatory Certificate
21. Pay-Off Letter(s)
22. Appointment of Agent for Service of Process - Borrower
23. Appointment of Agent for Service of Process - Guarantor
24. Post Closing Agreement
25. Fee Letter
26. Funding Agreement
E. UCC, STATE AND FEDERAL TAX LIEN AND JUDGMENT SEARCHES;
UCC TERMINATION AND FINANCING STATEMENTS
27. UCC, State and Federal Tax Lien and Judgment Searches -- See
Exhibit A attached hereto for list of required searches
-6-
<PAGE>
28. Copyright, Patent and Trademark Searches -- See Exhibit B attached
hereto for list of Registration Numbers
29. UCC-3 Termination Statements releasing the Liens listed on Exhibit C
attached hereto
30. UCC-1 Financing Statements naming Borrower and each Guarantor, as
Debtor and Agent as Secured Party filed in the jurisdictions set forth
in Exhibit D attached hereto
F. ORGANIZATIONAL DOCUMENTS, RESOLUTIONS, AUTHORIZATIONS AND REQUIRED
CONSENTS
31. Mikohn Gaming Corporation
a. Secretary's Certificate (including signature samples)
Exhibit A - Articles of Incorporation
Exhibit B - By-laws
Exhibit C - Resolutions
b. Good Standing Certificates from the States of
(1) Arizona
(2) Colorado
(3) Connecticut
(4) Delaware
(5) Florida
(6) Illinois
(7) Indiana
(8) Iowa
(9) Kansas
(10) Louisiana
(11) Massachusetts
-7-
<PAGE>
(12) Michigan
(13) Minnesota
(14) Mississippi
(15) Missouri
(16) Montana
(17) Nebraska
(18) Nevada
(19) New Jersey
(20) New Mexico
(21) New York
(22) North Carolina
(23) North Dakota
(24) Oregon
(25) South Dakota
(26) Washington
(27) West Virginia
(28) Wisconsin
32. Mikohn Nevada
a. Secretary's Certificate (including signature samples)
Exhibit A - Articles of Incorporation
Exhibit B - By-laws
Exhibit C - Resolutions
b. Good Standing Certificate from the States of
(1) Nevada
-8-
<PAGE>
33. MGC, Inc.
a. Secretary's Certificate (including signature samples)
Exhibit A - Articles of Incorporation
Exhibit B - By-laws
Exhibit C - Resolutions
b. Good Standing Certificate from the States of
(1) Colorado
(2) Mississippi
(3) Nevada
34. Casino Excitement, Inc.
a. Secretary's Certificate (including signature samples)
Exhibit A - Articles of Incorporation
Exhibit B - By-laws
Exhibit C - Resolutions
b. Good Standing Certificate from the States of
(1) Mississippi
(2) Nevada
(3) New Jersey
35. Games of Nevada
a. Good Standing Certificate from the States of
(1) Nevada
36. Mikohn International, Inc.
a. Good Standing Certificate from the States of
(1) Nevada
-9-
<PAGE>
G. COPIES OF THE FOLLOWING DOCUMENTS:
37. Employment Agreements
38. Leases
H. LEGAL OPINIONS
39. Charles McCrea (General Counsel)
I. INSURANCE
40. Insurance Certificates with Lender's Loss Payee (Casualty) and
Additional Insured (Liability) Endorsements
-10-
<PAGE>
EXHIBIT A
LIST OF REQUIRED UCC, STATE AND FEDERAL TAX LIEN,
PENDING SUIT AND JUDGMENT SEARCHES
1. Mikohn Gaming Corporation
Manufacturing Facilities:
------------------------
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
c. Mississippi Secretary of State (Federal Tax Lien, UCC)
d. Harrison County, Mississippi (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
e. South Dakota Secretary of State (Federal Tax Lien, UCC)
f. Pennington County, South Dakota (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
Sales and Service Offices:
-------------------------
g. Colorado Secretary of State (Federal Tax Lien, UCC)
h. Jefferson County, Colorado (UCC, including fixtures, state and federal
tax liens, pending suits and judgments)
i. Florida Department of State (Federal Tax Lien, UCC)
j. Broward County, Florida (UCC, including fixtures, state and federal
tax liens, pending suits and judgments)
k. Missouri Secretary of State (Federal Tax Lien, UCC)
1. St. Charles County, Missouri (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
m. Clay County, Missouri (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
n. New Mexico Secretary of State (Federal Tax Lien, UCC)
A-1
<PAGE>
o. Bernalillo County, New Mexico (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
p. New Jersey Secretary of State (Federal Tax Lien, UCC)
q. Atlantic County, New Jersey (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
r. Washoe County, Nevada (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
2. Mikohn, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
c. Mississippi Secretary of State (Federal Tax Lien, UCC)
d. Harrison County, Mississippi (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
e. South Dakota Secretary of State (Federal Tax Lien, UCC)
f. Pennington County, South Dakota (UCC, including fixtures, state and
federal tax liens, pending suits and judgments)
3. Casino Excitement, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, including state and federal tax liens,
pending suits and judgments)
c. Mississippi Secretary of State (Federal Tax Lien, UCC)
d. Harrison County, Mississippi (UCC, including state and federal tax
liens, pending suits and judgments)
e. New Jersey Secretary of State (Federal Tax Lien, UCC)
f. Atlantic County, New Jersey (UCC, including state and federal tax
liens, pending suits and judgments)
A-2
<PAGE>
4. MGC, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
c. Mississippi Secretary of State (Federal Tax Lien, UCC)
d. Harrison County, Mississippi (UCC, including state and federal tax
liens, pending suits and judgments)
5. Mikohn Nevada
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, including fixtures, state and federal tax
liens, pending suits and judgments)
Acquisitions:
- ------------
6. Games of Nevada, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, state and federal tax liens)
7. Casino Signs North, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Washoe County, Nevada (UCC, state and federal tax liens)
8. Peterson Sign Art, Inc.
a. South Dakota Secretary of State (Federal Tax Lien, UCC)
b. Pennington County, South Dakota (UCC, state and federal tax liens)
9. Casino Signs, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, state and federal tax liens)
A-3
<PAGE>
10. Current Technology Systems, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, state and federal tax liens)
11. Trans Sierra Communications, Inc.
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Washoe County, Nevada (UCC, state and federal tax liens)
12. John Renton Young Lighting & Signs
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, state and federal tax liens)
13. J.R.Y. Lighting & Sign Company
a. Nevada Secretary of State (Federal Tax Lien, UCC)
b. Clark County, Nevada (UCC, state and federal tax liens)
c. New Jersey Secretary of State (Federal Tax Lien, UCC)
d. Atlantic County, New Jersey (UCC, state and federal tax liens)
Tradenames:
- ----------
14. Mikohn Worldwide
a. Nevada Secretary of State (UCC)
b. Clark County, Nevada (UCC)
c. Mississippi Secretary of State (UCC)
d. Harrison County, Mississippi (UCC)
e. South Dakota Secretary of State (UCC)
f. Pennington County, South Dakota (UCC)
15. Mikohn Lighting & Signs
A-4
<PAGE>
a. Nevada Secretary of State (UCC)
b. Clark County, Nevada (UCC)
c. Mississippi Secretary of State (UCC)
d. Harrison County, Mississippi (UCC)
e. New Jersey Secretary of State (UCC)
f. Atlantic County, New Jersey (UCC)
16. Casino Signs Gulfport
a. Nevada Secretary of State (UCC)
b. Clark County, Nevada (UCC)
c. Mississippi Secretary of State (UCC)
d. Harrison County, Mississippi (UCC)
17. Casino Signs South, Inc.
a. Nevada Secretary of State (UCC)
b. Clark County, Nevada (UCC)
A-5
<PAGE>
EXHIBIT B
1. Trademark Registration Numbers
See Attached Schedule I
2. Patent Registration Numbers
See Attached Schedule II
B-1
<PAGE>
SCHEDULE I
----------
MIKOHN GAMING CORPORATION
TRADEMARK REGISTRATIONS
1. Games of Nevada
Trademark Reg. No. 2,000,899
2. MVP and Design
Trademark Reg. No. 2,043,083
3. MikohnVision
Trademark Reg. No. 2,043,081
4. Mikohn
Trademark Reg. No. 2,043,082
5. MiniKeno
Trademark Reg. No. 1,466,437
6. Hold and Draw Bingo
Trademark Reg. No. 1,466,436
7. Hold and Draw
Trademark Reg. No. 1,465,650
8. Mikohn
Trademark Reg. No. 1,824,259
(Registered under Mikohn, Inc.)
9. Casino Products
Trademark Reg. No. 1,769,789
(Registered under Casino Products)
B/I-1
<PAGE>
SCHEDULE II
-----------
MIKOHN GAMING CORPORATION
PATENT RIGHTS
1. Gaming System With Progressive Jackpot
Patent No. 5,280,909 (Tracy)
2. Progressive Jackpot Gaming System Linking
Gaming Machines with Different Hit
Frequencies & Denominations - Patent No. 5,116,055 (Tracy)
3. Progressive Jackpot Gaming System With
Enhanced Accumulator - Patent No. 5,344,144
(Joseph Canon)
4. Card Dispensing Shoe Having a Counting Device
and Method of Using The Same - Patent No. 5,374,061
(Albrecht)
5. Gaming Machine With Skill Feature - Skill Slot
Patent No. 5,342,049 (Wichinsky)
6. Coin Projecting and Target Game Apparatus - Flip-It
Patent No. 4,496,160 (Withinsky)
7. Time and Attendance System and Method Therefor
Patent No. 5,550,359 (Bennett)
8. Secure Multi-Site Progressive Jackpot System for
Live Card Games - Patent No. 5,605,334 (McCrea)
9. Progressive System for a Match Number Game and Method
Therefor - Patent No. 5,536,016 (Thompson)
10. Automated Gaming Table Tracking System and
Method Therefor - Patent No. 5,586,936 (Bennett)
11. Digital Image Capture System for Photo Identification
Cards - Patent No. 5,642,160 (Bennett)
B/II-1
<PAGE>
EXHIBIT C
LIENS TO BE RELEASED AT CLOSING
<TABLE>
<CAPTION>
SECURED DATE OF FILING
STATE OFFICE DEBTOR PARTY FILING NUMBER
<S> <C> <C> <C> <C> <C>
===================================================================================================================================
Mississippi Sec of State Mikohn Gaming Bank of America NV 05/02/95 0886864
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi Harrison Mikohn Gaming Bank of America NV 05/05/95 95-1136
County Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi Harrison Mikohn Gaming Bank of America NV 05/01/95 95-1634
County Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi Harrison Mikohn Gaming Bank of Mississippi 05/19/95 Bk: 1617
(*) County Corporation Pg: 559-562
(mortgage)
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi Harrison Mikohn Gaming Bank of Mississippi 11/08/95 Bk: 1653
(*) County Corporation Pg: 662-665
(mortgage)
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi Harrison Mikohn Gaming Bank of Mississippi 02/15/96 Bk: 1670
(*) County Corporation Pg: 493-496
(mortgage)
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Sec of State Mikohn Gaming Wichinsky (Ind.) 02/13/95 95-02109
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Sec of State Mikohn Gaming Bank of America NV 05/01/95 95-06062
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Sec of State Trans Sierra Matsushita Electric 02/16/88 88-01596
Communications Corp. of America 09/14/92
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Sec of State Trans Sierra Toshiba America 03/06/95 95-03088
Communications Consumer Products,
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Sec of State Trans Sierra Panasonic 05/24/91 91-04876
Comm., a division Communications & 03/12/96
of Mikohn Gaming Systems Company
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Clark County Mikohn Gaming Bank of America NV 05/02/95 Bk: 950502
Corporation Pg: 01357
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada (*) Clark County Mikohn Gaming Lawyers Title Co. of 09/12/97 Bk: 970912
Corporation America and Bank of Pg: 00587
America National (deed of trust)
Trust and Savings
Association
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Clark County Mikohn Gaming Bank of America 10/13/97 Bk: 971013
Corporation NT&SA Pg: 00534
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Clark County Mikohn, Inc. U.S. Bank of Nevada 06/15/93 Bk: 930615
Pg: 01246
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada Washoe County Mikohn Gaming Bank of America NV 05/15/95 1893069
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Sec of State Mikohn Gaming Bank of America NV 07/10/95 1645257
Corporation, a
Nevada
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Atlantic County Mikohn Gaming Bank of America NV 05/01/95 17811
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota Pennington Mikohn Gaming Bank of America 09/10/97 Bk: 68
(*) County Corporation, a National Trust and Pg: 6864
Nevada Savings Association (mortgage)
corporation
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota Sec of State Mikohn Gaming Bank of America NV 05/15/95 951351100558
Corporation
-----------------------------------------------------------------------------------------------------------------------------------
(*) denotes deed of trust or mortgage filings
===================================================================================================================================
Office Assignor Secured Party Reel/Frame: Date of Filing Collateral
==================================================================================================================================
Trademark Mikohn Gaming Bank of 1353/0420 05/02/95 2 Trademarks
Corporation America NV
-----------------------------------------------------------------------------------------------------------------------------------
Patent "" "' 7467/0689 05/02/95 3 Patents
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2
<PAGE>
EXHIBIT D
UCC FINANCING STATEMENTS
TO BE FILED
1. Filings against Mikohn Gaming CORPORATION
<TABLE>
<CAPTION>
====================================================================================================================================
Debtor State Office Filing Date Filing Number
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Mikohn Gaming Corp. Colorado Secretary of State 10/23/97 19972092216
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. Florida Department of State 10/23/97 97-240042
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. Missouri Secretary of State 10/23/97 2843178
St. Charles County 10/23/97 04015
Clay County 10/24/97 H166159
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. Nevada Secretary of State 10/23/97 9717782
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. Mississippi Secretary of State 10/23/97 01152945
Harrison County 10/27/97 008047
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. New Jersey Secretary of State 10/24/97 1798591
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. New Mexico Secretary of State 10/23/97 971023075
- ----------------------------------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp. South Secretary of State 10/23/97 972961003010
Dakota
===================================================================================================================================
2. FILINGS AGAINST CASINO EXCITEMENT, INC.
==================================================================================================================================
Debtor State Office Filing Date Filing Number
==================================================================================================================================
Casino Excitement, Inc. Mississippi Secretary of State 10/23/97 01152940
Harrison County 10/27/97 008046
- ----------------------------------------------------------------------------------------------------------------------------------
Casino Excitement, Inc. New Jersey Secretary of State
- ----------------------------------------------------------------------------------------------------------------------------------
Casino Excitement, Inc. Nevada Secretary of State 10/23/97 9717780
==================================================================================================================================
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
3. Filings against MGC, Inc.
<S> <C> <C> <C> <C>
===================================================================================================================================
Debtor State Office Filing Date Filing Number
===================================================================================================================================
MGC, Inc. Colorado Secretary of State 11/05/97 19972097601
- ----------------------------------------------------------------------------------------------------------------------------------
MGC, Inc. Mississippi Secretary of State 10/23/97 01152936
Harrison County 10/27/97 008045
- ----------------------------------------------------------------------------------------------------------------------------------
MGC, Inc. Nevada Secretary of State 10/23/97 9717779
==================================================================================================================================
4. Filings against Mikohn Nevada
===================================================================================================================================
Debtor State Office Filing Date Filing Number
===================================================================================================================================
Mikohn Nevada Nevada Secretary of State 10/23/97 9717781
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
D-2
<PAGE>
SCHEDULE B
TO
CREDIT AGREEMENT
dated as of October 24, 1997
DISCLOSURE SCHEDULES
--------------------
Description
-----------
Part
- ----
6.1 Borrower and Subsidiaries, showing jurisdictions in which each is
qualified to do business as foreign corporation.
6.9 Contingent Obligation (JRY Acquisition)
6.10 (a) [1] Chief Executive Office of each Credit Party
[2] Principal Place of Business of each Credit Party
6.10 (b) [1] (i) Schedule showing leased facilities (domestic and
foreign.
(ii) Schedule showing locations owned by Borrower.
[2] Name and address of each warehouse not owned by any
Credit Party at which Inventory is stored (none).
6.11 (i) List of Subsidiaries (direct and indirect)
(ii) Statement re stock ownership in Subsidiaries.
6.12 Pending and threatened litigation.
6.14 Labor union contracts.
6.16 Schedule of ERISA Plans
6.17 Failure to comply with environmental laws (no instances).
6.20 (c) Pending or threatened audits, investigations or claims relating
to tax liabilities.
6.21 Schedule of Material Contracts.
8.8 Schedule of Permitted Indebtedness.
8.9 (b) Schedule of Permitted Liens.
<PAGE>
SCHEDULE B, PART 6.1
Appended as Exhibit 6.1 is a schedule listing Borrower and all of its
------------
Subsidiaries and showing each jurisdiction in which Borrower and each of its
Subsidiaries is qualified to do business as a foreign corporation on the Closing
Date.
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF STATES
QUALIFIED TO DO BUSINESS
COMPANY STATE QUALIFIED
------- ---------------
Mikohn Gaming Corporation (a Nevada Corporation) (FEIN:
88-0218876) Arizona
Colorado
Connecticut
Delaware
Florida
Illinois
Indiana
Iowa
Kansas
Louisiana
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Jersey
New Mexico
New York
North Carolina
North Dakota
Oregon
South Dakota
Washington
West Virginia
Wisconsin
CASINO EXCITEMENT, INC. (a Nevada Corporation) (FEIN: 88- Mississippi
0303833)
New Jersey
Games of Nevada, Inc. (a Nevada Corporation) (FEIN: None
None)(Inactive)
MGC, Inc. (a Nevada Corporation) (FEIN: 88-0811761 ) Colorado
Mississippi
Mikohn International, Inc. (a Nevada Corporation) (FEIN:
88-02177317) (Inactive) None
Mikohn Nevada (a Nevada Corporation) (FEIN: 88-0356727) None
Exhibit 6.1
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF STATES
QUALIFIED TO DO BUSINESS
COMPANY STATE QUALIFIED
------- ---------------
Foreign Corporations:
- ----------------------
Mikohn Europe, BV
Mikohn Gaming Australasia Pty. Ltd.
Mikohn South America, S.A.
Club Casino Products Holdings Pty. Ltd. (subsidiary of
Mikohn Gaming Australasia Pty. Ltd.)
<PAGE>
SCHEDULE B, PART 6.9
The Consolidated Entity has no Contingent Obligation (or any other material
liabilities which were not incurred by the Credit parties in the ordinary course
of business) which is not reflected in the Financial Statements referenced in
Section 6.9 of the Credit Agreement or the footnotes thereto.
Borrower has guaranteed the faithful performance by CEI of the terms of that
certain Agreement dated November 7, 1994 among John Renton Young et al and CEI
and Borrower. A copy of the pages of said agreement germane to this Contingent
Obligation is annexed hereto as Exhibit 6.9.
------------
<PAGE>
AGREEMENT
---------
THIS AGREEMENT is entered into as of this 7th day of November, 1994 by
--
and between THE YOUNG GROUP, INC. ("YGI"), a Nevada corporation, JOHN R. YOUNG
("YOUNG"), JOHN RENTON YOUNG, LTD. (doing business as John Renton. Lighting &
Sign), a Nevada corporation, JOHN RENTON YOUNG OF NEW JERSEY, INC. (doing
business as John Renton Young Lighting & Sign N.J. ), a New Jersey
corporation, JOHN RENTON YOUNG LIGHTING OF MISSISSIPPI, INC., a Nevada
corporation (John Renton Young, Ltd., John Renton Young of New Jersey, Inc. and
John Renton Young Lighting of Mississippi, Inc. are collectively referred to as
"JRY"; YGI, YOUNG and JRY are collectively referred to as "SELLERS"), CASINO
EXCITEMENT, INC. ("CEI"), a Nevada corporation, and MIKOHN GAMING CORPORATION,
a corporation ("MIKOHN").
W I T N E S S E T H :
WHEREAS, YOUNG is the legal and beneficial owner of all the stock (the "YGI
Shares") in YGI; and
WHEREAS, YGI is the legal and beneficial owner of all of all the stock
(the "JRY Shares") in JRY; and
WHEREAS, JRY and YGI are engaged in the business of designing, developing,
fabricating, manufacturing, selling, leasing, installing, maintaining and
servicing commercial sign and lighting systems (the "Business"); and
WHEREAS, JRY and YGI own tangible and intangible assets used in the
Business which include, without limitation, real property, leases, equipment
and equipment leases, contracts, permits, licenses, franchises, approvals and
authorizations by governmental or regulatory authorities or bodies, work in
process, inventory, supplies, tools, accounts receivable, bank accounts, notes
receivable, prepaid expenses and deferred expenses, telephone equipment and
telephone numbers, computer hardware, software and firmware, computer tapes,
disks and codes, trademarks, service marks, trade names, patents and/or patent
applications and/or technology, ideas, designs, concepts, inventions and
processes which may or may not be patentable, copyrights, licenses, trade
secrets, know how, formulae, test information, market surveys, customer
lists, supplier lists, claims and rights against third parties, set-offs and
credits, manufacturing processes, business marketing plans, good will, and
accounting, financial and business records (the "JRY Assets") all as reflected
in the financial statements for the year ending June 30, 1994 and the quarter
ending September 30, 1994 attached as Exhibits A-1 and A-2 respectively (the
"Financial Statements"); and
WHEREAS, YGI owns certain real property commonly known as 3665 W. Diablo
Drive, Las Vegas, Nevada, more particularly
AGREEMENT, Page 1 of 25
Exhibit 6.9
<PAGE>
liability;
28.0.2. any damage by reason of liability or deficiency in the JRY
Assets or the Real Property resulting from any misrepresentation, breach of
warranty or nonfulfillment of any agreement on the part opf SELLERS under this
Agreement, or in any certificate or other instruments described and referred to
in this Agreement, or in the Exhibits attached hereto, or to be furnished to
CEI hereunder;
28.0.3 all actions, suits, proceedings, demands, damages,
assessments, taxes, judgments, costs and expenses incident to any of the
foregoing, including, but not limited to, attorneys' fees.
29 Security Agreement. To secure the faithful performance of the
------------------
obligations created by Sections 27 and 28, YOUNG shall execute the Security
Agreement and Pledge of Stock in the form of Exhibit E.
30 Release From Personal Guaranties. Within sixty (60) days after the
--------------------------------
First Closing, CEI shall take such action as is reasonable and necessary to
cause YOUNG to be removed as guarantor in respect to all obligations assumed by
CEI pursuant to this Agreement.
31 Lease of Real Property Pending Second Closing. Commencing the date
---------------------------------------------
of the First Closing and ending of the date of the Second Closing, CEI shall
lease the Real Property from SELLERS at a monthly rental equal to one-twelfth of
the total annual direct carrying costs of the Real Property plue ONE AND NO/100
DOLLAR ($1.00). For purposes of this Agreement, "direct carrying costs" include
payments under any purchase money mortgage or deed of trust, ad valorem taxes,
special assessments which are encumbrances against the Real Property, insurance
premiums, repair and maintenance costs, or any other expense attributable to the
ownership of the Real Property actually incurred by SELLERS subsequent to the
First Closing. "Direct carrying costs" do not include the payment of any
liability assumed by CEI in accordance with Section 5.2 of this Agreement.
32 Guaranty of MIKOHN. MIKOHN guarantees the faithful performance of the
------------------
terms of this Agreement by CEI.
AGREEMENT, Page 24 of 25
<PAGE>
IN WITNESS WHEREOF, the undersigned shall be deemed to have executed this
Agreement as of the date specified on page one hereof.
CASINO EXCITEMENT, INC. JOHN RENTON YOUNG LIGHTING
& SIGN COMPANY OF NEVADA
By /s/ David J. Thompson By /s/ John R. Young
--------------------- ------------------
David J. Thompson John R. Young
President President
JOHN RENTON YOUNG LIGHTING JOHN RENTON YOUNG LIGHTING
& SIGN COMPANY OF NEW JERSEY & SIGN COMPANY OF MISSISSIPPI
By /s/ John R. Young By /s/ John R. Young
--------------------- ------------------
John R. Young John R. Young
President President
MIKOHN GAMING CORPORATION
/s/ John R. Young By /s/ David J. Thompson
--------------------- ------------------
JOHN R. YOUNG David J. Thompson
President
AGREEMENT, Page 25 of 25
<PAGE>
SCHEDULE B, PART 6.10(a)
[1] The chief executive office of each Credit Party is the
office of
Mikohn Gaming Corporation
1045 Palms Airport Drive
P.O. Box 98686
Las Vegas, NV 89193-8686
[2] The principal place of business of each Credit Party is
a follows:
Mikohn Gaming Corporation
(same as [1] above)
Casino Excitement, Inc.
3665 West Diablo Drive
Las Vegas, NV 89118
MGC, Inc.
(same as [1] above)
Mikohn Nevada
(same as [1] above)
<PAGE>
SCHEDULE B, PART 6.10 (b)
[1] As of the Closing Date, locations at which any Credit Party has
Collateral (other than vehicles and Inventory in transit) are the following:
(i) Annexed hereto as Exhibit 6.10(b)[1](i) is a schedule entitled
SUMMARY OF LEASED FACILITIES (DOMESTIC) AS OF OCTOBER 15, 1997,
which includes a schedule entitled SUMMARY OF LEASED FACILITIES
(FOREIGN) AS OF SEPTEMBER 15, 1997.
(ii) Annexed hereto as Exhibit 6.10(b)[1](ii) is a schedule entitled
LOCATIONS OWNED BY BORROWER. No other Credit Party owns any
locations.
[2] A complete list of the legal name and address of each warehouse not owned
by any Credit Party at which Inventory of any Credit Party is stored as of the
Closing Date is set forth below:
None.
- ------------------------
1. Not included among these locations are the premises of customers who have
purchased on conditional sale or leased Collateral consisting of proprietary
games.
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF LEASED FACILITIES (DOMESTIC) AS OF OCTOBER 15, 1997
--------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D1 3095 East Patrick Lane (a) Patrick Partners $3,851 7/2/1992 Month to
Suite 10 1050 E. Flamingo Road Month
Las Vegas, NV Las Vegas, NV 89119
- -----------------------------------------------------------------------------------------------------------------------------------
D2 6700 Paradise Road (a) The Howard Hughes $14,351 5/28/1993 8/31/2000
Suite E Properties, LP plus annual
Las Vegas, NV 1231 Town Center Drive COLA
Las Vegas, NV 89134
- -----------------------------------------------------------------------------------------------------------------------------------
D3 6700 S. Paradise Road (a) The Howard Hughes $7,377 11/9/1993 8/31/2000
Suite D Properties, LP plus annual
Las Vegas, NV 1231 Town Center Drive COLA
Las Vegas, NV 89134
- -----------------------------------------------------------------------------------------------------------------------------------
D4 400 Corporate Circle (a) MIE Denver Associates $1,918 5/15/1994 Month to
Suite G 12860 W. Cedar Drive, #101 Month
Golden, CO Lakewood, CO 80288
- -----------------------------------------------------------------------------------------------------------------------------------
D5 1045 Palms Airport Drive (a) MEDIQ/PRN Life Support $27,322 6/1/1994 8/31/2000
Las Vegas, NV Services, Inc. plus annual
One Mediq Plaza COLA
Pennsauken, NJ 08110
- -----------------------------------------------------------------------------------------------------------------------------------
D6 6065 South Polaris Avenue (a) JEMCO Properties $7,830 6/29/1994 6/30/2002
Suite C 9061 Santa Monica Blvd. plus annual
Las Vegas, NV Los Angeles, CA 90069 COLA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF LEASED FACILITIES, Page
(a) Mikohn Gaming Corporation (c) Mikohn Nevada
(b) MGC, Inc. (d) Casino Excitement, Inc.
Exhibit 6.10(b)[1](i)
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D7 898 Hancock Road (d) Carlon Thomas $ 525 7/7/1994 Month to
Bullhead City, AZ 912 Hancock Road Month
Riviera, AZ 86442
- -----------------------------------------------------------------------------------------------------------------------------------
D8 1100 Doughty Road (d) John & Teresa $ 3,800 11/1/1994 11/1/1997
Pleasantville, NJ 1010 Morton Avenue
Absecon, NJ
- ----------------------------------------------------------------------------------------------------------------------------------
D9 3665 West Diablo Drive (d) The Young Group $1 plus 1/12 11/15/94 11/15/97
Las Vegas, NV 3665 West Diablo of all annual
Drive carrying
Las Vegas, NV costs
89119
- ----------------------------------------------------------------------------------------------------------------------------------
D10 5455 Desert Point Drive (a) L.H. Leonardi $ 4,298 12/7/1994 11/30/1999
Las Vegas, NV Electric
Construction Co.
P.O. Box 750457
Subtenant: John B. Rudy Company Petaluma, CA
94975-0457
- ----------------------------------------------------------------------------------------------------------------------------------
Dll 5050 Steptoe Street (a) Donald & $4,641 plus 4/1/1995 4/1/1998
Las Vegas, NV Stephanie Harmer annual
5050 Steptoe COLA
Street
Las Vegas, NV
89122
- ----------------------------------------------------------------------------------------------------------------------------------
D12 3232 South West Second Ave. (a) Mackenzie $550 7/1/1995 Month to
Bay 202 Ft. Lauderdale, FL Limited Month
Partnership
No. 1, Ltd.
P.O. Box 21850
Ft. Lauderdale,
FL 33335
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Mikohn Gaming Corporation (C) Mikohn Nevada
(B) MGC, Inc. (D) Casino Excitement, Inc.
SUMMARY OF LEASED FACILITIES, Page 2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D13 6375 Delilah Road and (a) Rober D. Lehman $3,025 12/15/1995 12/15/1998
6579 Delilah Road, Ste. 2 6601 Ventnor Avenue $1,193 plus
Egg Harbor Township, NJ Suite 306 annual
Ventnor, NJ 08406 COLA
- ------------------------------------------------------------------------------------------------------------------------------------
D14 4835 Longley Lane (a) Dermody Properties $10,572 1/15/1996 4/5/2001
Reno, NV 1200 Financial Blvd. plus annual
P.O. Box 7098 COLA
Reno, NV 89510
- ------------------------------------------------------------------------------------------------------------------------------------
D15 5875 Tyrone Road (a) Industrial Properties of NV $4,532 7/15/1996 7/14/2001
Reno, NV 295 Holcomb Ave., Ste. 4
Reno, NV 89502
Subtenant: Doctors Corporation
of America
- ------------------------------------------------------------------------------------------------------------------------------------
D16 11088 Millpark Drive (a) Centerline Investment Co. $1,200 plus 1/1/1997 12/31/1999
Suite 144 P.O. Box 28428 annual
Maryland Heights, MO St. Louis, MO 63146 COLA
- ------------------------------------------------------------------------------------------------------------------------------------
D17 2095 Exchange Drive (a) Meyer/Burkemper Construction $2,063 1/1/1997 12/31/1999
St. Charles, MO P.O. Box 635
St. Peters, MO
- ------------------------------------------------------------------------------------------------------------------------------------
D18 3950 N.E. 33rd Terrace (a) Vick-Pursell Partners $875 1/1/1997 12/31/1999
Suite 8-E 300 North Church Road
Kansas City, MO Liberty, MO
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Mikohn Gaming Corporation (C) Mikohn Nevada
(B) MGC, Inc. (D) Casino Excitement, Inc.
SUMMARY OF LEASED FACILITIES, Page 3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D19 2502 Goodman Road (b) Joe Poppenheimer $900 - 1997 1/28/1997 2/28/1999
Horn Lake, MS 1018 Goodman Drive $950-1998
Horn Lake, MS
- ------------------------------------------------------------------------------------------------------------------------------------
D20 840 Pilot Road (c) Pilot Company $41,176 8/1/1997 7/31/2004
Las Vegas, NV P.O. Box 17724 plus annual
Anaheim, CA 92817 COLA
- ------------------------------------------------------------------------------------------------------------------------------------
D21 3860 Hawkins NE (a) Sun Belt Business Centers $2,156 10/1/1997 9/30/1999
Albuquerque, NM 87109 Partnership IV
c/o Good Management
3844 Hawkins NE
Albuquerque, NM 87109
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) MIkohn Gaming Corporation (C) Mikohn Nevada
(B) MGC, Inc. (D) Casino Excitement, Inc.
SUMMARY OF LEASED FACILITIES, Page 4
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF LEASED FACILITIES (FOREIGN) AS OF SEPTEMBER 15, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
F1 Mikohn South America, SA Corporacion E Inversiones $2,478 7/4/1997 7/3/2000
Av. Republica de Panama 3533-3535 Gremcco S.A.
Torre "A", Ofic. 504 Av. Salaverry No. 2650
San Isidro (Lima), Peru San Isidro, Peru
- ------------------------------------------------------------------------------------------------------------------------------------
F2 Mikohn South America, SA Inmobiliaria Santa Martha y $3,038 1/10/1996 1/9/2001
Calle Sucre 195 Anita S.A.
Urb. Vulcano Calle Uno No 108 Urb.
Ate (Lima), Peru Santa Lucia
Ate Vitarte, Peru
- ------------------------------------------------------------------------------------------------------------------------------------
F3 Mikohn Gaming Corporation Angeles Iniguez and $450 12/1/1996 11/30/1998
Juramento 2801 Carmen Mercedes Acosta
Piso 14 "E" Av. Las Heras 2570
Capital Federal (Buenos Aires) Piso 9 "D"
Argentina Capital Federal (Buenos Aires)
Argentina
- ------------------------------------------------------------------------------------------------------------------------------------
F4 Mikohn Europe B.V. MBB Project 31 B.V. $11,933 4/1/1995 3/31/2000
Leidse Rijn 2-16 Postbus 1448
3454 PZ De Meern (Amsterdam)) 3600 BK Maarken
The Netherlands The Netherlands
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF LEASED FACILITIES, Page 5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
F5 Mikohn Gaming Australasia Menora Nominees Pry Ltd $(AUS)13,450 9/15/1996 9/14/2001
132 McEvoy Street (ACN 001 146 498) & Steven
Alexandria (Sydney), Australia Stux and Ruth Stux
C/- Stephen & Co. Pry Ltd
Suite 16
201 New South Head Road
Edgecliff (Sydney), Australia
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF LEASED FACILITIES, Page 6
<PAGE>
LOCATIONS OWNED BY BORROWER
(a) 4181 West Oquendo Road, Las Vegas, NV 89118
(b) 405 12th Street, Rapid City, SD 57701
(c) 4708 Hewes Avenue, Gulfport, MS 38507
(a) Mikohn Gaming Corporation
(b) MGC, Inc.
(C) Mikohn Nevada
(D) Casino Excitement, Inc.
Exhibit 6.10 (b) [1] (ii)
-------------------------
<PAGE>
SCHEDULE B, PART 6.11
[i] As of the Closing Date, the only direct or indirect Subsidiaries of
Borrower are the following, all of which are direct Subsidiaries of Borrower
except as otherwise noted:
DIRECT SUBSIDIARIES
-------------------
Credit Parties
--------------
Casino Excitement, Inc.
MGC, Inc.
Mikohn Nevada
Inactive Subsidiaries
---------------------
Mikohn International, Inc.
Games of Nevada, Inc.
Foreign Subsidiaries
--------------------
Mikohn Europe, BV
Mikohn South America, SA
Mikohn Gaming Australasia Pry Ltd.
INDIRECT SUBSIDIARY
-------------------
Club Casino Products Pry Ltd.
(wholly owned by Mikohn Gaming Australasia Pry Ltd.)
(ii) As of the Closing Date, Borrower is the record and beneficial owner of
all of the issued and outstanding shares (or other ownership interests) of each
of the Direct Subsidiaries except that Borrower owns 99.7 percent of the
outstanding shares of Mikohn South America SA.
<PAGE>
SCHEDULE B, PART 6.12
Other than as set forth on Exhibit 6.12 annexed hereto, to the knowledge of
-------------
Borrower and each other Credit Party, as of the Closing Date there is no pending
or threatened litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against any Credit Party or any Subsidiary of any
Credit Party that would have a Material Adverse Effect on any Credit Party.
<PAGE>
SUMMARY OF PENDING JUDGMENTS, LITIGATION AND OTHER CLAIMS
---------------------------------------------------------
PENDING JUDGMENTS
NONE.
PENDING LITIGATION
HILTON V. FIREMAN'S FUND:
- -------------------------
<TABLE>
<CAPTION>
<S> <C>
Plaintiff: Las Vegas Hilton Corporation
Defendants: Fireman's Fund Insurance Company, Craigin & Pike, Inc., Young & Company, Inc.,
Casino Excitement, Inc., Tom Pappas, Inc., Progressive Construction, Inc., K & J Steel, Inc., CJB Designs, Uriah
Enterprises, Inc., Converse Consultants, Inc., Martin, Peltyn & Early, Inc. (Casino Excitement, Inc.
is wholly owned subsidiary of Mikohn Gaming Corporation.)
Court: Clark County District Court, Clark County, Nevada; Case No. A354653
Filing Date: January 11, 1996
Summary of
Claims: Action seeks damages for the collapse of the world's largest free standing sign
during a violent windstorm in Las Vegas on July 18, 1994. The sign was built by
John Renton Young Lighting & Sign ("JRY"). CEI entered into a contract to
purchase the assets of JRY in November 1994. CEI is indemnified pursuant to
agreement with Young Group. CEI's insurance carrier is defending under a
reservation of rights.
Status: Pretrial discovery. No trial date has been set. CEI denies all liability and is
vigorously defending.
Counsel: Frank Roberts, Reno, Nevada (702-329-4041); Steve Lane,
Las Vegas, Nevada (702-362-5118)
ACTON V. MIKOHN:
- ----------------
Plaintiff: Ken Acton
Defendants: Mikohn Gaming Corporation, MGC, Inc., Bruce Peterson
Court: Clark County District Court, Clark County, Nevada; Case No. A358265
Filing Date: April 15, 1996
Summary of
Claims: Wrongful termination, breach of contract. Insurance carrier is defending.
Status: Pretrial discovery. No trial date has been set. The Company denies all liability
and is vigorously defending.
Counsel: Steve Lane, Las Vegas, Nevada (702-362-5118)
</TABLE>
SCHEDULE B, Part 6.12, Page 1
<PAGE>
<TABLE>
<CAPTION>
ACTON V. MIKOHN:
- ----------------
<S> <C>
Plaintiff: Ken Acton
Defendant: Mikohn Gaming Corporation
Court: United States District Court for the District of Nevada; Case
No. CV-S-96-00724-DWH
Filing Date: August 12, 1996
Summary of
Claims: Age discrimination, intentional infliction of emotional
distress. Insurance carrier is defending.
Status: Pretrial discovery. No trial date has been set. The Company
denies all liability and is vigorously defending.
Counsel: Steve Lane, Las Vegas, Nevada (702-362-5118)
FRANKE V. MIKOHN:
- -----------------
Plaintiff: Gwen Franke
Defendant: Mikohn Gaming Corporation
Court: Filed in the Seventh Judicial Circuit Court for the State of
South Dakota, County of Pennington and removed to the United
States District Court for the District of South Dakota,
Western Division, Case No. CIV. 96-5079
Filing Date: August 27, 1996
Summary of
Claims: Wrongful termination, sexual harassment
Status: Pretrial discovery. The Company denies all liability and is
vigorously defending.
Counsel: James Nelson, Rapid City, South Dakota (605-342-1078)
MIKOHN V. WENTWORTH HILL
- ------------------------
Plaintiff: Mikohn Gaming Corporation, Casino Signs Holdings Pty Limited
(now know as Mikohn Australasia)
Defendants: Wentworth Hill, Casino Magic Australasia Pty Limited
Court: Supreme Court of New South Wales, Sydney Registry, Equity
Division; Case No. 3183 of 1996
Filing Date: August 28, 1996
Summary of
Claims: Action against former employee to enforce covenant not to
compete and for damages resulting from breach of contract.
Status: Pretrial discovery. No trial date has been set.
Counsel: Edmund Fredericks, Sydney, Australia (011-612-9646-1600)
</TABLE>
SCHEDULE B, Part 6.12, Page 2
<PAGE>
<TABLE>
<CAPTION>
ADTRONICS V. YOUNG & COMPANY
- ----------------------------
<S> <C>
Plaintiff: Adtronics Sign Company, Ltd.
Defendants: Young & Company, Inc., Casino Excitement, Inc., Las Vegas Hilton Corporation
Court: District Court, Clark County, Nevada, Case No. A366072
Filing Date: November 5, 1996
Summary of
Claims: Breach of contract (Young & Mikohn), unjust enrichment (Hilton). Mikohn is
indemnified under agreement with Young Group.
Status: Pretrial discovery. No trial date has been set. The Company denies all liability
and is vigorously defending.
Counsel: Steve Lane, Las Vegas, Nevada (702-362-5118)
SHAHNAM V. MIKOHN
- -----------------
Plaintiff: Hamid Shahnam
Defendants: Mikohn Gaming, Inc. and Trans Sierra Communications
Court: Second Judicial District Court of the State of Nevada in and for the County of
Washoe; Case No. CV96-07752
Filing Date: December 2, 1996
Summary of
Claims: Breach of contract by former employee claiming entitlement to certain
commissions, unused vacation and sick pay at time of resignation in July 1995.
Status: The Company denies all liability and is vigorously defending. Maximum exposure
is less than $25,000.
Counsel: Madelene Amendola, Reno, Nevada (702-788-8666)
MIKOHN V. TEMPLE
- ----------------
Plaintiff: Mikohn Gaming Corporation
Defendant: John Temple; Young Electric Sign Company
Court: District Court, Clark County, Nevada; Case No. A368322
Filing Date: January 8, 1997
Summary of
Claims: Action against a former employee for injunctive relief to enforce covenants of
confidentiality, non-solicitation and non-competition. Action against Young
Electric for intentional interference with contract.
Status: Injunction issued against Temple and award of damages by arbitrator in favor of
Mikohn. No trial date has been set. Discovery is in process.
Counsel: Paul Hejmanowski, Las Vegas, Nevada (702-383-8880)
</TABLE>
SCHEDULE B, Part 6.12, Page 3
<PAGE>
PETERSON V. TRUMP TAJ MAHAL
- ---------------------------
<TABLE>
<CAPTION>
<S> <C>
Plaintiff: Mary Peterson
Defendants: Trump Taj Mahal; Mikohn Gaming Corporation
Court: Supreme Court of the State of New York County of Queens; Case No. 018374/97
Filing Date: August 1, 1997
Summary of
Claims: Personal injury action. Plaintiff tripped over technician's tool box. Complaint
Status: served 8/14/97. Submitted to carrier to provide defense 8/25/97.
Counsel: Tom Speziale, New York, New York (516-364-8844)
MIKOHN V. MARTIN
- ----------------
Plaintiff: Mikoln Gaming Corporation
Defendants: Hank Martin; Keith Albion; Ted Graney; Gaming Facilities International, Inc.
Court: District Court Clark County, Nevada; Case No. A378180
Filing Date: September 9, 1997
Summary of
Claims: Action against former employees for violation of covenants not to compete
Status: Pending
Counsel: Paul Hejmanowski & Colin Adkins, Las Vegas, Nevada (702-383-8888)
MIKOHN V. ACRES
- ---------------
Plaintiff: Mikohn Gaming Corporation
Defendants: Acres Gaming, Inc.
Court: United States District Court, Las Vegas, Nevada; Case No. CVS 97-01383 HDM (LRL)
Filing Date: October 2, 1997
Summary of
Claims: Action for declaratory judgment that Mikohn's MoneyTime(TM) System does not
infringe Acres Patent and that Acres Patent is invalid; tortious interference
with business relationship; tortious interference with prospective business
relationship; trade libel.
Status: Pending
Counsel: Kristina Pickering, Las Vegas, Nevada (702-474-9400)
SCHEDULE B, Part 6.12, Page 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRANEY V. MIKOHN
- ----------------
<S> <C>
Plaintiff: Ted Graney
Defendant: Mikohn Gaming Corporation
Court: Washoe County District Court, Nevada,
Case No. Cv97-04392
Filing Date: July 10, 1997
Summary of Claims: Breach of contract claim by former employee claiming entitlement to commissions
and 30 days pay at time of resignation in April, 1997.
Status: Pending; NOT SERVED
Counsel: None
ALBION V. MIKOHN
- ----------------
Plaintiff: Keith Albion
Defendant: Mikohn Gaming Corporation
Court: Washoe County District Court, Nevada,
Case No. CV97-04393
Filing Date: July 10, 1997
Summary of Claims: Breach of contract claim by former employee.
Status: Pending; NOT SERVED
Counsel: None
MARTIN V. MIKOHN
- ----------------
Plaintiff: Hank Martin
Defendant: Mikohn Gaming Corporation
Court: Washoe County District Court, Nevada,
Case No. CV97-04394
Filing Date: July 10, 1997
Summary of Claims: Breach of contract claim by former employee; claims
entitlement to at least $70,000 bonus and 30 days
pay at April, 1997 resignation.
Status: Pending; NOT SERVED
Counsel: None
LUBBE V. MIKOHN
- ---------------
Plaintiff: Glenn Lubbe
Defendant: Mikohn Gaming Corporation
Court: Washoe County District Court, Nevada,
Case No. CV97-04677 July 22, 1997
Filing Date: July 22, 1997
Summary of Claims: Breach of contract claim by former employee claiming
entitlement to a 3% commission of about $125,000 and 30
days pay at time of resignation in April, 1997.
Status: Pending; NOT SERVED
Counsel: None
</TABLE>
SCHEDULE B, Part 6.12, Page 5
<PAGE>
OTHER CLAIMS
<TABLE>
<S> <C>
Plaintiff: Missouri Gaming Commission
Defendants: Mikohn Gaming Corporation
Forum: Missouri Gaming Commission; Case No. DC-97-043
Filing Date: August 28, 1997
Summary of
Claims: Disciplinary action seeking imposition of $10,000 fine for alleged
Violation of (entering into contractual relationship with formor
employee of commission prior to expiration of two year 'cooling
off" period).
Status: Pending
Counsel: Michael Lazaroff, St. Louis, Missouri (314-552-6131)
</TABLE>
SCHEDULE B, Part 6.12, Page 6
<PAGE>
Schedule B, Part 6.14
Set forth on Exhibit 6.14, appended, are all labor union contracts to which
------------
Casino Excitement, Inc. is a party on the Closing Date. No other Credit Party or
any Subsidiary thereof is a party to any labor union contract.
<PAGE>
INTEROFFICE COMMUNICATION
Date: 10/13/97
To: Don Stevens
From: Yvette G. Joachim
Subj: Labor Status Report
- --------------------------------------------------------------------------------
Mikohn Gaming Corporation has no employees covered by collective bargaining
agreement and no employees currently represented by a third party entity.
Casino Excitement, Inc., dba Mikohn Lighting and Sign, has seventy employees
covered by three different collective bargaining agreements. The status of those
agreements is as follows:
<TABLE>
<CAPTION>
MLS LOCATION UNIT EMPLOYEES LABOR UNION CONTRACT TERM
- ------------ -------------- ----------- -------------
<S> <C> <C> <C>
Las Vegas, NV. 45 - Manufacturing IBEW, Local #357 10/01/97 - 09/30/00
18 - Service & Install IBEW, Local #357 10/01/97 - 09/30/00
Egg Harbor Twp., NJ. 3 - Manufacturing SMWIA Local #27 08/01/95 - 08/31/98
4 - Service & Install IBEW, Local #351 08/01/95 - 08/31/98
</TABLE>
Mikohn's relationships with all three unions are healthy. There have been no
grievances filed or work stoppages experienced at any location.
<PAGE>
SCHEDULE B, PART 6.16
On the Closing Date, no Credit Party, no Subsidiary of any Credit Party and
no ERISA Affiliate maintains or contributes to any Plan other than those listed
on Exhibit 6.16 attached.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benefit plans for Mikohn Mikohn Gaming Corp. 401 (k) Plan
Mikohn Gaming Corp. Employee / Director
Stock Option Plan
Mikohn Gaming Corp, Employees' Investment
Plan (stock purchase plan)
Comprehensive Medical Package
Dental Plan
Vision Package
Employee Assistance Program
Short Term Disability
Voluntary Long Term Disability
Life Insurance
Attendance Incentive Program
Employee Resolution Committee
Internal Job Posting Program
Assorted Training Programs
Educational Assistance Program
Employee Discounts
Annual Paid Vacations
Holiday Pay
Service Recognition
2nd Chance Program
Corporate Realtor
AFLAC Coverage
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Inactive:
---------
John Renton Young 401 (k) Plan for employees
employed by John Renton Young prior to
acquisition by the Company
Trans Sierra Communications, Inc 401 (k) Plan
for employees employed by Trans Sierra
Communications, Inc, prior to acquisition by
the Company
- --------------------------------------------------------------------------------
<PAGE>
Schedule B, Part 6.17
Failure as of the Closing Date to comply with environmental
laws.
None.
<PAGE>
SCHEDULE B, PART 6.20
(c) Except as set forth below, to the knowledge of Borrower, at the
Closing Date there are no pending or threatened audits, investigations or claims
for or relating to any liability for taxes and there are no matters under
discussion with any Governmental Authority which could reasonably be expected to
result in a material additional liability for taxes.
Federal and other audits:
Federal audits: None.
State audits: October, 1997 -- New Jersey commencing income, sales and
payroll tax desk audit.
City audits: Golden, Colorado property tax desk audit in process.
<PAGE>
SCHEDULE B, PART 6.21
As of the Closing Date, the following Material Contracts were in effect:
[1] Agreement dated November 7, 1994, as amended, between Borrower and
John Renton Young et al.
[2] Employment Agreement dated July, 1993, as amended, between Borrower
and David J. Thompson, Borrower's Chairman and Chief Executive Officer.
[3] Labor contracts identified at Exhibit 6.14.
[4] License Agreement dated September 21, 1993 between Borrower and
Progressive Games, Inc. licensing Borrower to distribute certain proprietary
games.
[5] Agreement dated September 27, 1997 between Borrower and Progressive
Games, Inc. regarding status of contract following resolution of Nevada Gaming
Control Board proceeding involving Progressive Games, Inc.
[6] Exclusive Licensing Agreement dated December 19, 1994 with IGT
licensing Borrower to manufacture, market, distribute, sell, lease etc. IGT
proprietary slot machines known as "Colossus" and "Big Bertha".
<PAGE>
SCHEDULE B, PART 8.8
List of Indebtedness permitted pursuant to Section 8.8(d) of the Credit
Agreement:
See Exhibit 8.8 appended hereto.
------------
<PAGE>
MIKOHN GAMING CORPORATION
Debt Schedule
As of August 31, 1997
<TABLE>
<CAPTION>
Original APR Balance Additions Payments
Description of Loan Loan 12/31/96 01/97 - 08/97 01/97 - 08/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDEBTEDNESS TO BE PAID AT CLOSING:
Bank of America 20,000,000 Prime + 0.75% 17,892,858 975,000
Games of Nevada
Michael Wichinsky - Purchase 6,250,000 8.00% 4,067,477 455,852
Michael Wichinsky- Patent 140,000 7.00% 100,285 30,522
Bank of Mississippi (Construction) 400,000 Prime + 1.25%
Converted to Real Estate Loan 334,421 Prime + 1.00% 272,980 41,236
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal of Indebtedness to be Paid at Closing 22,333,600
- ------------------------------------------------------------------------------------------------------------------------------------
INDEBTEDNESS WHICH WILL NOT BE PAID AT CLOSING:
Maze/Rodgers #2 517,149 0.00%
Less: imputed interest (77,149) 10.00% 169,231 94,213
Mississippi #8420 35,270 10.00% 3,459 3,459
Mississippi #8427 32,932 10.00% 6,102 6,102
Gulfport--1994 Ford F-250
Gaudin Ford 11,909 11.00% 11,376 2,570
Mikohn Lighting and Sign*
Orix Credit Alliance-#475 124,669 9.00% 31,871 28,328
First Security Bank 49,035 Prime + 2.00% 12,720 12,720
TransSierra AT&T Auto 46,936 9,047
Australia Short-term lease 18,181 7,554
Australia Long-term lease 70,657 25,629
Europe-Car Loan 14,607 5,393
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL OF INDEBTEDNESS WHICH WILL NOT BE PAID AT CLOSING 386,140
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total AMOUNT OF DEBT 22,718,740
====================================================================================================================================
<CAPTION>
Balance G/L Account
8/31/97 Number(s)
---------------------------
<C> <C>
INDEBTEDNESS TO BE PAID AT CLOSING:
Bank of America 18,667,858 2061-00-00
Games of Nevada
Michael Wichinsky - Purchase 3,611.625 2705-00-14
Michael Wichinsky - Patent 69,763 2710-00-14
Bank of Mississippi (Construction)
Converted to Real Estate Loan 231,744 2730-00-55
- -------------------------------------------------------------------------------------------------------------
Subtotal of Indebtedness to be Paid at Closing 22,180,990
- -------------------------------------------------------------------------------------------------------------
INDEBTEDNESS WHICH WILL NOT BE PAID AT CLOSING:
Maze/Rodgers #2 75,018 2720-00-00, 2721-00-00, 2722-00-00
Less: imputed interest
Mississippi #8420 0 2776-00-55
Mississippi #8427 0 2771-00-55
Gulfport--1994 Ford F-250
Gaudin Ford 8,806 2778-00-35,2778-00-55
Mikohn Lighting and Sign*
Orix Credit Alliance-#475 3,543 2419-00-30,2421-00-30
First Security Bank 0 2414-00-30
TransSierra AT&T Auto 37,889 2740-00-25
Australia Short-term lease 25,735
Australia Long-term lease 45,028
0
Europe-Car Loan 9,214
- -------------------------------------------------------------------------------------------------------------
SUBTOTAL OF INDEBTEDNESS WHICH WILL NOT BE PAID AT CLOSING 205,233
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Total AMOUNT OF DEBT 22,986,223
=============================================================================================================
CASH COLLATERALIZE LETTER OF CREDIT 380,000
</TABLE>
Casino Excitement, Inc.
Exhibit 8.8
<PAGE>
EXHIBIT 8.8 (CONTINUED)
ADDITIONAL PERMITTED INDEBTEDNESS
---------------------------------
1 Indebtedness of the Borrower to Bank of America ("BofA") with respect to
drawings under (and any other sums owing to BofA with respect to) a
Letter of Credit in the maximum drawable amount of Austrian Schillings
$3,000,000 issued by BofA (for the account of the Borrower) in favor of
Mikron, GmbH.
<PAGE>
SCHEDULE B, PART 8.9
List of Liens permitted by Section 8.9(b) of the Credit Agreement:
See Exhibit 8.9 appended hereto.
------------
<PAGE>
EXHIBIT 8.9
ADDITIONAL PERMITTED LIENS
--------------------------
1. Banker's lien and right of set-off in favor of Bank of America ("BofA")
with respect to U.S. $400,000 deposited with BofA in a segregated bank
account (the "L/C Cash Collateral Account") to secure drawings under (and
any other sums owing to BofA with respect to) a Letter of Credit in the
maximum drawable amount of Austrian Schillings $3,000,000, issued by BofA
(for the account of the Borrower) in favor of Mikron, GmbH; provided,
--------
however, no other funds of the Borrower or any Subsidiary thereof are
-------
deposited in the L/C Cash Collateral Account.
2. To the extent, if at all, not otherwise permitted pursuant to Section 8.9
of the Credit Agreement, Exception Nos. 1 - 11, 14 and 17 reflected on
Schedule B of that certain Commitment No. 97-10-0954 of Nevada Title
Company dated October 16, 1997 (respecting that certain real property
commonly known as 4181 Oquendo Road, Las Vegas, Nevada).
3. To the extent, if at all, not otherwise permitted pursuant to Section 8.9
of the Credit Agreement, Exception Nos. 4, 5, 7, 9 and 10 reflected on
Schedule B -Section 2 of that certain Commitment No. 35144-SD of First
American Title Company of South Dakota dated October 9, 1997 (respecting
that certain real property commonly known as 405 12/th /Street, Rapid City,
South Dakota).
4. To the extent, if at all, not otherwise permitted pursuant to Section 8.9
of the Credit Agreement, Exception Nos. 1, 6, 7 and 11 set forth in the
title report dated October 16, 1997 issued by Estes and Estes, P.A. to
Nevada Title Company (respecting that certain real property commonly known
as 4708 Hewes Avenue, Gulfport, Mississippi).
<PAGE>
EXHIBIT A
---------
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
I, ______________, in my capacity as ____________________ of Mikohn Gaming
Corporation, a Nevada corporation ("Borrower"), hereby certify in connection
with the Credit Agreement dated as of October __, 1997 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Borrower, the Lenders party thereto and First Source
Financial LLP, an Illinois limited liability partnership, in its capacity as
agent for the Lenders party thereto (in such capacity, the "Agent"),that I am
the duly elected ____________________ of Borrower and that the information and
each calculation set forth in the attached Borrowing Base Certificate are true,
correct and complete as of the Computation Date set forth on such Borrowing Base
Certificate and are calculated in accordance with the Credit Agreement. Unless
otherwise defined herein, all terms used herein shall have the meanings ascribed
to them in the Credit Agreement.
Borrower hereby certifies that Borrower is in material compliance with all
the terms and provisions set forth in the Credit Agreement and no Default or
Event of Default has occurred and is continuing.
Dated:_____________, _____
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
<PAGE>
MIKOHN GAMING CORPORATION
BORROWING BASE CERTIFICATE
I. Borrowing Base Calculation as of _____________,
_____ (the "Computation Date")
Eligible Accounts Receivable at Computation DATE (A) $_______________
(B) .85
Availability (A x B) (C) $_______________
Eligible Inventory at Computation Date (D) $_______________
(E) .60
Availability (D x E) (F) $_______________
Borrowing Base at Computation Date (C + F) $_______________
II. CALCULATION OF ELIGIBLE ACCOUNTS RECEIVABLE
1. Total Accounts Receivable at Computation $_______________
Date
2. Total Accounts Receivables Reduced by:
Accounts arising out of a sale made by Credit
Party to an Affiliate of such Credit Party or
to any other Credit Party $_______________
Unpaid Accounts more than ninety (90) days
after the original payment due date $_______________
Accounts from the same account debtor or its
Affiliate and fifty percent (50%) or more of
all Accounts from that same account debtor
(and its Affiliates) which are ineligible
under (J) above $_______________
<PAGE>
Accounts where the account debtor is a creditor
of such Credit Party, has asserted in writing a
right of setoff against such Credit Party, has
disputed in writing its liability or made any
written claim with respect to the said Account
or any other Account which has not been resolved,
but in each of the foregoing cases, solely to the
extent of the amount of such actual or asserted
right of setoff, or the amount of such dispute or
claim, as the case may be and in all events as
evidenced or asserted in writing $_______________
Accounts where the account debtor is (or the
assets of the account debtor are) the subject
of an Insolvency Event unless the account debtor
has obtained post-petition financing on terms
reasonably acceptable to Agent $_______________
Accounts which are not payable in United States
dollars or Canadian dollars or the account debtor
for the Account is located outside the continental
United States and Canada, unless the Accounts are
supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance and
issuer) and assigned to and directly drawable by
Agent $_______________
Accounts where the sale-to the account debtor
is on a guaranteed sale, sale-and-return, sale
on approval or consignment basis or made
pursuant to any other written agreement
providing for repurchase or return $_______________
Accounts where the account debtor is the United
States of America or any department, agency or
instrumentality thereof, unless such Credit
Party duly assigns its rights to payment of
such Accounts to Agent pursuant to the
Assignment of Claims Act of 1940, as amended
(31 U.S.C. (S)(S) 3727 et seq.) $_______________
<PAGE>
Accounts arising under contracts where
payment is due over the term of the
contract, the goods giving rise to such
Accounts have not been shipped and
delivered to and accepted by the account
debtor, the services giving rise to
such Accounts have not been performed and
accepted or the Accounts otherwise do not
represent a final sale $_______________
Accounts which do not comply in all material
respects with all Requirements of Law $_______________
Accounts which are not subject to a valid and
perfected first priority Lien in favor of
Agent or does not otherwise conform to the
representations and warranties contained in
the Credit Documents $_______________
3. Eligible Accounts Receivable at Computation
Date $_______________
III. CALCULATION OF ELIGIBLE INVENTORY
1. Total Eligible Inventory at Computation Date $_______________
2. Total Eligible Inventory Reduced by:
Inventory not owned solely by such Credit
Party or such Credit Party does not have
good, valid and marketable title thereto $_______________
Inventory not located in the United States or
Canada $_______________
Inventory not located on property owned by a
Credit Party or by a third party that has
executed and delivered a Collateral Access
Agreement (other than Proprietary Gaming
Equipment located on property owned by a
third party who has not executed and delivered
a Collateral Access Agreement to the extent
such Proprietary Gaming Equipment is located on
such property solely for the purpose of a
temporary field trial) and, in the case of
Inventory located on property owned by such a
third party, it is segregated or otherwise
separately identifiable from goods of others,
if any, stored on such property $_______________
<PAGE>
Inventory not subject to a valid and perfected
first priority Lien in favor of Agent, except,
with respect to such Inventory stored at
locations other than locations owned by a
Credit Party, for Liens for unpaid rent or
normal and customary warehousing charges $_______________
Inventory subject to a reserve for
obsolescence established in accordance
with GAAP $_______________
3. Eligible Inventory at Computation Date $_______________
<PAGE>
EXHIBIT B
---------
FORM OF EXTENSION REQUEST
-------------------------
First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Attention: Contract Administration
Ladies and Gentlemen:
This Extension Request is furnished pursuant to the Credit Agreement, dated
as of October __, 1997 (as from time to time amended, modified or supplemented,
the "Credit Agreement"), among Mikohn Gaming Corporation, a Nevada corporation,
the financial institutions from time to time party thereto, as Lenders, and
First Source Financial LLP, an Illinois registered limited liability
partnership, as Agent for such Lenders. Capitalized terms used but not elsewhere
defined herein shall have the respective meanings ascribed to such terms in the
Credit Agreement.
In accordance with Section 2.1.2 of the Credit Agreement, the undersigned
-------------
hereby requests an extension of the Expiration Date for $of the Revolving Loan
Commitments to __________, ____, (or, if such date is not a Business Day, to the
next preceding. Business Day).
Borrower hereby represents and warrants that no Default or Event of Default
presently exists and is continuing.
Please acknowledge and confirm (on behalf of the Revolving Lenders) such
extension by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: ____________________________________
Name: ___________________________________
Title: __________________________________
<PAGE>
The undersigned hereby acknowledges and confirms (on behalf of the Revolving
Lenders), this __ day of __________ , 19__, the extension of the Expiration Date
as requested above.
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.,
its Agent/Manager
By: _________________________
Name Printed: _______________
Its: ________________________
2
<PAGE>
EXHIBIT C
---------
NOTICE OF LIBOR ACTIVITY
------------------------
TO: First Source Financial, Inc., as Servicer
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
ATTN: Loan Administration
RE: LIBOR Activity
We refer to that certain Credit Agreement, dated as of October __, 1997 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") by and among MIKOHN GAMING CORPORATION, a Nevada
corporation, as Borrower, the financial institutions from time to time party
thereto, as Lenders, and FIRST SOURCE FINANCIAL LLP, as Agent for such Lenders.
Capitalized terms used but not otherwise defined herein are used herein as
defined in the Credit Agreement.
Pursuant to Section 2.5 of the Credit Agreement, Borrower hereby requests
Lenders to convert and or continue the Loan(s) indicated below (collectively,
the "Requested LIBOR Activity"):
Please circle relevant transactions/activities
and complete requested information
----------------------------------------------
LIBOR CREATE (Conversion from Reference Rate):
- ----------------------------------------------
Effective Date: __________________
Term [months] (circle one) 1 3 6
Amount: ____________ [minimum $1,000,000 in increments of $100,000]
Affected Tranche: (circle one) Revolver Term Loan A
LIBOR MATURING:
- ---------------
CONTINUATION TO NEW LIBOR RATE
Original Date: ______________
Original Amount: ____________
<PAGE>
Affected Tranche: (circle one) Revolver Term Loan A
Effective Date: _____________
Term [months] (circle one) 1 3 6
Amount: ________________ [minimum $1,000,000 in increments of $100,000]
Comments: ______________________________________________________________________
________________________________________________________________________________
________________________.
To induce Agent and Lenders to effect the Requested LIBOR Activity,
Borrower hereby represents and warrants to Agent and Lenders that:
(a) No Event of Default or Default has occurred and is continuing, or has
resulted or will result from such Requested LIBOR Activity.
(b) The warranties contained in the Credit Agreement and in the Credit
Documents are true and correct in all material respects as of the date
hereof, with the same effect as though made on the date hereof (other
than representations and warranties which expressly relate solely to
an earlier date, in which case such representations and warranties
were true and correct in all material respects on and as of such
earlier date).
Dated this ____ day of ___________, _____.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
2
<PAGE>
SCHEDULE I
FOR FSFI USE ONLY
Rate set for __________________ month LIBOR
Please be advised that the rate set for the LIBOR effective _____________ (date)
for ______________________________________________________________ (tranche) has
been set as follows:
LIBOR Rate: __________
*Spread __________
All in Rate: __________
Effective: __________
Maturity Date: __________
Total Principal: __________
3
<PAGE>
EXHIBIT D
---------
FORM OF NOTICE OF BORROWING
---------------------------
To: First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
We refer to the Credit Agreement dated as of October __, 1997 (herein as
heretofore amended or modified called the "Credit Agreement") among Mikohn
Gaming Corporation, a Nevada corporation ("Borrower"), the financial
institutions from time to time party thereto, as Lenders, and First Source
Financial LLP, an Illinois registered limited liability partnership as Agent for
such Lenders. Capitalized terms used but not elsewhere defined herein are used
herein as defined in the Credit Agreement.
Pursuant to Section 2.1 of the Credit Agreement, the undersigned hereby
requests a Revolving Loan to be made on _____________, ____ in the principal
amount of $___________________ ("Requested Loan") to Borrower.
To induce Lenders to make the Requested Loan Borrower hereby represents and
warrants to Agent and Lenders that:
(a) No Event of Default or Default has occurred and is continuing, or has
resulted or will result from the making of the Requested Loan.
(b) The warranties and representations contained in Article 6 of the
Credit Agreement and in the Credit Documents are true and correct in
all material respects as of the date hereof, with the same effect as
though made on the date hereof (other than representations and
warranties which expressly relate to an earlier date, in which case
such representations and warranties were true and correct in all
material respects on and as of such earlier date).
Dated this __________ day of ____________________, ____.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT E
---------
FORM OF REVOLVING NOTE
----------------------
$10,000,000.00 Due October __, 2002
CUSIP No. __________ Executed October __, 1997
FOR VALUE RECEIVED, on or before October __, 2002, the undersigned hereby
promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender"), at the principal office of
LaSalle National Bank, N.A. in Chicago, Illinois, the principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) or, if less, the aggregate unpaid
principal amount of all Revolving Loans made by Lender pursuant to the Credit
Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of each Revolving Loan from the date of such Revolving Loan until such
Revolving Loan is paid in full. payable at such rate(s) and at such time(s),
applicable to Revolving Loans as provided in the Credit Agreement hereinafter
referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, .that certain Credit Agreement of even date herewith (and, if
amended, all amendments 'thereto) among the undersigned, the financial
institutions from time to time party thereto. and First Source Financial LLP, an
Illinois registered limited liability partnership, as agent for such financial
institutions (herein called the "Credit Agreement"), to which Credit Agreement
reference is hereby made for a statement of the terms and provisions under which
this Note may be paid prior to its due date or its due date accelerated.
Reference is hereby made to the Credit Agreement for provisions relating to
reductions in the principal amount of this Note. Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement hereinabove
referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys'
<PAGE>
fees and legal expenses, incurred by the holder of this Note in endeavoring to
collect any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
2
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT F
---------
FORM OF TERM NOTE A
-------------------
$5,000,000.00 Due October 1, 2004
CUSIP No. ____________ Executed October __, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of [Insert Lender Name] (a/an)
("Lender") at the principal office of [The First National Bank of Chicago in
Chicago, Illinois], the principal amount of FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00)or, if less, the aggregate unpaid principal amount of Term Loan A
made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan A from the date hereof until Term Loan A is paid in full,
payable at such rate(s) and at such time(s), applicable to the Term Loan A as
provided in the .Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any
<PAGE>
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: ____________________________________
Name: ___________________________________
Title: _________________________________
2
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT G
---------
FORM OF TERM NOTE B
-------------------
$5,000,000.00 Due October 1, 2004
CUSIP No. ______________ Executed October __, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of [Insert Lender Name] (a/an) ____________________
("Lender") at the principal office of [The First National Bank of Chicago in
Chicago, Illinois], the principal amount of FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00)or, if less, the aggregate unpaid principal amount of Term Loan B
made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to the Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership, as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: ____________________________________
Name: ___________________________________
Title: __________________________________
2
<PAGE>
EXHIBIT H
---------
FORM OF COMPLIANCE CERTIFICATE
------------------------------
TO: First Source Financial LLP,
as Agent and a Lender
2850 W. Golf Road, 5th Floor
Rolling Meadows, IL 60008
We refer to the Credit Agreement, dated as of October __, 1997 (herein, as
amended or modified called the "Credit Agreement"),among Mikohn Gaming
Corporation, a Nevada corporation, the financial institutions from time to time
party thereto, as Lenders, and First Source Financial LLP} an Illinois
registered limited liability partnership, as Agent for such Lenders. Capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Credit Agreement. Section references used herein
refer to such Sections in the Credit Agreement.
Borrower hereby certifies and warrants to you that the following is a true
and correct computation as at ____________, 1992 (the "Computation Date") of
the following ratios and/or financial restrictions contained in Sections 8.1
through 8.7 of the Credit Agreement for the periods shown:
[to be prepared by FSFP]
Borrower hereby further certifies and warrants to you that no Default or
Event of Default has occurred and is continuing since the most recent Compliance
Certificate furnished by the Borrower to the Agent except for such Defaults or
Events of Default, if any, as follows:
________________________________________________________________________________
________________________________________________________________________________
IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed and
delivered by its duly authorized officer this ____ day of ____________, 199_.
MIKOHN GAMING CORPORATION, a
Nevada corporation
By: ____________________________________
Name: ___________________________________
Title: _________________________________
<PAGE>
EXHIBIT I
---------
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
October __, ____
Reference is made to the Agreement described in Item 2 of Annex I annexed
hereto (as amended through the date hereof, the "Credit Agreement"). [ASSIGNOR]
(the "Assignor")and [ASSIGNEE] (the "Assignee") agree as follows:
1. When capitalized and used herein, terms defined in the Credit
Agreement and not otherwise defined herein shall have the meanings ascribed to
them in the Credit Agreement.
2. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
all of the Assignor's rights and obligations under the Credit Agreement as of
the date hereof which represents the percentage interest specified in the
applicable sections of Item 4 of Annex I of all outstanding rights and
obligations under the Credit Agreement relating to the Revolving Loan
Commitment, the Term Loan A Commitment and the Term Loan B Commitment. After
giving effect to such sale and assignment, the Assignee's Revolving Loan
Commitment, Term Loan A Commitment, Term Loan B Commitment and the amount of the
Loans owing to the Assignee and the Assignee's interest in the Letters of Credit
will be as set forth in Item 4 of Annex I.
3. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) 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
of the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement, the Notes, or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any of its Subsidiaries or the performance or observance by Borrower or any of
its Subsidiaries of any of Borrower's obligations under the Credit Agreement,
the Notes, or any other instrument or document furnished pursuant thereto.
4. The Assignee (i) represents that it is either (A)a Person organized
under the laws of the United States or a state thereof or (B) if it is a Person
organized under the laws of any jurisdiction other than the United States or any
state thereof (a "Foreign Lender"), the information set forth in the documents
delivered pursuant to clause (vii) of this Section 4 is true and correct as of
the date hereof; (ii) confirms that it is either a commercial lender, other
financial institution or "accredited investor" (as defined in Regulation D
promulgated under the Securities Act of 1933, as amended) which makes loans or
purchases notes in the ordinary course of business and that it will make all
Loans under the Credit
<PAGE>
Agreement solely for its own account in the ordinary course of business and not
with a view to or for sale in connection with any distribution of the Notes;
provided, however, that (x) the Assignee shall not be deemed to have breached
this representation by making assignments or granting participations as
permitted in the Credit Agreement and (y) the disposition of the Notes, or other
evidence of debt held by the Assignee shall at all times be within its exclusive
control; (iii) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to therein 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 Assumption
Agreement; (iv) agrees that it will independently and without reliance upon the
Agent, the Assignor 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; (v)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (vi) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (vii) if it is a Foreign Lender, attaches two
accurate and complete original signed copies of forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
or, if applicable, such other documents as are necessary to indicate that such
payments are subject to such rates at a rate reduced by an applicable tax
treaty.
5. Following the execution of this Assignment and Assumption Agreement by
the Assignor and the Assignee, it will be delivered to the Agent for acceptance
and recording by the Agent in the Register. The effective date (the "Effective
Date")of this Assignment and Assumption Agreement shall be the date of execution
and delivery hereof to the Agent by the Assignor and tile Assignee.
6. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement' and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement, relinquish its rights and
be released from its obligations under the Credit Agreement.
7. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and fees (if applicable) with respect thereto)
to the Assignee. Upon the Effective Date, the Assignee shall pay to the Assignor
the principal amount of any outstanding Loans under the Credit Agreement which
are being assigned hereunder, net of any closing costs. The Assignor and the
Assignee shall make all appropriate adjustments in payments under
2
<PAGE>
the Credit Agreement for periods prior to the Effective Date directly between
themselves on the Effective Date.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Illinois,
without regard to conflict of laws provisions.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement and Annex I hereto be executed by their respective officers
thereunto duly authorized, as of the date first above written.
[NAME OF ASSIGNOR], as Assignor
By: _______________________________
Name: _______________________________
Title: _______________________________
[NAME OF ASSIGNEE], as Assignee
By: _______________________________
Name: _______________________________
Title: _______________________________
Accepted:
FIRST SOURCE FINANCIAL LLP,
as Agent
By: ____________________
Name: ____________________
Title: ____________________
4
<PAGE>
ANNEX I
-------
1. Borrower: MIKOHN GAMING CORPORATION, a
Nevada corporation
2. Name and Date of Credit Agreement dated as of
Credit Agreement: October __, 1997 among Borrower,
each of the financial institutions
initially a signatory thereto,
together with those assignees
pursuant to Section 11.8 thereof,
and First Source Financial LLP, as
Agent
3. Effective Date: _______________, ____
4. Amounts (as of Date in
Item #3 above):
A. Revolving Loan Commitment
of Assignor immediately
prior to Effective Date: $______________
B. Assigned Share: ______%
C. Amount of Assigned Share: $______________
D. Revolving Loans and Letter
of Credit Participations of
Assignor outstanding
immediately prior to
Effective Date: $______________
E. Revolving Loans and Letter
of Credit Participations of
Assignee outstanding on the
Effective Date: $______________
F. Term Loan A Commitment of
Assignor immediately prior to
Effective Date: $______________
G. Assigned Share: _____%
<PAGE>
H. Amount of Assigned Share: $______________
I. Principal Balance of Term Loan
A of Assignor outstanding
immediately prior to
Effective Date: $______________
J. Principal Balance of Term Loan
A of Assignee outstanding on the
Effective Date: $______________
K. Term Loan B Commitment of
Assignor immediately prior to
Effective Date: $______________
L. Assigned Share: _____%
M. Amount of Assigned Share: $______________
N. Principal Balance of Term Loan
B of Assignor outstanding
immediately prior to
Effective Date: $_______________
O. Principal Balance of Term Loan
B of Assignee outstanding on the
Effective Date: $______________
5. Notice and Payment Instructions:
ASSIGNOR:
Payment NOTICE
------- ------
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
ASSIGNEE:
Payment NOTICE
------- ------
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
<PAGE>
Accepted and Agreed To By:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: ______________________________ By: __________________________
Title: ___________________________ Title: _______________________
Dated: October __, 1997
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT BETWEEN
FIRST SOURCE FINANCIAL LLP
AND
SENIOR DEBT PORTFOLIO
October 24, 1997
Reference is made to the Agreement described in ITEM 2 of ANNEX I annexed
hereto (as amended through the date hereof, the "CREDIT AGREEMENT"). First
Source Financial LLP (the "ASSIGNOR") and Senior Debt Portfolio (the "ASSIGNEE")
agree as follows:
1. When capitalized and used herein, terms defined in the Credit Agreement
and not otherwise defined herein shall have the meanings ascribed to them in the
Credit Agreement.
2. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, that interest in and to all of
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof which represents the percentage interest specified in the applicable
sections of ITEM 4 of ANNEX I of all outstanding rights and obligations under
the Credit Agreement relating to the Revolving Loan Commitment, the Term Loan A
Commitment and the Term Loan B Commitment. After giving effect to such sale and
assignment, the Assignee's Revolving Loan Commitment, Term Loan A Commitment,
Term Loan B Commitment and the amount of the Loans owing to the Assignee and the
Assignee's interest in the Letters of Credit will be as set forth in ITEM 4 of
ANNEX I.
3. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) 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
of the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement, the Notes, or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any of its Subsidiaries or the performance or observance by Borrower or any of
its Subsidiaries of any of Borrower's obligations under the Credit Agreement,
the Notes, or any other instrument or document furnished pursuant thereto.
4. The Assignee (i) represents that it is either (A) a Person organized
under the laws of the United States or a state thereof or (B) if it is a Person
organized under the laws of any jurisdiction other than the United States or any
state thereof (a "FOREIGN LENDER"), the information set forth in the documents
delivered pursuant to clause (vii) of this SECTION 4 is true and correct as of
the date hereof; (ii) confirms that it is either a commercial lender, other
financial institution or "accredited investor" (as defined in Regulation D
promulgated under the Securities Act of 1933, as amended) which makes loans or
purchases notes in the ordinary course of business and that it will make all
Loans under the Credit Agreement solely for its own
<PAGE>
account in the ordinary course of business and not with a view to or for sale in
connection with any distribution of the Notes; PROVIDED, HOWEVER, that (x) the
Assignee shall not be deemed to have breached this representation by making
assignments or granting participations as permitted in the Credit Agreement and
(y) the disposition of the Notes, or other evidence of debt held by the Assignee
shall at all times be within its exclusive control; (iii) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements referred to therein 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 Assumption Agreement; (iv) agrees that it will
independently and without reliance upon the Agent, the Assignor 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; (v) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vii) if it
is a Foreign Lender, attaches two accurate and complete original signed copies
of forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all payments to be made to
the Assignee under the Credit Agreement or, if applicable, such other documents
as are necessary to indicate that such payments are subject to such rates at a
rate reduced by an applicable tax treaty.
5. Following the execution of this Assignment and Assumption Agreement by
the Assignor and the Assignee, it will be delivered to the Agent for acceptance
and recording by the Agent in the Register. The effective date (the "EFFECTIVE
DATE") of this Assignment and Assumption Agreement shall be the date of
execution and delivery hereof to the Agent by the Assignor and the Assignee.
6. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement, relinquish its rights and
be released from its obligations under the Credit Agreement.
7. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and fees (if applicable) with respect thereto)
to the Assignee. Upon the Effective Date, the Assignee shall pay to the
Assignor the principal amount of any outstanding Loans under the Credit
Agreement which are being assigned hereunder, net of any closing costs. The
Assignor and the Assignee shall make all appropriate adjustments in payments
under the Credit Agreement for periods prior to the Effective Date directly
between themselves on the Effective Date.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Illinois,
without regard to conflict of laws provisions.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement and ANNEX I hereto be executed by their respective officers
thereunto duly authorized, as of the date first above written.
FIRST SOURCE FINANCIAL, LLP, as Assignor
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ EDWARD A. SZARKOWICZ
---------------------------
Name: EDWARD A. SZARKOWICZ
-------------------------
Title: VICE PRESIDENT
------------------------
SENIOR DEBT PORTFOLIO, as Assignee
By: Boston Management and Research, as
Investment Advisor
/s/ SCOTT H. PAGE
------------------------------
Name: SCOTT H. PAGE
-------------------------
Title: VICE PRESIDENT
------------------------
Accepted:
FIRST SOURCE FINANCIAL LLP,
as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ EDWARD A. SZARKOWICZ
------------------------------
Name: EDWARD A. SZARKOWICZ
----------------------------
Title: VICE PRESIDENT
---------------------------
3
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
<S> <C>
1. Borrower: MIKOHN GAMING CORPORATION,
a Nevada corporation
2. Name and Date of Credit Agreement dated as of October 24,
1997 among Borrower, each of the
financial institutions initially a signatory
thereto, together with those assignees
pursuant to SECTION 11.8 thereof, and First
Source Financial LLP, as Agent
3. Effective Date: October ____, 1997
4. Amounts (as of Date in
Item #3 above):
A. Revolving Loan Commitment
of Assignor immediately
prior to Effective Date: $10,000,000.00
B. Assigned Share: 0%
C. Amount of Assigned Share: $0
D. Revolving Loans and Letter
of Credit Participations of
Assignor outstanding
immediately prior to
Effective Date: $0
E. Revolving Loans and Letter
of Credit Participations of
Assignee outstanding on the
Effective Date: $0
F. Term Loan A Commitment
of Assignor immediately
prior to Effective Date: $10,000,000.00
G. Assigned Share: 50%
H. Amount of Assigned Share: $5,000,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
I. Principal Balance of Term Loan A
of Assignor outstanding
immediately prior to
Effective Date: $10,000,000.00
J. Principal Balance of Term Loan A
of Assignee outstanding on the
Effective Date: $5,000,000
K. Term Loan B Commitment
of Assignor immediately
prior to Effective Date: $0
L. Assigned Share: 0%
M. Amount of Assigned Share: $0
N. Principal Balance of Term Loan B
of Assignor outstanding
immediately prior to
Effective Date: $0
O. Principal Balance of Term Loan B
of Assignee outstanding on the
Effective Date: $0
5. Notice and Payment Instructions:
ASSIGNOR:
PAYMENT NOTICE
------- ------
LaSalle National Bank First Source Financial, LLP
ABA #071000505 2850 West Golf Road, 5th Floor
Account No: 2358830 Rolling Meadows, Illinois 60008
Reference: Mikohn Attention: Contract Administration
ASSIGNEE:
PAYMENT NOTICE
------- ------
Investors Bank and Trust Co. Senior Debt Portfolio
ABA # 011-001-438 c/o Boston Management and Research
Account # 79650-9107 24 Federal Street, 6th Floor
Atention: Senior Debt Portfoliot Boston, Massachusetts 02110
</TABLE>
<PAGE>
Accepted and Agreed To By:
FIRST SOURCE FINANCIAL LLP SENIOR DEBT PORTFOLIO
By: First Source Financial, Inc. By: Boston Management and Research,
its Agent/ Manager as Investment Advisor
/s/ EDWARD A. SZARKOWICZ /s/ SCOTT H. PAGE
By:_____________________________ ____________________________________
EDWARD A. SZARKOWICZ SCOTT H. PAGE
Name:___________________________ Name:_______________________________
Vice President Vice President
Title: ___________________________ Title: ____________________________
Dated: October 24, 1997
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
REVOLVING NOTE
--------------
$10,000,000.00 Due October 31, 2002
CUSIP No. 59862K A# 5 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 31, 2002, the undersigned hereby
promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender"), at the principal office of
LaSalle National Bank, N.A. in Chicago, Illinois, the principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) or, if less, the aggregate unpaid
principal amount of all Revolving Loans made by Lender pursuant to the Credit
Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of each Revolving Loan from the date of such Revolving Loan until such
Revolving Loan is paid in full, payable at such rate(s) and at such time(s),
applicable to Revolving Loans as provided in the Credit Agreement hereinafter
referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois registered limited liability partnership, as agent for such financial
institutions (herein called the "Credit Agreement"), to which Credit Agreement
reference is hereby made for a statement of the terms and provisions under which
this Note may be paid prior to its due date or its due date accelerated.
Reference is hereby made to the Credit Agreement for provisions relating to
reductions in the principal amount of this Note. Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement hereinabove
referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
-------------------------------
Name: Don W. Stevens
-------------------------------
Title: EVP
-------------------------------
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE A
-----------
$5,000,000.00 Due October 1, 2004
CUSIP No. 59862K A@ 7 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender"), at the principal office of
LaSalle National Bank, N.A. in Chicago, Illinois, the principal amount of FIVE
MILLION AND NO/100 DOLLARS ($5,000,000.00) or, if less, the aggregate unpaid
principal amount of Term Loan A made by Lender pursuant to the Credit Agreement
hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan A from the date hereof until Term Loan A is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan A as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any
<PAGE>
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
_______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE A
-----------
$5,000,000.00 Due October 1, 2004
CUSIP No. 59862K A@ 7 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of Allstate Insurance Company, an Illinois
corporation ("Lender"), at the principal office of Harris Trust and Savings
Bank, in Chicago, Illinois, the principal amount of FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00) or, if less, the aggregate unpaid principal amount of
Term Loan A made by Lender pursuant to the Credit Agreement hereinafter referred
to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan A from the date hereof until Term Loan A is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan A as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any
<PAGE>
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE A
-----------
$5,000,000.00 Due October 1, 2004
CUSIP No. 59862K A@ 7 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of Senior Debt Portfolio, a mutual fund,
("Lender"), at the principal office of Boston Management and Research in Boston,
Massachusetts, the principal amount of FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00) or, if less, the aggregate unpaid principal amount of Term Loan
A made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan A from the date hereof until Term Loan A is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan A as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership, as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE B
-----------
$3,000,000.00 Due October 1, 2004
CUSIP No. 59862K A* 9 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of Fidelity & Guaranty Life Insurance Co., a
Maryland corporation ("Lender"), at the principal office of The Bank of New York
in New York, New York, the principal amount of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00) or, if less, the aggregate unpaid principal amount of Term Loan
B made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
_______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE B
-----------
$2,000,000.00 Due October 1, 2004
CUSIP No. 59862K A* 9 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of Hartford Life Insurance Company, a Connecticut
corporation ("Lender"), at the principal office of Chase Manhattan Bank, in New
York, New York, the principal amount of TWO MILLION AND NO/100 DOLLARS
($2,000,000.00) or, if less, the aggregate unpaid principal amount of Term Loan
B made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership, as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE B
-----------
$5,000,000.00 Due October 1, 2004
CUSIP No. 59862K A* 9 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of TRAL & CO., a Connecticut General Partnership
("Lender"), at its office at One Tower Square, Hartford, Connecticut 06183, the
principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) or, if less,
the aggregate unpaid principal amount of Term Loan B made by Lender pursuant to
the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled
to the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership, as agent for such financial
institutions (herein called the "Credit Agreement"), to which Credit Agreement
reference is hereby made for a statement of the terms and provisions under which
this Note may be paid prior to its due date or its due date accelerated. Terms
used but not otherwise defined herein are used herein as defined in the Credit
Agreement hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions
of the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any
<PAGE>
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: /s/ Don W. Stevens
---------------------------
Name: Don W. Stevens
---------------------------
Title: EVP
---------------------------
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE B
-----------
$3,000,000.00 Due October 1, 2004
CUSIP No. 59862K A* 9 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of Fidelity & Guaranty Life Insurance Co., a
Maryland corporation ("Lender"), at the principal office of The Bank of New York
in New York, New York, the principal amount of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00) or, if less, the aggregate unpaid principal amount of Term Loan
B made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
_______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
TERM NOTE B
-----------
$2,000,000.00 Due October 1, 2004
CUSIP No. 59862K A* 9 Executed October 24, 1997
FOR VALUE RECEIVED, on or before October 1, 2004, the undersigned hereby
promises to pay to the order of United States Fidelity & Guaranty Company, a
Maryland corporation ("Lender"), at the principal office of The Bank of New York
in New York, New York, the principal amount of TWO MILLION AND NO/100 DOLLARS
($2,000,000.00) or, if less, the aggregate unpaid principal amount of Term Loan
B made by Lender pursuant to the Credit Agreement hereinafter referred to.
The undersigned further promises to pay interest on the unpaid principal
amount of Term Loan B from the date hereof until Term Loan B is paid in full,
payable at such rate(s) and at such time(s), applicable to Term Loan B as
provided in the Credit Agreement hereinafter referred to.
This Note evidences certain indebtedness incurred under, and is entitled to
the benefits of, that certain Credit Agreement of even date herewith (and, if
amended, all amendments thereto) among the undersigned, the financial
institutions from time to time party thereto, and First Source Financial LLP, an
Illinois limited liability partnership as agent for such financial institutions
(herein called the "Credit Agreement"), to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may be paid prior to its due date or its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Credit Agreement and the Credit
Documents referred to therein, and reference is made thereto for a statement of
terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement hereinabove referred to, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
______________________________
Name: Don W. Stevens
______________________________
Title: EVP
______________________________
-2-
<PAGE>
GUARANTY
--------
THIS GUARANTY (this "GUARANTY"), dated as of October 24, 1997, is made by
CASINO EXCITEMENT, INC., a Nevada corporation ("CEI"), MGC, INC., a Nevada
corporation ("MGC"), and MIKOHN NEVADA, a Nevada corporation ("MIKOHN NEVADA")
(CEI, MGC and Mikohn Nevada hereinafter are referred to individually as a
"GUARANTOR" and collectively as the "GUARANTORS"), to and for the benefit of
FIRST SOURCE FINANCIAL LLP, an Illinois registered limited liability
partnership, as agent (the "AGENT") for the "Lenders" (as defined in the Credit
Agreement defined below).
BACKGROUND
1. Mikohn Gaming Corporation, a Nevada corporation ("BORROWER"), Agent
and the financial institutions initially a signatory thereto are parties to that
certain Credit Agreement dated as of October 24, 1997 (herein, as the same from
time to time may be amended, modified, supplemented or restated and in effect,
called the "CREDIT AGREEMENT"), pursuant to which Lenders have agreed to make
loans and other financial accommodations to Borrower, subject to the terms and
conditions therein set forth. Capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
2. Each Guarantor is a Subsidiary of Borrower and, accordingly, each
Guarantor will receive substantial direct and indirect benefits by inducing
Lenders to make the Loans.
3. One of the conditions precedent to Lenders' willingness to make the
Loans is the execution and delivery by Guarantors of this Guaranty and the
performance by Guarantors of their respective obligations hereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Guarantors hereby agree as
follows:
1. GUARANTY OF PAYMENT. Each Guarantor hereby unconditionally and
-------------------
irrevocably guarantees to Agent the punctual payment and performance when due,
whether at stated maturity or by acceleration or otherwise, of the Obligations.
Each Guarantor agrees that this Guaranty is a present and continuing guaranty of
payment and not of collectibility, and that Agent shall not be required to
prosecute collection, enforcement or other remedies against Borrower, any other
Guarantor or any other Person, or to enforce or resort to any of the Collateral
or other rights or remedies pertaining thereto, before calling on such Guarantor
for payment. Notwithstanding anything to the contrary contained in this
Guaranty, it is intended that this Guaranty, and any Liens granted by Guarantors
to secure this Guaranty, not constitute a fraudulent conveyance under Section
548 of the Bankruptcy Code, 11. U.S.C. (S)(S)101 et. seq., as amended, or a
-- ---
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable state law, as in effect from time to time (any such fraudulent
conveyance or transfer being referred to herein as a "FRAUDULENT CONVEYANCE").
Consequently, if this Guaranty or any Liens granted by any Guarantor to secure
this Guaranty would, but for the application of this sentence, constitute a
Fraudulent Conveyance, this Guaranty and each such Lien shall be valid
and enforceable only to the maximum extent that would not cause this Guaranty or
the granting
<PAGE>
of such Lien to constitute a Fraudulent Conveyance, and this Guaranty
automatically shall be deemed to have been amended accordingly at all relevant
times.
2. CONTINUING GUARANTY. All obligations of each Guarantor pursuant to
-------------------
this Guaranty and any of the other Credit Documents to which such Guarantor is a
party (the "GUARANTOR OBLIGATIONS") shall be primary obligations of such
Guarantor, shall not be subject to any counterclaim, set-off, abatement,
deferment or defense based upon any claim that such Guarantor may have against
Agent, Borrower, any other Guarantor or any other Person, and shall remain in
full force and effect without regard to, and shall not be released, discharged
or affected in any way by any circumstance or condition (whether or not such
Guarantor shall have any knowledge thereof), including without limitation:
(a) any lack of validity or enforceability of the Credit Agreement or
any of the other Credit Documents;
(b) any termination, amendment, modification or other change in the
Credit Agreement or any of the other Credit Documents;
(c) any furnishing, exchange, substitution or release of any
Collateral, or any failure to perfect any Lien in any of the Collateral;
(d) any failure, omission or delay on the part of Borrower, Agent or
any Lender to conform or comply with any term of the Credit Agreement or
any of the other Credit Documents or any failure of Agent to give notice of
any Event of Default;
(e) any waiver, compromise, release, settlement or extension of time
of payment or performance or observance of any of the obligations or
agreements contained in the Credit Agreement or any of the other Credit
Documents;
(f) any action or inaction by Agent or any Lender under or in respect
of the Credit Agreement or any of the other Credit Documents, any failure,
lack of diligence, omission or delay on the part of Agent to enforce,
assert or exercise any right, power or remedy conferred on Agent in the
Credit Agreement or any of the other Credit Documents, or any other action
or inaction on the part of Agent or any Lender;
(g) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets
and liabilities or similar events or proceedings with respect to Borrower
or any Guarantor or any of their respective property or creditors, or any
action taken by any trustee or receiver or by any court in any such
proceeding;
(h) any merger or consolidation of Borrower or any Guarantor into or
with any Person, or any sale, lease or transfer of any of the assets of any
Guarantor or Borrower to any other Person;
2
<PAGE>
(i) any change in the ownership of Borrower or any change in the
relationship between any Guarantor and Borrower, or any termination of any
such relationship;
(j) any release or discharge by operation of law of any Guarantor,
Borrower or any other Person from any obligation or agreement contained in
the Credit Agreement or any of the other Credit Documents; or
(k) to the extent permitted by law, any other occurrence,
circumstance, happening or event, whether similar or dissimilar to the
foregoing and whether foreseen or unforeseen, which otherwise might
constitute a legal or equitable defense or discharge of the liabilities of
a guarantor or surety or which otherwise might limit recourse against any
Guarantor or Borrower.
3. WAIVERS. Each Guarantor unconditionally waives (i) notice of any of
-------
the matters referred to in SECTION 2 above, (ii) all notices which may be
required by statute, rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against such Guarantor, including, without
limitation, any demand, presentment and protest, proof of notice of non-payment
under the Credit Agreement or any of the other Credit Documents and notice of
any Event of Default or any failure on the part of any Guarantor or Borrower to
perform or comply with any covenant, agreement, term or condition of the Credit
Agreement or any of the other Credit Documents, (iii) any right to the
enforcement, assertion or exercise against any Guarantor or Borrower of any
right or remedy conferred under the Credit Agreement or any of the other Credit
Documents, (iv) any requirement of diligence on the part of any Person, (v) any
requirement to exhaust any remedies or to mitigate the damages resulting from
any default under the Credit Agreement or any of the other Credit Documents and
(vi) any notice of any sale, transfer or other disposition of any right, title
or interest of Agent or any Lender under the Credit Agreement or any of the
other Credit Documents.
4. TERMINATION; REINSTATEMENT. The Guarantor Obligations shall continue
--------------------------
until all Obligations then due and payable shall have been paid in full and the
Commitments shall have been terminated in accordance with the Credit Agreement.
The Guarantor Obligations shall continue to be effective or automatically be
reinstated, as the case may be, if at any time payment of any of the Obligations
is rescinded or otherwise must be restored or returned by Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Guarantor or Borrower or for any other reason, all as though such payment
had not been made.
5. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and
------------------------------
warrants to Agent that the representations and warranties contained in the
Credit Agreement, as applied to such Guarantor, are true and correct in all
material respects.
6. REMEDIES ON DEFAULT. If any Event of Default occurs (a) Guarantors
-------------------
shall pay the Obligations in full immediately upon demand by Agent and (b) Agent
may enforce its rights and remedies hereunder and under the other Credit
Documents to which Guarantors are a party in accordance with their respective
terms and enforce any other rights or remedies accorded to Agent in equity or
law, by virtue of statute or otherwise.
3
<PAGE>
7. SUCCESSORS AND ASSIGNS. This Guaranty shall inure to the benefit of
----------------------
Agent and its respective successors and assigns. This Guaranty shall be binding
on each Guarantor, and its successors and assigns, and shall continue in full
force and effect until all of the Obligations are paid and performed in full and
the Commitments have been terminated.
8. NO WAIVER OF RIGHTS. Neither any delay in exercising, nor any failure
-------------------
on the part of Agent to exercise any right, power or privilege under this
Guaranty or any of the other Credit Documents shall operate as a waiver thereof,
and no single or partial exercise of any right, power or privilege shall
preclude any other or further exercise thereof or the exercise of any other
power or right, or be deemed to establish a custom or course of dealing or
performance among the parties hereto. The rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies provided by law. No
notice to or demand on any Guarantor in any case shall entitle any Guarantor to
any other or further notice or demand in the same, similar or any other
circumstance.
9. MODIFICATION. The terms of this Guaranty may be waived, discharged or
------------
terminated only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of Agent.
10. COSTS AND EXPENSES. Guarantors agree to pay on demand all costs and
------------------
expenses incurred by or on behalf of Agent (including, without limitation,
reasonable attorneys' fees and expenses) in enforcing the obligations of
Guarantors under this Guaranty.
11. SEVERABILITY. Whenever possible each provision of this Guaranty shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Guaranty. All obligations of Guarantors and
Agent expressed herein or in the other Credit Documents shall be in addition to
and not in limitation of those provided by applicable law or in any other
written instrument or agreement relating to any of the Obligations.
11. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS.
12. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE LENDERS, AGENT AND
--------------------------
THE GUARANTORS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL
BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND
THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT
AGENT ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED
4
<PAGE>
AGAINST ANY GUARANTORS OR THEIR RESPECTIVE PROPERTIES IN ANY LOCATION REASONABLY
SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH GUARANTOR
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-
CLAIMS IN ANY PROCEEDING BROUGHT BY AGENT OR ANY LENDER. EACH GUARANTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
13. SERVICE OF PROCESS. EACH GUARANTOR HEREBY WAIVES PERSONAL SERVICE
------------------
UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, HEREBY IRREVOCABLY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, WITH AN OFFICE ON THE DATE HEREOF
AT 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604, AND SUCH OTHER PERSONS AS
MAY HEREAFTER BE SELECTED BY SUCH GUARANTOR WHICH IRREVOCABLY AGREE IN WRITING
TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS ISSUED
BY ANY COURT IN ANY LEGAL ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS
GUARANTY, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED
SHALL BE MAILED BY REGISTERED MAIL TO THE APPLICABLE GUARANTOR C/O MIKOHN GAMING
CORPORATION, 1045 PALMS AIRPORT DRIVE, LAS VEGAS, NEVADA 89119, EXCEPT THAT,
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY
GUARANTOR REFUSES TO ACCEPT SERVICE, EACH SUCH PERSON HEREBY AGREES THAT SERVICE
UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR ANY
LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR SHALL
LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
14. JURY TRIAL. GUARANTOR, AGENT AND THE LENDERS HEREBY WAIVE ANY RIGHT
----------
TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
15. WAIVER OF RIGHTS AGAINST BORROWER. NOTWITHSTANDING ANYTHING TO THE
---------------------------------
CONTRARY WHICH MAY BE CONTAINED HEREIN, EACH GUARANTOR HEREBY UNCONDITIONALLY
AND IRREVOCABLY AGREES THAT SUCH GUARANTOR (I) WILL NOT AT ANY TIME ASSERT
AGAINST BORROWER (OR BORROWER'S ESTATE IF BORROWER BECOMES BANKRUPT OR BECOMES
THE SUBJECT OF ANY CASE OR PROCEEDING UNDER THE BANKRUPTCY LAWS
5
<PAGE>
OF THE UNITED STATES OF AMERICA) ANY RIGHT OR CLAIM, AT LAW OR IN EQUITY, TO
INDEMNIFICATION, REIMBURSEMENT, CONTRIBUTION, RESTITUTION OR PAYMENT FOR OR WITH
RESPECT TO ANY AND ALL AMOUNTS SUCH GUARANTOR MAY PAY OR BE OBLIGATED TO PAY TO
AGENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS AND ANY AND ALL OTHER
OBLIGATIONS WHICH SUCH GUARANTOR MAY PERFORM, SATISFY OR DISCHARGE, UNDER OR
WITH RESPECT TO THIS GUARANTY, AND (II) WAIVES AND RELEASES ALL SUCH RIGHTS AND
CLAIMS, AT LAW OR IN EQUITY, TO INDEMNIFICATION, REIMBURSEMENT, CONTRIBUTION,
RESTITUTION OR PAYMENT WHICH SUCH GUARANTOR MAY HAVE NOW OR AT ANY TIME AGAINST
BORROWER (OR BORROWER'S ESTATE IF BORROWER BECOMES BANKRUPT OR BECOMES THE
SUBJECT OF ANY CASE OR PROCEEDING UNDER THE BANKRUPTCY LAWS OF THE UNITED STATES
OF AMERICA). EACH GUARANTOR FURTHER UNCONDITIONALLY AND IRREVOCABLY AGREES THAT
SUCH GUARANTOR SHALL HAVE NO RIGHT OF SUBROGATION, AND WAIVES ANY RIGHT TO
ENFORCE ANY REMEDY WHICH AGENT NOW HAS OR HEREAFTER MAY HAVE AGAINST BORROWER,
AND WAIVES ANY DEFENSE BASED UPON AN ELECTION OF REMEDIES BY AGENT, WHICH
DESTROYS OR OTHERWISE IMPAIRS ANY SUBROGATION RIGHTS OF GUARANTORS AND/OR THE
RIGHT OF GUARANTORS TO PROCEED AGAINST BORROWER FOR REIMBURSEMENT.
16. NO JOINDER. Each Guarantor agrees that any action to enforce this
----------
Guaranty may be brought against such Guarantor without any reimbursement or
joinder of Borrower in such action.
[signature page follows]
6
<PAGE>
IN WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date
first above written.
CASINO EXCITEMENT, INC., a Nevada corporation
By:/s/ DAVID J. THOMPSON
Name: David J. Thompson
Title: Chairman of the Board & CEO
MGC, INC., a Nevada corporation
By: /s/ DAVID J. THOMPSON
Name: David J. Thompson
Title: Chairman of the Board & CEO
MIKOHN NEVADA, a Nevada corporation
By: /s/ DAVID J. THOMPSON
Name: David J. Thompson
Title: Chairman of the Board & CEO
7
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT, dated as of October 24, 1997 (herein, as the same
from time to time may be amended, modified, restated or supplemented and in
effect, called this "AGREEMENT"), is by and among MIKOHN GAMING CORPORATION, a
Nevada corporation ("BORROWER"), MIKOHN NEVADA, a Nevada corporation ("MIKOHN
NEVADA"), MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a
Nevada corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter
are referred to individually as each "Guarantor" and collectively as
"Guarantors" and Borrower and Guarantors sometimes hereinafter are referred to
individually as each "Debtor" and collectively as "Debtors"), and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("FSFP"), as
"AGENT" for all "LENDERS" (as such terms are defined in Section 1 below).
BACKGROUND:
1. Borrower and FSFP, for itself, as a Lender, and as Agent for all
Lenders, and the financial institutions parties thereto have entered into a
certain Credit Agreement of even date herewith (herein, as the same from time to
time may be amended, modified, supplemented or restated and in effect, called
the "CREDIT AGREEMENT"), pursuant to which Lenders have agreed to make certain
Loans to Borrower.
2. Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as
the same from time to time may be amended, modified, supplemented or restated
and in effect, called the "GUARANTY") made by Guarantors in favor of Agent.
3. It is a condition precedent to the making of the initial Loans under
the Credit Agreement that this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. Definitions. (a) When used herein, the following terms
-----------
shall have the following meanings:
ACCOUNT shall mean all "Accounts" (as such term is defined in the Uniform
Commercial Code), including, without limitation, any right of any Debtor to
payment for goods sold or leased or for services rendered which is not evidenced
by an Instrument or Chattel Paper, whether or not it has been earned by
performance.
ACCOUNT DEBTOR shall mean the Person who is obligated on or under any
Account, Chattel Paper or, if appropriate, any of the General Intangibles of any
Debtor.
<PAGE>
AGENT BANK shall mean any bank or financial institution acting as agent or
pledgee-in-possession for Agent with respect to any Collateral (including,
without limitation, pursuant to a Bank Agency Agreement entered into among such
bank or financial institution, Agent and Debtor).
BENEFITS shall have the meaning assigned to such term in SECTION 16.
CERTIFICATED SECURITY shall have the meaning assigned to such term in the
Uniform Commercial Code.
CHATTEL PAPER shall have the meaning assigned to such term in the Uniform
Commercial Code.
COLLATERAL shall mean all property or rights in which a Security Interest
is granted hereunder.
COMMITMENTS shall mean, collectively, Lenders' commitments to Borrower
pursuant to the Credit Agreement.
COMPUTER HARDWARE AND SOFTWARE COLLATERAL shall mean (i) all computer and
other electronic data processing hardware, integrated computer systems, central
processing units, memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware, whether now owned,
licensed or leased or hereafter acquired by any Debtor; (ii) all software
programs (including source code and object code and all related applications and
data files), whether now owned, licensed or leased or hereafter acquired by any
Debtor, designed for use on the computers and electronic data processing
hardware described in clause (i) above; (iii) all firmware associated therewith,
------ ---
whether now owned, licensed or leased or hereafter acquired by any Debtor; (iv)
all documentation (including flow charts, logic diagrams, manuals, guides and
specifications) for such hardware, software and firmware described in the
preceding clauses (i), (ii) and (iii), whether now owned, licensed or leased or
------- --- ---- -----
hereafter acquired by any Debtor; and (v) all rights with respect to all of the
foregoing, including, without limitation, any and all copyrights, licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and any substitutions, replacements, additions or model
conversions of any of the foregoing.
COPYRIGHT COLLATERAL shall mean all copyrights and all semiconductor chip
product mask works of any Debtor, whether statutory or common law, registered or
unregistered, now or hereafter in force throughout the world, including, without
limitation, all of any Debtor's right, title and interest in and to all
copyrights and mask works registered in the United States Copyright Office or
anywhere else in the world and also including, without limitation, the
copyrights and mask works referred to in ITEM A of SCHEDULE III attached hereto,
and all applications for registration thereof, whether pending or in
preparation, all copyright and mask work licenses, including each copyright and
mask work license referred to in ITEM B of SCHEDULE III attached hereto, the
right to sue for past, present and future infringements of any thereof, all
rights corresponding thereto throughout the world, all extensions and renewals
of any
-2-
<PAGE>
thereof and all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages and proceeds of suit.
DEFAULT shall mean any Unmatured Event of Default or any Event of Default.
DEPOSIT ACCOUNTS shall have the meaning assigned to such terms in the
Uniform Commercial Code.
DOCUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
EQUIPMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
EXCLUDED PROPERTY shall mean (i) all slot route participation agreements
and space lease agreements to which any Debtor is a party pertaining to
Proprietary Gaming Equipment and all inter-casino linked system agreements to
which any Debtor is a party, (ii) any property of any Debtor in which a Security
Interest may not be granted under Applicable Gaming Laws without the prior
consent of applicable Gaming Authorities including, without limitation, the
capital stock or other equity securities of any Subsidiary of any Debtor that is
registered or licensed under Applicable Gaming Laws, unless and until such
consent is obtained, (iii) General Intangibles arising under the contracts and
agreements described on Schedule VIII attached hereto, to the extent a Security
Interest may not be granted therein without the prior consent of all parties
thereto other than the applicable Debtor, unless and until such consent is
obtained and (iv) the capital stock of (or other ownership interest in) any of
Borrower's Subsidiaries. Notwithstanding the foregoing, Excluded Property shall
not be deemed to include the right to receive all proceeds derived or arising
from or in connection with the sale or assignment of any property of Debtor
described in clauses (i), (ii) or (iv) above or from any contracts or agreements
described in clause (iii) above.
FIXTURE shall have the meaning assigned to such term in the Uniform
Commercial Code.
GENERAL INTANGIBLES shall have the meaning assigned to such term in the
Uniform Commercial Code and shall include, without limitation, goodwill.
GOODS shall have the meaning assigned to such term in the Uniform
Commercial Code.
INSTRUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
INTANGIBLE COLLATERAL shall mean all Collateral other than Goods.
INTELLECTUAL PROPERTY COLLATERAL shall mean, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
-3-
<PAGE>
INVENTORY shall mean all "Inventory" (as such term is defined in the
Uniform Commercial Code), including, without limitation, all goods, merchandise
and other personal property furnished under any contract of service or intended
for sale or lease, including, without limitation, all raw materials, work in
process, finished goods and materials and supplies, of any kind, nature or
description, that are used or consumed by any Debtor's business, or are or might
be used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and other personal property, and
all returned or repossessed goods now or at any time or times hereafter in the
possession or under the control of any Debtor or Agent.
INVESTMENT PROPERTY shall have the meaning assigned to such term in the
Uniform Commercial Code.
LANDLORD'S CONSENT shall mean a declaration and agreement substantially in
the form of Exhibit A hereto (and in form and substance satisfactory to Agent)
---------
executed and delivered by the appropriate Persons pursuant to Section 4(d).
------------
LIABILITIES shall mean, as to Borrower, the Obligations, and, as to each
Guarantor, all obligations of such Guarantor arising under the Guaranty.
NOTES shall mean any and all promissory notes of Borrower evidencing any
loan or advance made by any Lender to Borrower, and any promissory notes taken
in extension or renewal of any thereof or in replacement therefor.
PATENT COLLATERAL shall mean:
(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in ITEM A of SCHEDULE II attached hereto;
(b) all patent licenses, including each patent license referred to in
ITEM B of SCHEDULE II attached hereto;
(c) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
CLAUSES (A) and (B); and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in ITEM A of SCHEDULE II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in ITEM B of SCHEDULE II attached hereto, and all rights corresponding
thereto throughout the world.
SECURITY shall have the meaning assigned to such term in the Uniform
Commercial Code.
-4-
<PAGE>
SECURITY INTEREST shall mean any mortgage, lien, pledge, encumbrance,
charge or other security interest of any kind, whether arising under a security
agreement, mortgage, deed of trust, chattel mortgage, assignment, pledge,
financing or similar statement or notice or as a matter of law, judicial process
or otherwise. As used herein with respect to the rights granted to Agent
hereunder in the Collateral, "SECURITY INTEREST" means a security interest under
the Uniform Commercial Code.
TRADEMARK COLLATERAL shall mean:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks,
certification marks, collective marks, logos, other sources of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (each of the
foregoing items in this CLAUSE (A) being called a "TRADEMARK"), now
existing anywhere in the world or hereafter adopted or acquired, whether
currently in use or not, all registrations and recordings thereof and all
applications in connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any foreign country, including
those referred to in ITEM A of SCHEDULE I attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in ITEM B of SCHEDULE I attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
----------- ---
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
----------- ---
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by any Debtor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in ITEM A and ITEM B of SCHEDULE I attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
TRADE SECRETS COLLATERAL shall mean common law and statutory trade secrets
and all other confidential and proprietary information and all know-how obtained
by or used in or contemplated at any time for use in the business of any Debtor
(each of the foregoing being called a "TRADE SECRET"), whether or not such Trade
Secret has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating or referring in any way to such
Trade Secret, all Trade Secret licenses, including each Trade Secret license
referred to in SCHEDULE IV attached hereto, and including the right to sue for
and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade secret license.
-5-
<PAGE>
UNCERTIFICATED SECURITY shall have the meaning assigned to such term in the
Uniform Commercial Code.
UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code as in effect
in the State of Illinois on the date of this Agreement.
UNMATURED EVENT OF DEFAULT shall mean any event or condition which if it
continues uncured will, with the passage of time or giving of notice, or both,
become an Event of Default.
UNMATURED INSOLVENCY DEFAULT shall mean an Unmatured Event of Default
arising under Section 9.1(f) of the Credit Agreement.
(b) Unless otherwise defined herein, capitalized terms used herein and
defined in the Credit Agreement shall have the same meanings when used herein.
Terms not otherwise defined herein or in the Credit Agreement shall have the
meanings, if any, ascribed to them under the Uniform Commercial Code, as it may
be in effect in the State of Illinois.
SECTION 2. Grant of Security Interest. Subject to Section 17 hereof and
--------------------------
to the last sentence of this Section 2, as collateral security for the prompt
and complete payment, performance and observance of its Liabilities, each Debtor
hereby mortgages, pledges and grants to Agent a continuing Security Interest
under the Uniform Commercial Code and all other applicable laws in, all of the
following property of such Debtor wherever located, whether now or hereafter
existing, owned, licensed, leased, consigned, arising or acquired:
(i) Accounts;
(ii) Goods (including, without limitation, all of such Debtor's
Equipment, Fixtures and Inventory);
(iii) General Intangibles, including, without limitation,
(A) all tax refunds,
(B) all Intellectual Property Collateral, and
(C) rights arising out of leases, licenses and contracts which are
not Accounts, but excluding, however, any licenses issued by any
Governmental Authority to the extent, and only to the extent, it
is unlawful to grant a Security Interest in such licenses, but
including, without limitation, the right to receive all proceeds
derived or arising from or in connection with the sale or
assignment of such licenses;
(iv) Chattel Paper, Documents, Instruments, Investment Property,
Certificated Securities and Uncertificated Securities;
-6-
<PAGE>
(v) money and property now or at any time in the possession or under
the control of, or in transit to, any Lender, Agent or any Agent
Bank, any Debtor or any bailee, agent or custodian of Lenders,
Agent, Agent Bank or any Debtor;
(vi) right, title and interest (if any) in and to all accounts of any
Debtor maintained at any Agent Bank, and any other accounts
maintained by any Debtor, all funds on deposit therein, all
investments arising out of such funds, all claims thereunder or
in connection therewith, and all cash, securities, rights and
other property at any time and from time to time received,
receivable or otherwise distributed in respect of such accounts,
such funds or such investments;
(vii) insurance policies, including claims or rights to payment
thereunder; and
(viii) Liens, guaranties and other rights and privileges pertaining to
any of the Collateral;
together with: (ix) all books, ledgers, books of account, records, writings,
data bases, information and other property relating to, used or useful in
connection with, evidencing, embodying, incorporating or referring to, any of
the foregoing; and (x) all proceeds, products, rents, issues, profits and
returns of and from any of the foregoing. Notwithstanding anything to the
contrary set forth above or elsewhere, the Collateral shall expressly exclude
the Excluded Property.
SECTION 3. Each Debtor to Remain Liable. Each Debtor hereby expressly
----------------------------
agrees that, anything herein to the contrary notwithstanding, such Debtor shall
remain liable under each contract, agreement, interest or obligation assigned to
Agent hereunder to observe and perform all of the conditions and obligations to
be observed and performed by such Debtor thereunder, all in accordance with and
pursuant to the terms and provisions thereof. The exercise by Agent of any of
the rights assigned hereunder shall not release any Debtor from any of its
duties or obligations under any such contract, agreement, interest or
obligation. Neither Agent nor any Lender shall have any duty, responsibility,
obligation or liability under any such contract, agreement, interest or
obligation by reason of or arising out of the assignment thereof to Agent for
the benefit of Lenders or the granting to Agent for the benefit of Lenders of a
Security Interest therein or the receipt by Agent for the benefit of Lenders of
any payment relating to any such contract, agreement, interest or obligation
pursuant hereto, nor shall Agent be required or obligated in any manner to
perform or fulfill any of the obligations of any Debtor thereunder or pursuant
thereto, or to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by Agent or the sufficiency of any
performance of any party under any such contract, agreement, interest or
obligation, or to present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been
assigned to Agent and Lenders, in which Agent may have been granted a Security
Interest or to which Lenders may be entitled at any time or times.
SECTION 4. Representations and Warranties and Agreements. Each Debtor
---------------------------------------------
represents and warrants to, and covenants and agrees with, Agent and Lenders
that:
-7-
<PAGE>
(a) No Uniform Commercial Code financing statement (other than any which may
have been filed on behalf of Agent for the benefit of Lenders or in connection
with a Permitted Lien or which has been, or in connection with execution and
delivery hereof is being, terminated) covering any of the Collateral is on file
in any public office.
(b) Such Debtor has and will have a valid leasehold interest in all
Collateral such Debtor leases which is material to the operation of such
Debtor's business, and good and marketable title to all its other Collateral,
real and personal, of any nature whatsoever (which, with respect to licenses,
means that such Debtor is the lawful owner of its rights under licenses, except
as otherwise noted in the Credit Agreement), free of all Security Interests
whatsoever, other than the Security Interest created hereby and the Permitted
Liens, with full power and authority to execute this Agreement, to perform such
Debtor's obligations hereunder, and to subject the Collateral to the assignment
and Security Interest created hereby.
(c) All of such Debtor's books and records are now located at the premises
shown on SCHEDULE V hereto as the location of such Debtor's chief executive
office, and all of such Debtor's Equipment, Inventory and other Goods (other
than Goods in transit) are located at the location of such Debtor's chief
executive office or at one or more of the other premises shown on SCHEDULE V
hereto or at one or more of the premises shown on SCHEDULE VI hereto;
(d) Such Debtor shall provide Agent with a Landlord's Consent executed by
the landlord under all leases covering the premises designated with an asterisk
on SCHEDULE V hereto.
(e) All information with respect to the Collateral and the Account Debtors
set forth in any schedule, certificate or other writing at any time heretofore
or hereafter furnished by or on behalf of such Debtor to Agent, and all other
information heretofore or hereafter furnished by or on behalf of such Debtor to
Agent, is and will be true, correct and complete in all material respects as of
the date furnished and does not and will not omit any material fact necessary to
make the statements not misleading.
(f) Such Debtor will at all times maintain its chief executive office as
identified in SCHEDULE V hereto (or as relocated by such Debtor with notice to
Agent as provided in the Credit Agreement) in the contiguous continental United
States and such Debtor shall take such action from time to time as is required
so that a creditor of such Debtor would reasonably expect the chief executive
office, as identified on SCHEDULE V or as relocated by such Debtor with notice
to Agent as provided in the Credit Agreement, to be its chief executive office
for purposes of Article 9 of the Uniform Commercial Code.
(g) With respect to any Intellectual Property Collateral the loss,
impairment or infringement of which might have a Material Adverse Effect:
(i) such Intellectual Property Collateral owned by such Debtor is, and
to the knowledge of such Debtor such Intellectual Property Collateral
licensed by such Debtor is, subsisting and has not been adjudged invalid or
unenforceable, in whole or in part,
-8-
<PAGE>
(ii) such Intellectual Property Collateral owned by such Debtor is,
and to the knowledge of such Debtor such Intellectual Property Collateral
licensed by such Debtor is, valid and enforceable,
(iii) such Debtor has made all filings and recordations necessary in
the exercise of reasonable and prudent business judgment to protect its
interest in such Intellectual Property Collateral, including, without
limitation, recordations of all of its interest in the Patent Collateral and
Trademark Collateral in the United States Patent and Trademark Office and
its claims to the Copyright Collateral in the United States Copyright
Office,
(iv) for Intellectual Property Collateral owned by such Debtor, such
Debtor is, and for such Intellectual Property Collateral licensed by such
Debtor, to the knowledge of such Debtor such Debtor is, the owner of the
entire and unencumbered right, title and interest in and to such
Intellectual Property Collateral and, except as disclosed in writing from
time to time to Agent, no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted rights of
any third party, and
(v) such Debtor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout such parts of the world where the failure to do
so could be reasonably considered to have a Material Adverse Effect, as
applicable.
Such Debtor owns directly, or is entitled to use by license or otherwise, all
Intellectual Property Collateral used in, necessary for or material to the
conduct of such Debtor's business. As of the date hereof and except as
disclosed in any Schedule to the Credit Documents or as otherwise disclosed by
any Debtor in writing from time to time to Agent, no litigation is pending or,
to the best knowledge of such Debtor, threatened which contains allegations
respecting the validity, enforceability, infringement or ownership of any of the
Intellectual Property Collateral, which if adversely determined reasonably could
be expected to have a Material Adverse Effect.
(h) None of the Collateral (other than Intangible Collateral) has, within
the four (4) months preceding the date of this Agreement, been located at any
place other than such Debtor's own premises at the address shown on the
signature page hereto or at one or more of the premises listed on SCHEDULES V
and VI hereto.
(i) SCHEDULE VII hereto lists all trade names by which such Debtor is now
known or was previously known.
SECTION 5. Processing, Sale, Collections, Etc.
----------------------------------
(a) Until notice from Agent to the contrary, given at any time after the
occurrence and during continuance of any Event of Default or Unmatured
Insolvency Default, any Debtor (i) may, in the ordinary course of its business,
at its own expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by such Debtor for such purpose, and use and consume, in
the ordinary course of its business, any raw materials, work in process or
materials normally held by such Debtor for such purpose (but no such sale or use
shall limit or
-9-
<PAGE>
impair Agent's Security Interest in any proceeds thereof, including, without
limitation, any Account), (ii) will, at its own expense, endeavor to collect, as
and when due, all amounts due with respect to any of the Intangible Collateral,
including the taking of such action with respect to such collection as Agent may
reasonably request or, in the absence of such request, as such Debtor may deem
advisable, and (iii) may grant, subject to the next sentence hereof, to any
Person obligated on any of the Intangible Collateral, any rebate, refund or
allowance to which such Person may be lawfully entitled, and may accept, in
connection therewith, the return of goods, the sale or lease of which shall have
given rise to such Intangible Collateral. Agent, however, may at any time after
the occurrence and during the continuance of any Event of Default, (1) notify
any Person obligated on any of the Intangible Collateral to make payment to
Agent of any amounts due or to become due thereunder; (2) enforce collection of
any of the Intangible Collateral by suit or otherwise; (3) surrender, release or
exchange all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby; and (4) notify such Debtor (and upon receipt of
such notice such Debtor agrees to notify, at its sole expense, any parties
obligated on any of the Collateral) to make payment to Agent of any amount due
or to become due under the Collateral.
(b) Subject to the terms of the Credit Agreement, each Debtor will,
forthwith upon receipt, transmit and deliver to Agent or an Agent Bank, in the
form received, all cash, checks, drafts and other instruments or writings for
the payment of money (properly endorsed, where required, so that such items may
be collected by Agent or such Agent Bank) which may be received by such Debtor
at any time in full or partial payment, or other proceeds of any Collateral.
Except as Agent may otherwise consent in writing, any such items which may be so
received by such Debtor will not be commingled by such Debtor with any of its
other funds or property, but, until delivery to Agent or an Agent Bank, will be
held separate and apart from such other funds and property and in trust for
Agent or such Agent Bank.
(c) Lenders, Agent and each Agent Bank each is authorized to endorse, in the
name of any Debtor, any item, howsoever received by Lenders, Agent or Agent Bank
representing any payment on or other proceeds of any of the Collateral provided
the proceeds thereof (so long as no Event of Default has occurred or is
continuing) are deposited into a bank account of a Debtor.
SECTION 6. Agreements of Debtors. Each Debtor shall:
---------------------
(a) Keep all its Inventory and other Goods, unless Agent shall otherwise
consent in writing, at one or more of its own premises (as shown on SCHEDULE V
hereto) or at one or more of the premises listed on SCHEDULE VI hereto;
provided, however, that (i) so long as no Event of Default or Unmatured
- -------- -------
Insolvency Default shall have occurred and be continuing, and subject to Section
-------
6(j), such Debtor may designate additional or replacement premises (such
- ----
premises shall be located in the contiguous continental United States or Canada)
for inclusion on SCHEDULE V hereto upon delivery to Agent of (A) 30 days' prior
written notice and (B) all documents, and completion of all action, required by
Agent to maintain the Security Interest in favor of Agent for the benefit
Lenders in the Collateral, free and clear of any other Security Interest
whatsoever except for Permitted Liens and (ii) in the case of any public
warehouse facility or distribution center listed on SCHEDULE VI hereto from time
to time (A) such Debtor's Inventory and other
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<PAGE>
Goods shall be kept separate from the Inventory and other Goods of those Persons
(other than such Debtor) using such premises and shall be clearly and
conspicuously designated as being such Debtor's sole property (for example, by
posting signs or by affixing such Debtor's name on its Inventory and other
Goods) and (B) such Debtor shall cause the owner of such premises to (1) sign
and deliver to Agent a Bailee Waiver in the form of Exhibit B hereto and (2)
place the following language prominently on the face of any bill of lading,
warehouse receipt or other document of title issued relating to Inventory or
Goods of such Debtor: "THE PROPERTY DESCRIBED HEREIN IS SUBJECT TO THE SECURITY
INTEREST OF FIRST SOURCE FINANCIAL LLP, AS AGENT FOR ALL LENDERS."
(b) Immediately notify Agent of (i) the occurrence of any event causing loss
or depreciation in value of any of such Debtor's Goods in excess, in the
aggregate during any of such Debtor's fiscal years, of $50,000, and (ii) the
amount of such loss or depreciation.
(c) Furnish Agent such information concerning such Debtor, the Collateral
and the Account Debtors as Agent may from time to time reasonably request.
(d) Defend such Debtor's title to the Collateral against all Persons and
against all claims and demands whatsoever (subject to Permitted Liens).
(e) Do all acts reasonably necessary to maintain, preserve and protect all
Collateral, keep all Collateral in good condition and repair (ordinary wear and
tear excepted), and prevent any waste or unusual or unreasonable depreciation
thereof, other than in the case of any Collateral that has become obsolete.
(f) Upon request of Agent, stamp on its records concerning the Collateral
(and/or enter into its computer records concerning the Collateral) a notation,
in form satisfactory to Agent, of the Security Interest created hereby.
(g) Except for the sale or lease of Inventory in the ordinary course of its
business and except as otherwise permitted by the Credit Agreement, not sell,
lease, assign, license, sublicense, abandon or otherwise transfer, or create or
permit to exist, any Security Interest (other than Permitted Liens) on any
Collateral to or in favor of any Person other than Agent.
(h) At all times keep all Inventory and Equipment insured against loss,
damage, theft and other risks in the manner required by Section 7.6 of the
Credit Agreement (whether or not the Credit Agreement shall be in effect) and,
if Agent so requests, deposit with Agent certified copies of the relevant
policies and certificates of insurance.
(i) Furnish to Agent, in accordance with Section 7.3 of the Credit
Agreement, notice in writing as soon as possible and in any event no later than
30 days prior to the occurrence from time to time of (i) any change in the
location of such Debtor's chief executive office and (ii) any change in the name
of such Debtor or the name under or by which it conducts its business, and take
all action required by Agent to maintain and preserve the Security Interest in
favor of Agent in the Collateral, free and clear of any other Security Interest
whatsoever except for Permitted Liens.
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<PAGE>
(j) Reimburse Agent for all expenses, including attorneys' fees and legal
expenses and expenses of any repairs to realty or other property to which any
Collateral may be affixed or be a part, incurred by Agent in seeking to collect
or enforce any rights under or with respect to the Collateral, in seeking to
collect the Notes and all other Liabilities, and in enforcing its rights
hereunder, together with interest thereon from the date incurred until
reimbursed by such Debtor at a rate per annum equal to the default rate
specified in Section 11(b) hereof.
-------------
(k) Not sell, assign or license to any third party any of its right, title
or interest in any of the Intellectual Property Collateral and General
Intangibles other than in such Debtor's ordinary course of business or as
otherwise permitted by the Credit Agreement.
(l) Not, unless such Debtor shall either (i) reasonably and in good faith
determine (and notice of such determination shall have been delivered to Agent)
that any of the Patent Collateral is of negligible economic value to such
Debtor, or (ii) have a valid business purpose to do otherwise, do any act, or
omit to do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable.
(m) Not, and shall not permit any of its licensees to, unless such Debtor
shall either (i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the Trademark
Collateral is of negligible economic value to such Debtor or (ii) have a valid
business purpose to do otherwise,
(A) fail to continue to use any of the Trademark Collateral in order
to maintain all of the Trademark Collateral in full force free from any
claim of abandonment for non-use,
(B) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(C) fail to employ all of the Trademark Collateral registered with any
Federal or State or foreign authority with an appropriate notice of such
registration,
(D) adopt or use any other Trademark which is confusingly similar or a
colorable imitation of any of the Trademark Collateral except in compliance
with applicable law,
(E) use any of the Trademark Collateral registered with any Federal or
State or foreign authority except for the uses for which registration or
application for registration of such Trademark Collateral has been made
except in compliance with applicable law, or
(F) do or permit any act or knowingly omit to do any act whereby any
of the Trademark Collateral may lapse or become invalid or unenforceable.
(n) Not, unless such Debtor shall either (i) reasonably and in good faith
determine (and notice of such determination shall have been delivered to Agent)
that any of the Copyright Collateral or any of the Trade Secrets Collateral is
of negligible economic value to such Debtor
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or (ii) have a valid business purpose to do otherwise, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral or any of
the Trade Secrets Collateral may lapse or become invalid or unenforceable or
placed in the public domain except upon expiration of the end of an unrenewable
term of a registration thereof.
(o) Notify Agent immediately if it knows, or has reason to know, that any
application or registration relating to any material item of the Intellectual
Property Collateral may become abandoned or dedicated to the public or placed in
the public domain or invalid or unenforceable, or of any adverse determination
or development (including 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 foreign counterpart thereof or any
court) regarding such Debtor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and enforce
the same.
(p) Not, nor shall any of such Debtor's agents, employees, designees or
licensees, file an application for the registration of any Intellectual Property
Collateral 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, unless such Debtor promptly informs Agent, and,
upon request of Agent, executes and delivers any and all agreements,
instruments, documents and papers as Agent may reasonably request to evidence
Agent's Security Interest in such Intellectual Property Collateral and the
goodwill and general intangibles of such Debtor relating thereto or represented
thereby.
(q) Take all necessary steps, including 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 any application (and to obtain the relevant
registration) filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications for
renewal, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and taxes
(except to the extent that dedication, abandonment or invalidation is permitted
under the foregoing clause (m), (n) or (o)).
---------- --- ---
(r) Contemporaneously herewith, execute and deliver to Agent an Agreement
(Patent), an Agreement (Trademark) and an Agreement (Copyright) in the forms of
Exhibits C, D and E hereto, respectively, and shall execute and deliver to Agent
- ---------- - -
any other document required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
(s) At its sole expense, (i) subject to Article 12 of the Credit Agreement,
without any request by Agent, immediately deliver or cause to be delivered to
Agent, in due form for transfer (i.e., endorsed in blank or accompanied by duly
---
executed undated blank stock or bond powers), all Securities, Chattel Paper,
Instruments, Investment Property and Documents, if any, at any time representing
all or any of the Collateral, (ii) upon request of Agent cause the Security
Interest granted to Agent hereunder and under the other Collateral Documents to
be at all times duly noted on any certificate of title issuable with respect to
any of the Collateral and forthwith deliver or cause to be delivered to Agent
each such certificate of title to the extent not covered by a Permitted Lien,
and (iii) execute and deliver, or cause to be executed and
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<PAGE>
delivered, to Agent, in due form for filing or recording (and pay the cost of
filing or recording the same in all public offices deemed necessary or advisable
by Agent) such assignments (including, without limitation, assignments of life
insurance, if such Debtor elects or is otherwise required to obtain such
insurance), security agreements, mortgages, deeds of trust, pledge agreements,
consents, waivers, financing statements, stock or bond powers and other
documents, and do such other acts and things, all as may from time to time be
necessary or desirable, to the satisfaction of Agent, to establish and maintain
in favor of Agent, a valid perfected lien on and Security Interest in all assets
of such Debtor now or hereafter existing or acquired (free of all other liens,
claims and rights of third parties whatsoever other than Permitted Liens) to
secure payment and performance of the Liabilities.
(t) At the request of Agent after the occurrence and during the continuance
of an Event of Default, transfer all or any part of the Collateral (including,
with respect to any Trademarks, the goodwill associated therewith) into the name
of Agent or its nominee for the benefit of Lenders, with or without disclosing
that such Collateral is subject to the Security Interest hereunder.
(u) At all times comply with the requirements of all applicable laws
(including, without limitation, the provisions of the Fair Labor Standards Act),
rules, regulations and orders of every governmental authority, the non-
compliance with which, as Agent determines, would, in its sole discretion,
materially and adversely affect the value of the Collateral or the worth of the
Collateral as collateral security, taken as a whole.
SECTION 7. Renewals, Amendments and Other Security; Partial Releases.
---------------------------------------------------------
(a) Agent may from time to time, whether before or after any of the
Liabilities shall become due and payable, without notice to all such Debtors,
take any or all of the following actions (provided that actions taken under
clause (v) only may be taken after the occurrence and during the continuance of
an Event of Default): (i) retain or obtain a Security Interest in any property
to secure payment and performance of any of the Liabilities, (ii) retain or
obtain the primary or secondary liability of any Person, in addition to any
Debtor, with respect to any of the Liabilities, (iii) create, extend or renew
for any period (whether or not longer than the original period) or alter or
exchange any of the Liabilities or release or compromise any obligation of any
nature of any Person with respect thereto, (iv) release or fail to perfect its
Security Interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Liabilities,
or create, extend or renew for any period (whether or not longer than the
original period) or release, compromise, alter or exchange any obligations of
any nature of any Person with respect to any such property, and (v) resort to
the Collateral for payment of any of the Liabilities whether or not Agent (1)
shall have resorted to any other property securing payment and performance of
the Liabilities or (2) shall have proceeded against any Person primarily or
secondarily liable on any of the Liabilities (all of the actions referred to in
preceding clauses (1) and (2) hereby being expressly waived by each Debtor).
------- --- ---
(b) No release from the Security Interest created by this Agreement of any
part of the Collateral by Agent shall in any way alter, vary or diminish the
force or effect of or Security Interest created by this Agreement against the
balance or remainder of the Collateral.
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<PAGE>
SECTION 8. Grant of License to Use Intangibles. In addition to Section
----------------------------------- -------
6(u) and solely for the purpose of enabling Agent to exercise rights and
- ----
remedies hereunder, each Debtor hereby grants to Agent, after the occurrence and
during the continuance of an Event of Default, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, assign, license or sublicense any of such Debtor's General
Intangibles, now owned or hereafter acquired by such Debtor, and wherever the
same may be located, including in such license reasonable access as to all media
in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.
SECTION 9. Information. Agent and any of the officers, employees, agents or
-----------
auditors of Agent shall have the right at reasonable intervals after the date
hereof to make reasonable inquiries by mail, telephone, telegraph or otherwise
to any Person with respect to validity and amount or any other matter
(including, without limitation, the assertion by Account Debtors of claims,
offsets and counterclaims) concerning any of the Collateral.
SECTION 10. Event of Default.
----------------
(a) (i) Whenever an Event of Default or Unmatured Insolvency Default
shall exist or be occurring, Agent may exercise from time to time any rights and
remedies available to Agent hereunder, under the Credit Agreement, the Guaranty
and the Uniform Commercial Code as in effect from time to time in Illinois or
otherwise available to Agent under applicable law. Each Debtor hereby expressly
waives, to the fullest extent permitted by applicable law, any and all notices,
advertisements, hearings, or process of law in connection with the exercise by
Agent of any of its rights and remedies after an Event of Default or Unmatured
Insolvency Default occurs.
(ii) Each Debtor agrees, upon the occurrence of an Event of Default or
Unmatured Insolvency Default and upon the request of Agent, to assemble, at such
Debtor's expense, all Collateral at any location requested by Agent.
(iii) To the fullest extent permitted by applicable law, each Debtor hereby
waives the right to object to the manner or sufficiency of advertising,
refurbishing of the Collateral, or solicitation of bids in connection with any
sales or other disposition of the Collateral. Any sale by Agent may be made at
any broker's board or public or private sale, with or without notice or
advertisement, for cash or credit, and for present or future delivery. At any
such public or private sale or other disposition of Collateral, Agent may, to
the fullest extent permissible under applicable law, purchase the whole or any
part of any Collateral sold, or may sell or dispose of the Collateral to any
other Person, free from any and all claims of such Debtor or of any other Person
claiming by, through, or under any Debtor. Each Debtor hereby expressly waives
and releases, to the fullest extent permitted by applicable law, any right of
redemption on the part of such Debtor. If any notification of intended
disposition of any of the Collateral is required by law, such notification, if
mailed, shall be deemed reasonably and properly given if mailed at least five
(5) days before such disposition, postage prepaid, addressed to the respective
Debtors either at the address shown below, or at any other address of such
Debtor appearing on the records of Agent. Any proceeds of any Collateral, or of
the disposition by Agent of any of the Collateral (including, without
limitation, Benefits to the extent provided in Section 16
----------
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<PAGE>
hereof), may be applied by Agent to the payment of expenses in connection with
the Collateral, including attorneys' fees and legal expenses, and any balance of
such proceeds may be applied by Agent toward the payment of such of the
Liabilities, and in such order of application, as Agent may from time to time
elect.
(b) Without limiting any other provision of this Agreement, whenever an
Event of Default or Unmatured Insolvency Default shall be existing, Agent, with
or without process of law, may enter upon any premises where the Collateral or
any part thereof may be, and take possession of all or any part thereof; and
Agent may, without being responsible except as provided under applicable law for
loss or damage, hold, store, keep idle, lease, operate or otherwise use or
permit the use of the Collateral or any part thereof for such time and upon such
terms Agent may deem to be reasonable, and may demand, collect and retain all
earnings and all other sums due and to become due in respect of the Collateral
from any Person whomsoever, accounting only for net earnings, if any, arising
from use or from the sale thereof after charging against all receipts from use
or from the sale thereof all costs and expenses of, and damages or losses by
reason of, such use or sale.
(c) Each Debtor hereby agrees to pay any and all reasonable costs and
expenses incurred by Lenders in retaking, holding, preparing for sale, selling
and the like with regard to the Collateral, including, without limitation,
reasonable attorneys' fees incurred by Lenders in connection therewith.
(d) Each Debtor agrees that in any sale of any of the Collateral, Agent is
authorized to comply with any limitation or restriction in connection with such
sale as counsel may advise Agent is necessary in order to avoid any violation of
applicable law (including, without limitation, compliance with such procedures
as may restrict the number of prospective bidders or purchasers, require that
such prospective bidders and purchasers have certain qualifications, and
restrict such prospective bidders and purchasers to Persons who will represent
and agree that they are purchasing for their own account or investment and not
with a view to the distribution or resale of such Collateral), or in order to
obtain any required approval of the sale or of the purchaser by any governmental
or regulatory authority or official, and each Debtor further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall Agent be liable or
accountable to such Debtor for any discount allowed by reason of the fact that
such Collateral was sold in compliance with any such limitation or restriction.
(e) The proceeds of any sale of Collateral sold pursuant to the terms of
this Section 10 and any cash held as Collateral hereunder shall be applied by
----------
Agent in accordance with Section 4.2 of the Credit Agreement.
-----------
(f) If sufficient sums are not realized upon any disposition of the
Collateral to pay all Liabilities and any expenses of such disposition,
including, without limitation, attorneys' fees, each Debtor hereby promises to
pay immediately any resulting deficiency.
(g) No right or remedy herein conferred is intended to be exclusive of any
other right or remedy, but every such right or remedy shall be cumulative and
shall be in addition to every
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<PAGE>
other right or remedy herein conferred, or conferred upon Agent by any other
agreement or instrument or security, or now or hereafter existing at law or in
equity or by statute.
SECTION 11. Authority of Agent. Subject to Applicable Gaming Laws, (a)
------------------
Agent shall have, and be entitled to exercise, all such powers hereunder as are
specifically delegated to Agent by the terms hereof, together with such powers
as are incidental thereto. Agent may execute any of their duties hereunder by
or through agents or employees and shall be entitled to retain counsel and to
act in reliance upon the advice of such counsel concerning all matters
pertaining to its duties hereunder. Neither Agent nor any director, officer or
employee of Agent shall be liable for any action taken or omitted to be taken by
Agent hereunder or in connection herewith. Each Debtor agrees to reimburse
Agent, on demand, for all reasonable costs and expenses incurred by Agent in
connection with the administration and enforcement of this Agreement (including
costs and expenses incurred by any agent employed by Agent) and agrees to
indemnify (which indemnification shall survive any termination of this
Agreement) and hold harmless Agent (and any such agent) from and against any and
all liability incurred by Agent (or such agent) hereunder or in connection
herewith except to the extent of any gross negligence or wilful misconduct on
the part of Agent.
(b) Agent may from time to time, without notice to Debtors, at its option,
perform any obligation to be performed by any Debtor hereunder, under the Credit
Agreement or the other Credit Documents which shall not have been performed and
take any other action which, in its reasonable discretion, Agent deems necessary
or desirable for the maintenance or preservation of any of the Collateral or
Agent's Security Interest in the Collateral. All moneys advanced by Agent in
connection with the foregoing shall, whether or not there are then outstanding
any Loans made under the Credit Agreement, bear interest at the Default Rate (or
such lower maximum rate as shall be legal under applicable law), and shall be
repaid together with such interest by such Debtor to Agent, upon the demand of
Agent, and shall be secured hereby prior to any other indebtedness or obligation
secured hereby, but the making of any such advance by Agent shall not relieve
such Debtor of any default hereunder or thereunder.
SECTION 12. Termination. Subject to Section 15(n) hereof, this Agreement
-----------
shall terminate when the Commitments shall be terminated and all the Liabilities
have been fully paid and performed, at which time Agent shall reassign and
redeliver (or cause to be reassigned and redelivered) to each Debtor, or to such
person as any such Debtor shall designate, against receipt, such of the
Collateral (if any) as shall not have been sold or otherwise applied by Agent
pursuant to the terms hereof and still shall be held by it hereunder, together
with appropriate instruments of termination, reassignment and release.
SECTION 13. Protection of Intellectual Property Collateral. (a) Each
----------------------------------------------
Debtor shall have the duty to protect, preserve and maintain all of such
Debtor's rights in each of the items of Intellectual Property Collateral,
including, without limitation, the duty to prosecute and/or defend against any
and all suits concerning validity, infringement, enforceability, ownership or
dilution or other aspects of the Intellectual Property Collateral, as well as
the duty to register material Copyrights with the United States Copyright Office
and to make publications of all copyrighted materials with an appropriate
copyright notice. Any expenses incurred in protecting, preserving and
maintaining the Intellectual Property Collateral shall be borne by such Debtor.
To the maximum extent permitted by law, after the occurrence of and during the
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continuance of an Event of Default, Agent shall have the right, without taking
title to any of the Intellectual Property Collateral, to bring suit, in Agent's
name or in the respective Debtor's name or in both such names, as determined by
Agent, to enforce any or all of the Intellectual Property Collateral or Agent's
Security Interest therein, in which event such Debtor shall, at the request of
Agent, do any and all lawful acts and execute any and all proper documents
required by Agent in aid of such enforcement. All costs, expenses and other
moneys advanced by Agent in connection with the foregoing shall be treated as an
advance under Section 11(b) hereof, but the making of any such advance by Agent
-------------
shall not relieve such Debtor of any default hereunder. In addition, each
Debtor shall indemnify (which indemnification shall survive any termination of
this Agreement) and hold harmless Agent from any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (including attorneys' fees and legal expenses) of any
kind whatsoever which may be imposed on, incurred by or asserted against Agent
in connection with or in any way arising out of such suits, proceedings or other
actions. Notwithstanding the foregoing, Agent shall have no obligations or
liabilities regarding any or all of the Intellectual Property Collateral by
reason of, or arising out of, this Agreement.
(b) If any Event of Default or Unmatured Insolvency Event shall have
occurred and be continuing, upon the written demand of Agent, each Debtor shall
execute and deliver to Agent an assignment or assignments of the Intellectual
Property Collateral and such other documents as are necessary or appropriate to
carry out the intent and purposes of this Agreement along with, in the case of
any Trademark, goodwill and assets relating to the products sold under such
Trademark. Each Debtor agrees that such an assignment shall be applied to
reduce the Liabilities then due only to the extent that Agent receives cash
proceeds in respect of the sale of, or other realization upon, the Intellectual
Property Collateral or licenses; such cash proceeds to be applied to the payment
of expenses incurred in connection with the Intellectual Property Collateral or
licenses, including attorneys' fees and legal expenses, and any balance of such
proceeds shall be applied by Agent as provided in Section 10(a)(iii). Without
------------------
limiting any other rights and remedies of Agent, each Debtor shall within five
(5) Business Days of written notice from Agent to make available, to Agent such
personnel in such Debtor's employ on the date of the Event of Default or
Unmatured Insolvency Event as Agent may reasonably designate, by name, title or
job responsibility, to permit Agent to continue, directly or indirectly, to
advertise and operate the business of any such Debtor under any of such Debtor's
General Intangibles.
SECTION 14. SUBMISSION TO JURISDICTION. AGENT MAY ENFORCE ANY CLAIM
--------------------------
ARISING OUT OF THIS AGREEMENT, ANY CREDIT DOCUMENT, ANY COLLATERAL OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM OR RELATED TO ANY
CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO,
ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT
TO ANY SUCH CLAIM, EACH DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS AND ALSO HAS IRREVOCABLY DESIGNATED THE PERSON WHOSE NAME AND
ADDRESS ARE SET FORTH IN THE CREDIT AGREEMENT TO RECEIVE FOR AND ON BEHALF OF
EACH DEBTOR SERVICE OF PROCESS IN
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<PAGE>
ILLINOIS. EACH DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE
PREPAID, TO EACH DEBTOR AND AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT
PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (II) SHALL BE TAKEN
AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING
HEREIN CONTAINED SHALL AFFECT THE RIGHT OF AGENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR PRECLUDE AGENT FROM BRINGING AN ACTION OR PROCEEDING
IN RESPECT HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER
SUCH ACTION. EACH DEBTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED
IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 15. Miscellaneous Provisions.
------------------------
(a) Agent and Agent Bank shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral if they take such
action for that purpose as any Debtor requests in writing, but failure of Agent
or Agent Bank to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care, and no failure of Agent or Agent Bank to
preserve or protect any rights with respect to the Collateral against prior or
other parties, or to do any act with respect to the preservation of the
Collateral not so requested by any Debtor, shall be deemed a failure to exercise
reasonable care in the custody or preservation of such Collateral.
(b) Each Debtor hereby appoints Agent, with full power of substitution after
the occurrence and during the continuance of an Event of Default, as such
Debtor's attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, each Debtor agrees that Agent shall have the right and authority:
(i) while any Event of Default or Unmatured Insolvency Default shall exist, to
assign, sell, license, sublicense or otherwise dispose of all right, title and
interest of such Debtor in and to the Intellectual Property Collateral any other
General Intangible including, without limitation, assignments, recordings,
registrations and applications therefor in the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency of the United States, any State thereof or any other country or political
subdivision thereof, and for the purpose of the recording, registering and
filing of, or accomplishing any other formality with respect to, the foregoing,
to execute and deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect such purpose; and
(ii) to make claim for, and receive and give acquittance for payment on account
of, loss under any insurance policy covering the Collateral, or any part
thereof, and to receive, endorse and collect all
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checks, drafts and other orders for the payment of money representing the
proceeds of such insurance.
(c) All notices or other communications hereunder shall be given in the
manner specified under Section 11.7 of the Credit Agreement, whether or not then
in effect.
(d) No delay on the part of Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Agent of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
(e) No amendment to, modification or waiver of, or consent with respect to,
any provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed and delivered by Agent, and then any such
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(F) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN DELIVERED AT CHICAGO,
ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF
LAW, AND APPLICABLE GAMING LAWS.
WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH
PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY,
WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS
OF THIS AGREEMENT. ALL OBLIGATIONS OF ANY DEBTOR, ANY OF ITS SUBSIDIARIES OR
ANY RELATED PERSON AND RIGHTS OF AGENT, LENDERS AND ANY OTHER HOLDER OF A NOTE
OR LIABILITY EXPRESSED IN THIS AGREEMENT SHALL BE IN ADDITION TO AND NOT IN
LIMITATION OF THOSE PROVIDED UNDER APPLICABLE LAW OR IN ANY OTHER WRITTEN
INSTRUMENT OR AGREEMENT RELATING TO ANY OF THE LIABILITIES.
(g) The rights and privileges of Agent hereunder shall inure to the benefit
of its successors and assigns. This Agreement shall be binding upon each Debtor
and its successors and assigns.
(h) At the option of Agent, this Agreement, or a carbon, photographic or
other reproduction of this Agreement or of any Uniform Commercial Code financing
statement covering the Collateral or any portion thereof, shall be sufficient as
a Uniform Commercial Code financing statement and may be filed as such.
(i) The section headings in this Agreement are inserted for convenience of
reference and shall not be considered a part of this Agreement or used in its
interpretation.
-20-
<PAGE>
(j) This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts and each such counterpart shall for
all purposes be deemed an original, but all such counterparts shall together
constitute but one and the same Agreement. Each Debtor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.
(K) EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATED TO
THIS AGREEMENT, ANY COLLATERAL OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING OR ARISING FROM ANY CREDIT 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.
(l) Each Debtor hereby expressly waives to the fullest extent permitted by
law: (i) notice of the acceptance by Agent of this Agreement, (ii) notice of
the existence or creation or non-payment of all or any of the Liabilities, (iii)
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever, and (iv) all diligence in collection or protection of or realization
upon the Liabilities or any thereof, any obligation hereunder, or any security
for or guaranty of any of the foregoing.
(m) Subject to the provisions of the Credit Agreement, any Lender may, from
time to time, without notice to any Debtor, assign or transfer any or all of the
Liabilities or any interest therein; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer thereof, such Liabilities
shall be and remain Liabilities for the purposes of this Agreement, and each and
every immediate and successive assignee or transferee of any portion of the
Liabilities or of any interest therein shall, to the extent of the interest of
such assignee or transferee in the Liabilities, be entitled to the benefits of
this Agreement to the same extent as if such assignee or transferee were an
original Lender; provided, however, that each Lender shall have an unimpaired
-------- -------
right, prior and superior to that of any such assignee or transferee, to enforce
this Agreement, as to those of the Liabilities which such Lender has not
assigned or transferred.
(n) Each Debtor agrees that, if at any time all or any part of any payment
theretofore applied by Agent to any of the Liabilities is or must be rescinded
or returned by Agent or any Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of any Debtor or any of
its Affiliates), such Liabilities shall, for the purposes of this Agreement, to
the extent that such payment is or must be rescinded or returned, be deemed to
have continued in existence, notwithstanding such application by Agent, and the
Security Interest granted hereunder shall continue to be effective or be
reinstated, as the case may be, as to such Liabilities, all as though such
application by Agent had not been made.
(o) Agent is the current holder of all Liabilities, but, subject to the
Credit Agreement, may in the future transfer, assign or sell certain
Liabilities.
-21-
<PAGE>
(p) Each Debtor hereby acknowledges that there are no conditions to the
effectiveness of this Agreement.
(q) If any item of Collateral hereunder also constitutes collateral granted
to Agent under any other mortgage, agreement or instrument, in the event of any
conflict between the provisions under this Agreement and those under such other
mortgage, agreement or instrument relating to such Collateral, the provision or
provisions selected by Agent shall control with respect to such Collateral.
(r) In case of conflict between any provision of this Agreement and any
provision of the Credit Agreement, the provisions of the Credit Agreement shall
control.
SECTION 16. Application of Insurance Proceeds. Any loss benefits
---------------------------------
("BENEFITS") under any of the insurance policies maintained by each Debtor
pursuant to Section 6(i) hereof shall be applied as follows:
------------
(a) If no Event of Default has occurred and is continuing, and the amount of
such Benefits, together with all other Benefits previously or contemporaneously
paid to Agent hereunder, is less than $25,000, then such Benefits may be paid
directly to Borrower.
(b) If no Event of Default has occurred and is continuing and the amount of
such Benefits, together with all other Benefits previously or contemporaneously
paid to Agent hereunder, is $25,000 or greater, then such Benefits, together
with any interest thereon, shall be held by Agent as additional Collateral
hereunder, but, so long as no Event of Default has occurred and is continuing,
such Benefits may, at any Debtor's discretion, be either:
(i) applied by Agent to the Loan Account, or
(ii) at any time, but subject to the following paragraph (c),
-------------
used by any Debtor to repair or replace the damaged or destroyed
Collateral giving rise to such Benefits.
(c) Agent shall have no obligation to release any Benefits to any Debtor
for such Debtor's use in repairing or replacing damaged or destroyed Collateral
unless such Debtor satisfies such conditions as Agent reasonably may impose upon
the release of Benefits and as are customary in the financing of repairs or
purchases of the type proposed by such Debtor, including without limitation, the
condition that the available amount of such Benefits shall be sufficient to
complete such repairs or replacements, or Agent shall have received from such
Debtor a cash deposit (or such Debtor shall maintain borrowing availability)
equal to the excess of the estimated cost of such repair or replacement over the
available amount of such Benefits.
(d) If any Event of Default or an Unmatured Insolvency Default has occurred
or is continuing, Agent may apply any Benefits to the repayment of the Loans in
the order of application set forth in Section 4.2 of the Credit Agreement,
subject to all of the terms and conditions of the Credit Agreement, and to the
extent such repayment reduces the principal balance of the Loans, the
Commitments shall be correspondingly reduced.
-22-
<PAGE>
SECTION 17. Governmental Approval. Notwithstanding anything to the
---------------------
contrary contained herein, no party hereto shall take any action, including, but
not limited to, the operation of the business of any Debtor, that would
constitute or result in the transfer or assignment of any license issued to or
held by such Debtor, or a transfer of control over any such Licenses, whether de
--
facto or de jure, if such assignment or transfer would require under then
- ----- -------
existing law, including, without limitation, Applicable Gaming Laws, the prior
approval of and/or any notice to any governmental agency, including, without
limitation, any Gaming Authorities, without such party first having notified
such governmental agency of any such assignment or transfer and, if required
under then existing law, obtaining the approval of such governmental agency
therefor, notifying such governmental agency of the consummation thereof and
complying with all other requirements of such governmental agency. The parties
hereto intend that the powers of Secured Party hereunder, in all relevant
aspects, shall be governed by such statutory requirements, rules and regulations
as administered by any governmental agency under the jurisdiction of which any
transfer or assignment as contemplated by this Section 17 may fall.
[Remainder of this page intentionally left blank.]
-23-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
MIKOHN GAMING CORPORATION, a Nevada corporation,
By: /s/ David J. Thompson
_____________________
Name: David J. Thompson
_________________
Title: Chairman of the Board & CEO
___________________________
MIKOHN NEVADA, a Nevada corporation
By: /s/ David J. Thompson
_____________________
Name: David J. Thompson
_________________
Title: Chairman of the Board & CEO
___________________________
MGC, INC., a Nevada corporation
By: /s/ David J. Thompson
_____________________
Name: David J. Thompson
_________________
Title: Chairman of the Board & CEO
___________________________
CASINO EXCITEMENT, INC., a Nevada corporation
By: /s/ David J. Thompson
_____________________
Name: David J. Thompson
_________________
Title: Chairman of the Board & CEO
___________________________
FIRST SOURCE FINANCIAL LLP, individually and in
its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Edward A. Szarkowicz
------------------------
Edward A. Szarkowicz
Vice President
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, WANDA M. JACOBSON, a notary public in and for said County, in the State
of aforesaid, DO HEREBY CERTIFY that DAVID J. THOMPSON, personally known to me
to be the CHAIRMAN/CEO of MIKOHN GAMING CORPORATION, a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/ Wanda M. Jacobson
[SEAL] ---------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, WANDA M. JACOBSON, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that DAVID J. THOMPSON, personally known
to me to be the CHAIRMAN/CEO of MIKOHN NEVADA, a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/ Wanda M. Jacobson
[SEAL] ---------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, WANDA M. JACOBSON, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that DAVID J. THOMPSON, personally known
to me to be the CHAIRMAN/CEO of MGC, INC., a Nevada corporation, and personally
known to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that he/she
signed and delivered the said instrument as such officer of said corporation,
pursuant to authority given by the Board of Directors of said corporation as
such person's free and voluntary act, and as the free and voluntary act and deed
of said corporation, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/ Wanda M. Jacobson
[SEAL] ---------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, WANDA M. JACOBSON, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that DAVID J. THOMPSON, personally known
to me to be the CHAIRMAN/CEO of CASINO EXCITEMENT, INC., a Nevada corporation,
and personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/ Wanda M. Jacobson
---------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF Illionois )
) SS.
COUNTY OF Cook )
I, O. Lynn Neistein, a notary public in and for said County, in the State
of aforesaid, DO HEREBY CERTIFY that Edward Szarkowicz, personally known to me
to be a VP of FIRST SOURCE FINANCIAL, INC., a Delaware corporation, the
Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation, pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 29 day of October, 1997.
/s/ O. Lynn Neistein
_____________________________
Notary Public
My Commission Expires:
[SEAL]
____________________________________
<PAGE>
SCHEDULE I
to
Security Agreement
ITEM A. TRADEMARKS
REGISTERED TRADEMARKS
---------------------
<TABLE>
<CAPTION>
Country/State Trademark Reg. No. Reg. Date
- ------------- --------- -------- ---------
<S> <C> <C> <C>
USA Mini Keno 1,466,437 11/24/87
USA Hold and Draw 1,465,650 11/17/87
USA Hold and Draw Bingo 1,466,436 11/24/87
USA Games of Nevada 2,000,899 09/17/96
USA MVP and design 2,043,083 03/11/97
USA MIKOHNVISION 2,043,081 03/11/97
USA MIKOHN 2,043,082 03/11/97
USA MIKOHN 1,824,259 03/01/94
NEVADA MoneyTime 09/04/97
NEVADA CasinoLink 09/04/97
NEVADA Safe Jack 09/04/97
NEVADA Slottrak 09/04/97
NEVADA SuperLink 07/14/97
NEVADA PlayerTrak 09/04/97
NEVADA TableTrak 09/04/98
USA Casino Products 1,769,789
<CAPTION>
PENDING TRADEMARK APPLICATIONS
------------------------------
Country/State Trademark Reg. No. Reg. Date
- ------------- --------- -------- ---------
<S> <C> <C> <C>
USA MoneyTime 73/306/162 06/10/97
USA Mystery 75/346/800 08/06/97
</TABLE>
<PAGE>
SCHEDULE I
to
Security Agreement
ITEM A. (CON'T.) TRADEMARKS
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
<TABLE>
<CAPTION>
Expected Products
Country/State Trademark Filing Date Services
- ------------- --------- ----------- --------
<S> <C> <C> <C>
USA CasinoLink 11/10/97 Computer software and
hardware for use in providing
Accounting, security, and
player information and
Rating for gaming and
amusement machines and
casino games
USA SlotTrak 11/10/97 Computer software and
hardware for use in providing
accounting, security, and
player information and
Rating for gaming and
Amusement machines
USA Safe Jack 11/10/97 Computer software and
hardware for use in providing
accounting, security, and
player information and rating
For card games
USA Safebac 11/10/97 Computer software and
hardware for use in providing
accounting, security and
player information and rating
For card games
USA SuperLink 11/10/97 Computer software and
hardware for use in
controlling jackpots in
gaming and amusement
machines
</TABLE>
<PAGE>
SCHEDULE I
to
Security Agreement
<TABLE>
<CAPTION>
ITEM A. (CON'T.) TRADEMARKS
<S> <C> <C> <C>
USA PlayerTrak 11/14/97 Computer software and
hardware for use in obtaining
information about and rating
players of casino table games,
gaming machines and
amusement machines
USA TableTrak 11/14/97 Computer software and
hardware for use in obtaining
Information about and rating
Players of casino table
games, gaming machines and
Amusement machines
USA InstaTrak 11/14/97 Optical character recognition
apparatus with dot-matrix
printer
USA Quickplay 11/14/97 Computer software and
hardware for enabling players
to access gaming and
amusement machines through
preestablished credit accounts
USA CaddTrak 11/14/97 Computer software for
controlling graphic interface
used in providing
accounting, security and
player information and rating
for gaming and amusement
machines and casino games
</TABLE>
<PAGE>
SCHEDULE I
to
Security Agreement
ITEM B. TRADEMARK LICENSES
------------------
<TABLE>
<CAPTION>
EFFECTIVE EXPIRATION
TERRITORY TRADEMARK LICENSOR LICENSEE DATE DATE
- --------- --------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
None.
</TABLE>
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM A. PATENTS
PATENTS
-------
<TABLE>
<CAPTION>
COUNTRY PATENT NO. ISSUE DATE INVENTOR(S) TITLE
- ------- ---------- ---------- --------- -----
<S> <C> <C> <C> <C>
USA 5,096, 196 03/17/92 Gutknechtt & Gaming Apparatus
Wichinsky
USA 4,496, 160 01/29/85 Wichinsky & Coin Projector and Target
Gutknecht Game Apparatus - Flip-It
USA Des 272,920 03/06/84 Wichinsky & Gaming Machine
Gutknecht
USA Des 278,069 03/19/85 Wichinsky Slotmachine
USA 5,103,081 04/07/92 Fisher, Vedeen Apparatus and Method for
& Gutknecht Reading Data Encoded on
Circular Objects, such as
Gaming Chips
USA 5,342,049 08/30/94 Wichinsky, Gaming Machine with Skill
Gutknecht & Feature
Femandez
USA 5,482,289 01/09/96 Weingardt Method of Playing a Bingo
Game with Progressive
Jackpot
USA 5,642,160 06/24/97 Bennett Digital Image Capture
System for Photo
Identification Cards
USA 5,550,359 08/27/96 Bennett Time and Attendance System
and Method Therefor
USA 5,536,016 07/16/96 Thompson Progressive System for a
Match Number Game and
Method Therefor
</TABLE>
1
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM A. (CON'T.) PATENTS
<TABLE>
<S> <C> <C> <C> <C>
USA 5,586,936 12/24/96 Bennett, Nino Automated Gaming Table
& Todoroff Tracking System and Method
Therefor
USA 5,374.061 12/20/94 Albrecht Card Dispensing Shoe
Having a Counting Device
and Method of Using the
Same
USA 5,116,055 05/26/92 Tracy Progressive Jackpot Gaming
System Linking Gaming
Machines with Different Hit
Frequencies and
Denominations
USA 5,280,909 01/25/94 Tracy Gaming System with
Progressive Jackpot
USA 5,344,144 09/06/94 Canon Progressive Jackpot Gaming
System with Enhanced
Accumulator
USA 5,605,334 02/25/97 McCrea, Jr. Secure Multi-Site Progressive
Jackpot System for Live
Card Games
</TABLE>
PENDING PATENT APPLICATIONS
---------------------------
<TABLE>
<CAPTION>
COUNTRY SERIAL NO. FILING DATE INVENTOR(S) TITLE
- ------- ---------- ----------- ----------- -----
<S> <C> <C> <C> <C>
USA 08/602,074 02/15/96 McCrea, Jr. Jackpot Systems for
08/933,636 09/19/97 McCrea, Jr. Live Card Games
Based Upon Game
Play Wagering AND
Method Therefore
</TABLE>
2
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM A.(CON'T.) PATENTS
<TABLE>
USA 08/665,889 06/19/96 Rykowski Improved Lens
Design for Outdoor
Sign
USA 08/665,888 06/19/96 Rykowski Incandescent Visual
Display System
USA 07/577,436 09/04/90 Green, Olsen A Configurable LED
08/893,124 07/15/97 Green, Olsen Matrix Display
USA 08/516,882 08/18/95 Barlow Large Incandescent
Live Image Display
System
USA 08/666,752 06/19/96 Barlow Incandescent Visual
Display System
USA 08/699,151 08/16/96 Barlow Visual Display
Lighting System
Having Front and
Rear Access
USA 60/056,692 08/28/97 Pierce Multi-Player Gaming
Machines
<CAPTION>
PATENT APPLICATIONS IN PREPARATION
----------------------------------
COUNTRY DOCKET NO. FILING DATE INVENTOR(S) TITLE
- ------- ---------- ----------- ----------- -----
<S> <C> <C> <C> <C>
USA 1482/132 10/07/97 Oliver Intelligent Casino
Chip System
USA 1482/134 10/11/97 Pierce Automated Wheel
Game
</TABLE>
3
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM A. (CON'T.) PATENTS
<TABLE>
<S> <C> <C> <C> <C>
USA 1482/135 10/11/97 Pierce Stepper Dice Bonus
Game
USA 1482/136 10/11/97 Pierce Wheel with Lighted
Player Table and
Multimedia Effects
USA 1482/137 10/11/97 Pierce Modular Giant
Gaming System
USA 1482/112 10/13/97 Thompson Pari-Mutuel Gaming
Invention
USA 1505/5 12/09/94 Carlson Universal Gaming
Engine
USA 1482/106 06/24/97 Saunders Cashless Method for
a Gaming System
USA 1482/86 06/24/97 Sorenson & Cashless Device for
Saunders a Gaming System
</TABLE>
4
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM B. PATENT LICENSES
---------------
<TABLE>
<CAPTION>
EFFECTIVE EXPIRATION SUBJECT
COUNTRY INVENTOR LICENSEE DATE DATE MATTER
- ------- -------- -------- ---- ---- ------
<S> <C> <C> <C> <C> <C>
USA Weingardt Weingardt 01/09/96 Method of Playing a
Bingo Game with
Progressive Jackpot
USA McCrea, Jr. Mikohn 02/25/97 Secure Multi-Site
Progressive Jackpot
System for Live Card
Games
USA McCrea, Jr. Mikohn 07/03/97 Jackpot System for
Live Card Games
Based Upon Game
Play Wagering and
Method Therefore
</TABLE>
5
<PAGE>
SCHEDULE III
to
Security Agreement
ITEM A. COPYRIGHTS/MASK WORKS
REGISTERED COPYRIGHTS/MASK WORKS
--------------------------------
<TABLE>
<CAPTION>
COUNTRY REGISTRATION NO. REG. DATE TITLE
- ------- ---------------- --------- -----
<S> <C> <C> <C>
USA VA96236 10/27/81 Slot machine board
USA Txu 203 866 6/24/85 Single card...super bingo
USA TX2 022 668 3/2/87 Hold & Draw Bingo
USA TX1 570 830 4/29/85 Video pokers
USA TX1 160 172 5/31/83 Bet, Bluff & Fold
USA TX1 806 365 4/21/86 Mini Keno
USA VAu 356-094 1/24/97 9X Triple Design L62517
USA VAu 356-093 1/24/97 9X Triple Design L62313
USA VAu 356-095 1/23/97 9X Triple Design
L62518 & L62519
USA VAu 391-962 3/3/97 Buffalo Saloon Design
USA VAu 392-897 3/3/97 Design R60181
USA VAu 392-898 3/3/97 Design R60543
USA VAu 392-896 3/3/97 Design R61066
USA VAu 392-213 3/3/97 Design 161832
USA VAu 392-899 3/3/97 Design L61734
USA VAu 392-903 3/3/97 Design L62043
USA VAu 392-781 3/3/97 Design L61626
USA VAu 392-901 3/3/97 Design L61537
USA VAu 392-902 3/3/97 Design L62806
USA VAu 392-900 3/3/97 Design L62460
USA VAu 392-633 3/3/97 Design L61402
<CAPTION>
COPYRIGHTS/MASK WORKS PENDING APPLICATIONS
------------------------------------------
COUNTRY SERIAL NO. FILING DATE TITLE
- ------- ---------- ----------- -----
<S> <C> <C> <C>
NONE
</TABLE>
<PAGE>
SCHEDULE III
to
Security Agreement
ITEM A.(CON'T.) COPYRIGHTS/MASK WORKS
<TABLE>
<CAPTION>
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
-------------------------------------------------
EXPECTED
COUNTRY DOCKET NO. FILING DATE TITLE
- ------- ---------- ----------- -----
<S> <C> <C> <C>
NONE
<CAPTION>
ITEM B. COPYRIGHTS/MASK WORKS LICENSES
------------------------------
EFFECTIVE EXPIRATION SUBJECT
TERRITORY LICENSOR LICENSEE DATE DATE MATTER
- --------- -------- -------- ---- ---- ------
<S> <C> <C> <C> <C> <C>
NONE
</TABLE>
2
<PAGE>
SCHEDULE IV
To
Security Agreement
TRADE SECRET OR KNOW-HOW LICENSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
County or Licensor Licensee Effective Expiration Subject
Territory -------- -------- Date Date Matter
- --------- ---- ---- ------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. (Exclusive) Bourgogne et Mikohn 3/20/95 Indefinitely: Either party B&G Chip System and related
World, except U.S. Grasset* may cancel on 3 months future improvements
(non-exclusive) written notice
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (Exclusive) Holland Mikohn 3/16/95 Indefinite: Each party has Patent rights and pending
Casinos* amend. cancellation right based patent applications
8/16/95 on non-performance by (Intellectual property covering
the other an automatic card shuffler
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (Exclusive) IGT* Mikohn 12/19/94 12/19/99: Automatic year Right to manufacture, sell,
to year thereafter w/5 year etc. worldwide, "Colossus"
firm renewal upon extra and "Big Bertha" proprietary
payment games
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (non- IGT Mikohn 4/20/95 & 4/10/96: Continuing year To display via manufacture of
exclusive, non- 4/27/95 to year; Mikohn may after market products,
transferable, non- amend. terminate by ceasing to including glass, for IGT
assignable, limited 5/15, 7/3, make products; IGT may manufactured gaming
license) 8/14, 8/31, terminate upon 60 days machines only, i.e. Double
10/2, written notice or upon Diamond, Wild Cherry, etc.
10/6/95 certain reasons (SLOT GLASS)
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (non- IGT Mikohn 5/11/95 5/31/96: Continuing year To display via manufacture of
exclusive, non- amend. to year; Mikohn may signs for IGT produced slot
transferable, non- 10/2, terminate by ceasing to machines (SIGNS)
assignable, limited 10/6/95 make products; IGT may
license) terminate upon 60 days
written notice or upon
certain reasons
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (non- Batty F. Kern Mikohn- 10/1/95 5 years; up to 5 automatic Kern, as consultant, provides
exclusive basis) (Consultant) Consultant renewals; Expires advice and proprietary
Agreement automatically upon death technology to Mikohn
of Consultant; Mikohn
may terminate w/ or w/o
cause with proper notice
(30 days)
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (exclusive) Bruce Lampa Mikohn 10/9/95 8/1/98 For acquisition of rights to
CADDTRAK
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (exclusive) Nevada Mikohn 7/25/97 Irrevocable Use, reproduce, display, sell,
Video, Inc. lease, etc. the video slot
d.b.n. P&M machine know as "Players
Coin Choice"
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Worldwide** Progressive Mikohn 9/21/93; Indeterminate, but Trademarks, copyrights, trade
(exclusive) Games, Inc. amend. cancelable upon default or secrets, etc. relating to
(PGI) 3/31/95 by Mikohn, at will by Caribbean Stud Game and 21
new written notice Superbucks Game
termination
agree. -
9/27/97***
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (exclusive) Safe Games, Mikohn 2/16/95 Indeterminate, but Pending German patent
Ltd. amend. cancelable upon default or application and certain
8/16/95 by Mikohn upon written trademarks and copyrights of
notice for certain reasons computerized system known
as "Safe Jack"
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide (exclusive) Safe Games, Smart 7/20/95 Indeterminate, but either Cooperation agreement
Ltd. Games, party may terminate upon between Safe Games, Ltd. and
(cooperation Inc. (co-op material default (60 days Smart Games, Inc. for the
agreement) agree.) written notice) supply of ideas, plans and
documentation of intellectual
property, including "Safe
Jack"
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide, except for Xpertx, Inc.+ Mikohn 11/29/93 Indeterminate, but Manufacture, sales,
Nevada (exclusive) amend. cancelable by Xpertx installation, etc. of Software,
7/1/95 upon Mikohn default or Hardware, Control Stations
by Mikohn upon material and Writer Stations for "Keno
breach System"
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Assignable with written consent of other party.
**U.S. excluding Colorado, Florida, Illinois, Indiana, Louisiana, Mississippi,
Indian reservations in Michigan, Conn., Florida, Nevada (as to Caribbean Stud),
Riverboats and cruise ships in Louisiana and Miss. and cruise ships in
international waters. Worldwide excluding Australia, United Kingdom, Spain,
Portugal, France, Netherlands, Belgium and Luxembourg.
***New termination agreement subject to approval by the Nevada Gaming Control
Board and Nevada Gaming Commission.
+Assignable by Mikohn with consent of Xpertx.
- --------------------
List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
SCHEDULE V
to
Security Agreement
LOCATIONS OF COLLATERAL
Please see Summary of Leased Facilities attached hereto
----------------------------
and Locations Owned By Borrower.
---------------------------
CHIEF EXECUTIVE OFFICES
-----------------------
The chief executive office of each Debtor is the office of:
Mikohn Gaming Corporation
1045 Palms Airport Drive
P.O. Box 98686
Las Vegas, NV 89193-8686
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF LEASED FACILITIES (DOMESTIC) AS OF OCTOBER 15, 1997
--------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 3095 East Patrick Lane Patrick Partners $3,851 7/2/1992 Month to
Suite 10 1050 E. Flamingo Road Month
Las Vegas, NV Las Vegas, NV 89119
- ---------------------------------------------------------------------------------------------------------------------
2 * 6700 Paradise Road The Howard Hughes $14,351 5/28/1993 8/31/2000
Suite E Properties, LP plus annual
Las Vegas, NV 1231 Town Center Drive COLA
Las Vegas. NV 89134
- ---------------------------------------------------------------------------------------------------------------------
3 * 6700 S. Paradise Road The Howard Hughes $7,377 plus 11/9/1993 8/31/2000
Suite D Properties, LP annual
Las Vegas, NV 1231 Town Center Drive COLA
Las Vegas, NV 89134
- ---------------------------------------------------------------------------------------------------------------------
4 400 Corporate Circle MIE Denver Associates $1,918 5/15/1994 Month to
Suite G 12860 W. Cedar Drive, #101 Month
Golden, CO Lakewood, CO 80288
- ---------------------------------------------------------------------------------------------------------------------
5 * 1045 Palms Airport Drive MEDIQ/PRN Life Support $27,322 6/1/1994 8/31/2000
Las Vegas, NV Services, Inc. plus annual
One Mediq Plaza COLA
Pennsauken, NJ 08110
- ---------------------------------------------------------------------------------------------------------------------
6 * 6065 South Polaris Avenue JEMCO Properties $7,830 plus 6/29/1994 6/30/2002
Suite C 9061 Santa Monica Blvd. annual
Las Vegas, NV Los Angeles, CA 90069 COLA
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Subject to Collateral Assignment
SUMMARY OF LEASED FACILITIES, Page 1
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7 898 Hancock Road Carlon Thomas $525 7/7/1994 Month to
Bullhead City, AZ 912 Hancock Road Month
Riviera, AZ 86442
- ---------------------------------------------------------------------------------------------------------------------
8 1100 Doughty Road John & Teresa Ioconelli $3,800 11/1/1994 11/1/1997
Pleasantville, NJ 1010 Morton Avenue
Absecon, NJ
- ---------------------------------------------------------------------------------------------------------------------
9 * 3665 West Diablo Drive The Young Group $1 plus 1/12 11/15/94 11/15/97
Las Vegas, NV 3665 West Diablo Drive of all annual
Las Vegas, NV 89119 carrying
costs
- ---------------------------------------------------------------------------------------------------------------------
10 5455 Desert Point Drive L.H. Leonardi Electric $4,298 12/7/1994 11/30/1999
Las Vegas, NV Construction Co.
P.O. Box 750457
Subtenant: John B. Rudy Company Petaluma, CA 94975-0457
- ---------------------------------------------------------------------------------------------------------------------
11 5050 Steptoe Street Donald & Stephanie Harmer $4,641 plus 4/1/1995 4/1/1998
Las Vegas, NV 5050 Steptoe Street annual
Las Vegas, NV 89122 COLA
- ---------------------------------------------------------------------------------------------------------------------
12 3232 South West Second Ave. Mackenzie Limited Partnership $550 7/1/1995 Month to
Bay 202 No. 1, Ltd. Month
Ft. Lauderdale, FL P.O. Box 21850
Ft. Lauderdale, FL 33335
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Subject to Collateral Assignment
SUMMARY OF LEASED FACILITIES, Page 2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13 6375 Delilah Road and Rober D. Lehman $3,025 12/15/1995 12/15/1998
6579 Delilah Road, Ste. 2 6601 Ventnor Avenue $1,193 plus
Egg Harbor Township, NJ Suite 306 annual
Ventnor, NJ 08406 COLA
- -----------------------------------------------------------------------------------------------------------------------
14 * 4835 Longley Lane Dermody Properties $10,572 1/15/1996 4/5/2001
Reno, NV 1200 Financial Blvd. plus annual
P.O. Box 7098 COLA
Reno, NV 89510
- -----------------------------------------------------------------------------------------------------------------------
15 5875 Tyrone Road Industrial Properties of NV $4,532 7/15/1996 7/14/2001
Reno, NV 295 Holcomb Ave., Ste. 4
Reno, NV 89502
Subtenant: Doctors Corporation
of America
- -----------------------------------------------------------------------------------------------------------------------
16 11088 Millpark Drive Centerline Investment Co. $1,200 plus 1/1/1997 12/31/1999
Suite 144 P.O. Box 28428 annual
Maryland Heights, MO St. Louis, MO 63146 COLA
- -----------------------------------------------------------------------------------------------------------------------
17 2095 Exchange Drive Meyer/Burkemper Construction $2,063 1/1/1997 12/31/1999
St. Charles, MO P.O. Box 635
St. Peters, MO
- -----------------------------------------------------------------------------------------------------------------------
18 3950 N.E. 33rd Terrace Vick-Pursell Partners $875 1/1/1997 12/31/1999
Suite 8-E 300 North Church Road
Kansas City, MO Liberty, MO
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Subject to Collateral Assignment
SUMMARY OF LEASED FACILITIES, Page 3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
19 2502 Goodman Road Joe Poppenheimer $900 - 1997 1/28/1997 2/28/1999
Horn Lake, MS 1018 Goodman Drive $950 - 1998
Horn Lake, MS
- -----------------------------------------------------------------------------------------------------------------------
20 * 840 Pilot Road Pilot Company $41,176 8/1/1997 7/31/2004
Las Vegas, NV P.O. Box 17724 plus annual
Anaheim, CA 92817 COLA
- -----------------------------------------------------------------------------------------------------------------------
21 3860 Hawkins NE Sun Belt Business Centers $2,156 10/1/1997 9/30/1999
Albuquerque, NM 87109 Partnership IV
c/o Good Management
3844 Hawkins NE
Albuquerque, NM 87109
=====================================================================================================================
</TABLE>
SUMMARY OF LEASED FACILITIES, Page 4
<PAGE>
MIKOHN GAMING CORPORATION
SUMMARY OF LEASED FACILITIES (FOREIGN) AS OF SEPTEMBER 15, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================================================================================
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Mikohn South America, SA Corporacion E Inversiones $2,478 7/4/1997 7/3/2000
Av. Republica de Panama 3533-3535 Gremcco S.A.
Torre "A", Ofic. 504 Av. Salaverry No. 2650
San Isidro (Lima), Peru San Isidro, Peru
- ---------------------------------------------------------------------------------------------------------------------------
2 Mikohn South America, SA Inmobiliaria Santa Martha y $3,038 1/10/1996 1/9/2001
Calle Sucre 195 Anita S.A.
Urb. Vulcano Calle Uno N degrees 108 Urb.
Ate (Lima), Peru Santa Lucia
Ate Vitarte, Peru
- ---------------------------------------------------------------------------------------------------------------------------
3 Mikohn Gaming Corporation Angeles Iniguez and $450 12/1/1996 11/30/1998
Juramento 2801 Carmen Mercedes Acosta
Piso 14 "E" Av. Las Heras 2570
Capital Federal (Buenos Aires) Piso 9 "D"
Argentina Capital Federal (Buenos Aires)
Argentina
- ---------------------------------------------------------------------------------------------------------------------------
4 Mikohn Europe B.V. MBB Project 31 B.V. $11,933 4/1/1995 3/31/2000
Leidse Rijn 2-16 Postbus 1448
3454 PZ De Meern (Amsterdam) 3600 BK Maarken
The Netherlands The Netherlands
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF LEASED FACILITIES, Page 5
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
FILE NO. ADDRESS OF PREMISES LANDLORD MONTHLY BEGINNING ENDING
REFERENCE RENT DATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 Mikohn Gaming Australasia Menora Nominees Pty Ltd $(AUS)13,450 9/15/1996 9/14/2001
132 McEvoy Street (ACN 001 146 498) & Steven
Alexandria (Sydney), Australia Stux and Ruth Stux
C/- Stephen & Co. Pty Ltd
Suite 16
201 New South Head Road
Edgecliff (Sydney), Australia
=====================================================================================================================
</TABLE>
SUMMARY OF LEASED FACILITIES, Page 6
<PAGE>
LOCATIONS OWNED BY BORROWER
4181 West Oquendo Road, Las Vegas, NV 89118
405 12th Street, Rapid City, SD 57701
4708 Hewes Avenue, Gulfport, MS 38507
<PAGE>
SCHEDULE VI
to
Security Agreement
THIRD PARTY LOCATIONS OF DEBTORS' GOODS
None.
<PAGE>
SCHEDULE VII
to
Security Agreement
TRADE NAMES OF EACH DEBTOR
1 Mikohn Gaming Corporation:
A) Current Trade Names
1) Mikohn Worldwide
2) Corporate Headquarters
3) Engineering, Service
4) Interior Signs - Rapid City Region
5) Mikohn Sculptures
6) Interior Signs - Las Vegas Region
7) Mikohn Service Division - Reno Region
8) Trans Sierra North
9) Trans Sierra South
10)Sculptures
11)Visual Products
12)Mikohn Gaming Corporation - Colorado (Sales)
13)Mikohn Gaming Corporation - Florida (Sales)
14)Mikohn Gaming Corporation - Minnesota (Sales)
15)Mikohn Gaming Corporation - Missouri (Sales)
16)Mikohn Gaming Corporation - Missouri Service
17)Mikohn Gaming Corporation - New Jersey (Sales)
18)Mikohn Gaming Corporation - New Mexico (Sales)
19)Slot Glass
B) Former Trade Names
1) Mikohn, Inc.
2) Engineering, Production, N.P.D.
3) Mikohn Gaming Corporation - Rapid City Region
4) South Dakota (Signs Division)
5) Acton Sculptures
6) Acton & Associates
7) Casino Signs a Division of Mikohn Gaming Corporation
8) Mikohn Gaming Corporation - Casino Signs
9) MGC - Casino Signs Div.
10)Casino Signs South
11)Casino Signs, Inc.
12)Mikohn Gaming Corporation - Reno Region
13)Casino Signs North
14)Trans Sierra Communications North Division of Mikohn Gaming Corporation
15)Trans Sierra Communications South Division of Mikohn Gaming Corporation
16)Mikohn Visual Products
17)Mikohn Sign Lab
18)Casino Signs North
19)Casino Signs Division
20)Mikohn Elko
21)Current Technology
22)Mikohn Gaming Corporation - Arizona
1
<PAGE>
SCHEDULE VII
to
Security Agreement
23)Mikohn Gaming Corporation - Louisiana
24)Mikohn Gaming Corporation - Japan
25)Casino Signs - Gulfport
2 Casino Excitement, Inc.
A) Current Trade Names
1) Casino Excitement, Inc. (dba Mikohn Lighting and Sign)
B) Former Trade Names
1) Casino Excitement, Inc. (dba JRY Lighting and Sign)
2) JRY Lighting and Sign
3) John Renton Young
3 MGC, Inc.
A) Current Trade Names
1) Interior Signs - Gulfport Region - current
B) Former Trade Names
1) Mikohn Gaming Corporation - Gulfport Region
2) Mississippi (Signs Division)
3) Casino Signs - Gulfport
4 Mikohn Nevada - current
A) Current Trade Names
1) Gaming Operations - current
2) Games Division - current
B) Former Trade Names
1) MGC, Inc. dba Games of Nevada
2) Games of Nevada
3) MGC Games Division
2
<PAGE>
Schedule VIII
to
Security Agreement
MIKOHN GAMING CORPORATION*
NON ASSIGNABLE CONTRACTS/
CONTRACTS WITH RESTRICTIONS ON ASSIGNABLITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CONTRACTING EFFECTIVE DATE TERMS OF NON-ASSINABILITY OR
PARTY OR PARTIES OF CONTRACT RESTRICTIONS ON ASSIGNABILITY
- ---------------- ----------- -----------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bourgogne et Grasset 3/20/95 Section 16 of the Contract prohibits either party
from assigning the agreement of any licenses
granted thereunder without the prior consent of the
other.
- -----------------------------------------------------------------------------------------------------------------------------------
Budget Signs, Michael Flaig 10/28/96 Neither party may assign without the written
and Clark Welbourne consent of the other "which consent shall not be
unreasonably withheld".
- -----------------------------------------------------------------------------------------------------------------------------------
Comdata Network, Inc. d.b.a. 7/3/96 Neither party may assign without written consent of
Comdata Corporation the other, such consent not to be unreasonably
withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
Holland Casinos 3/16/95, amended No assignment without written consent of other
8/16/95 party, which shall not be unreasonably withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
International Game 12/19/94 Not assignable "by either party without the written
Technology (IGT) (Colossus and Big consent of the other".
Bertha)
- -----------------------------------------------------------------------------------------------------------------------------------
International Game 4/20/95 and 4/27/95, Non-assignable.
Technology (IGT) amended 5/15, 7/3,
8/14, 8/31, 10/2,
10/6/95 (Slot glass)
- -----------------------------------------------------------------------------------------------------------------------------------
International Game 5/11/95, amended Non-assignable.
Technology (IGT) 10/2, 10/6/95 (Signs)
- -----------------------------------------------------------------------------------------------------------------------------------
Barry F. Kern 10/1/95 (Consulting No assignment without consent of other, "not to be
agreement) unreasonably withheld".
- -----------------------------------------------------------------------------------------------------------------------------------
Kern Sculpture Company, Inc. 10/1/95 Neither party may assign without written consent of
other, such consent not to be unreasonably withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
Lemex Enterprises, Inc. 3/6/95 Assignment only by written consent of parties, not
to be unreasonably withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
Mikohn S.A. 8/5/95 Assignable only with written consent of both
parties.
- -----------------------------------------------------------------------------------------------------------------------------------
PDS Financial Corporation 3/22/96 No assignment except by mutual written consent.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule VIII
to
Security Agreement
Page 2 of 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sheri Shelton and Photo 1/1/97 Assignment only by mutual written consent, not to
Finish be unreasonably withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
Progressive Games, Inc. (PGI) 9/21/93, amended and No assignment without prior written consent of PGI.
clarified 3/31/95; new
termination agreement
dated 9/27/97
- -----------------------------------------------------------------------------------------------------------------------------------
Safe Games, Ltd. 2/16/95, amended Mikohn may assign only with the written consent of
8/16/95 Licensor.
- -----------------------------------------------------------------------------------------------------------------------------------
Xpertx, Inc. 11/29/93, amended Mikohn may assign with consent of Xpertx, not to
7/1/95 be unreasonably withheld.
- -----------------------------------------------------------------------------------------------------------------------------------
John Renton Young, John 11/7/94, amended The agreement is not assignable by any party
Renton Young, Ltd. d.b.a. 9/8/95 as of 3/31/95 without the written consent of all of the parties,
John Renton Lighting & Sign, which consent shall not be unreasonably withheld,
John Renton Young of New
Jersey, Inc. d.b.a. John Renton
Young Lighting & Sign N.J.,
John Renton Young Lighting
of Mississippi, Casino
Excitement, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Mikohn Gaming Corporation is the only credit party to The Agreements listed on
this schedule.
<PAGE>
NON-ASSIGNABLE CONTRACTS/CONTRACTS WITH
RESTRICTIONS ON ASSIGNABILITY OF MIKOHN GAMING
CORPORATION WITH A ASSOCIATED REVENUE IMPACT
1) International Game Technology (IGT): Agreement to License "Colossus" and
"Big Bertha" to Mikohn Gaming: 1997 Year to date revenue of $4,400,000.
2) Progressive Games Incorporated (PGI): Agreement to License games to Mikohn
Gaming: 1997 Year to date revenue of $1,507,000 (net of royalties).
<PAGE>
EXHIBIT A
to
Security Agreement
LANDLORD'S CONSENT
1. The undersigned ("Lessor") is the lessor under a lease. under which
Mikoln Gaming Corporation a Nevada corporation, is the lessee ("Lessee") of the
premises covered thereby (the "Premises"). A copy of such lease (including all
amendments thereto) is attached as Exhibit A (the "Existing Lease"). The
----------
Existing Lease and all extensions, amendments and renewals thereof now or
hereafter in effect, hereinafter are referred to as the "Lease."
2. In connection with certain financing arrangements (the "Financing
Arrangements") from time to time entered into between Lessee and First Source
Financial LLP ("FSFP"), for itself, as a lender. and as agent for all lenders
under the Financing Arrangements, Lessee will (i) collaterally assign or grant a
leasehold interest in its interest under the Lease (the "Assignment") to FSFP
and (ii) grant FSFP a security interest in, among other things, all existing and
after-acquired furniture, fixtures, equipment, machinery, inventory and tangible
property owned by Lessee (the "Property").
3. Lessor consents to the Assignment and agrees that if FSFP exercises its
rights under the Assignment. Lessor shall recognize FSFP (or any purchaser at a
foreclosure sale or any other successor or assignee of FSFP) as the lessee under
the Lease entitled to all of the benefits thereof.
4. Lessor disclaims and releases any interest in or to the Property
(including rights of levy or distraint for rent). Lessor agrees that none of the
Property shall be considered fixtures or a part of the Premises.
5. If FSFP notifies Lessor that Lessee has defaulted on its obligations to
FSFP under the Financing Arrangements, Lessor shall permit FSFP to enter the
Premises and take possession of, use, remove, sell (including auction sales),
transfer or otherwise dispose of all or any part of the Property.
6. Lessor acknowledges that on the date hereof the Existing Lease is in
full force and effect and no default exists thereunder.
7. Lessor agrees to provide written notice to FSFP of any default by
Lessee under the Lease. Such notice shall describe the claimed default in
reasonable detail, including, without limitation, the provisions of the Lease
which have been violated. Lessor further agrees that: (a) FSFP, at its option
without any obligation to do so, shall have the right to cure (i) any payment
default under the Lease within 10 days after receipt by FSFP of notice of such
default or (ii) any other default under the Lease within 30 days after receipt
by FSFP of notice of such default; (b) Lessor shall not exercise any rights or
remedies it might have under the Lease as a result of any such default unless
FSFP does not cure such default within the applicable time
<PAGE>
period set forth above: and (c) if FSFP cures such default. Lessor shall accept
such cure thereby eliminating such default.
8. The address of FSFP is:
First Source Financial LLP
c/o First Source Financial, Inc. 2850 West Golf Road - 5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
9. This Agreement shall be binding upon Lessor and its successors and
assigns and shall inure to the benefit of FSFP, other lenders under the
Financing Arrangements, and their respective successors and assigns.
DATED: ____________, 199_ LESSOR:
-------
------------------------------
By:___________________________
Title:________________________
Address of Lessor:
---------------------------
---------------------------
---------------------------
---------------------------
-2-
<PAGE>
ANNEX A Copy of Lease
Please see attached.
[TO BE PROVIDED BY LESSOR]
<PAGE>
Exhibit B
to
Security Agreement
BAILEE WAIVER
------------- ----
First Source Financial LLP
c/o First Source Financial, Inc.
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Attention: Contract Administration
Re: Mikohn Gaming Corporation ("Company")
-------------------------------------
Ladies and Gentlemen:
Company, from time to time, delivers certain merchandise ("Merchandise") to
the undersigned for storage at the undersigned's public warehouse facility
located at ________________________________________________________________.
Company intends to enter into certain financing arrangements with First
Source Financial LLP ("FSFP"), for itself, as a lender, and as agent for all
lenders under such financing arrangements, and, as a condition precedent to the
extension of credit and other financial accommodations to Company, FSFP
requires, among other things, that Company grant liens in favor of FSFP in all
of the tangible and intangible personal property of Company, including, without
limitation, the Merchandise.
To induce FSFP (together with its successors and assigns) to make such
financing arrangements, and for other good and valuable consideration, the
undersigned hereby agrees that:
(i) FSFP's security interest in the Merchandise will be senior to
all liens, claims and interests other than the undersigned's warehouseman's
or processor's liens for any accrued and unpaid processing or warehousing
fees charged by the undersigned for the actual processing or storage of the
Merchandise.
(ii) If Company defaults on its obligations to FSFP and, as a
result, FSFP: undertakes to enforce its security interest in the
Merchandise, the undersigned will (a) cooperate with FSFP in its effort to
assemble all of the Merchandise located in its facility and will not hinder
FSFP's actions in enforcing its liens on the Merchandise and (b) store any
or all of the Merchandise upon the request of and at the direction of FSFP;
provided, however, that FSFP will pay the undersigned any and all fees
arising from such storage, which fees will be equal to those which would
otherwise be charged to Company for such storage.
<PAGE>
(iii) Company hereby agrees that the undersigned will have no
liability to Company if the undersigned complies with FSFP's oral or
written direction(s) as described above. Company further agrees that it
will continue to pay all warehousing fees and other expenses related to the
storage of the ,Merchandise and will reimburse the undersigned for all
reasonable costs or expenses incurred as a direct result of the
undersigned's compliance with the terms and provisions of this letter.
(iv) The undersigned will notify all successor owners, transferees,
purchasers and mortgagees of the existence of this agreement.
Notwithstanding the provisions of the preceding sentence and regardless of
whether the undersigned complies with the provisions of the preceding
sentence, the agreements contained herein shall be binding upon the
undersigned's successors, assigns and personal representatives, upon any
successor owner or transferee of the facility, and upon any purchasers,
including any mortgagee from the undersigned.
(v) The undersigned will act as FSFP's bailee for purposes of
perfecting FSFP's security interest in any portion of the Merchandise
consisting of invoices, bills of lading, warehouse receipts or other
documents of title relating to the merchandise in which a security interest
may be perfected by possession. and the undersigned will place the
following language prominently on the face of any such document: "THE
PROPERTY DESCRIBED HEREIN IS SUBJECT TO THE SECURITY INTEREST OF FIRST
SOURCE FINANCIAL LLP, AS AGENT."
The agreements contained herein shall continue in force until all of
Company's obligations and liabilities to FSFP are paid and satisfied in full and
all financing arrangements between FSFP and Company have been terminated. FSFP,
without affecting the validity of this Agreement, may extend, amend or in any
way modify the terms of payment or performance of any of Company's obligations
to FSFP, without the consent of the undersigned and without giving notice
thereof to the undersigned.
The instructions contained herein may only be amended or rescinded by FSFP.
Such instructions may not be amended or rescinded by Company.
Executed and delivered this __ day of __________, ___
[BAILEE]
By:_____________________________________
Name:________________________________
Title:_______________________________
AGREED AND ACKNOWLEDGED:
[COMPANY]
By:_____________________________________
Name:________________________________
Title:_______________________________
<PAGE>
EXHIBIT C
to
Security Agreement
AGREEMENT
(Patent)
THIS AGREEMENT (PATENT), dated as of October , 1997 (herein, as the same from
time to time may be amended. modified, restated or supplemented and in effect,
called this "Agreement"). is by and among MIKOHN GAMING CORPORATION, a Nevada
corporation ("Borrower"), MIKOHN NEVADA, a Nevada corporation "Mikohn Nevada"),
MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a Nevada
corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter are
referred to individually as each "Guarantor" and collectively as "Guarantors,"
and Borrower and Guarantors sometimes hereinafter are referred to individually
as each "Debtor" and collectively as "Debtor"), and FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership ("FSFP"), as "Agent" for
all "Lenders."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement dated as of October __, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among Borrower, FSFP, for
itself, as a Lender, and as Agent for all Lenders, and the financial
institutions parties thereto, Lenders have extended Commitments to make Loans to
Borrower; and
WHEREAS, Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as the
same from time to time may be amended, modified, supplemented or restated and in
effect, called the "Guaranty") made by Guarantors in favor of Agent; and
WHEREAS, in connection with the Credit Agreement and the Guaranty, Debtors
have executed and delivered to Lenders a Security Agreement, dated as of October
__, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "SECURITY AGREEMENT"); and
WHEREAS, as a condition precedent to the making of the initial Loans under
the Credit Agreement, Debtors are required to execute and deliver this Agreement
and to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Liabilities; and
WHEREAS, Debtors have duly authorized the execution, delivery and performance
of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in order to induce Lenders to make Loans (including the
initial Loans) to
<PAGE>
Borrower pursuant to the Credit Agreement. Debtors agree, for the benefit of
Lenders, as follows:
SECTION I. Definitions. Unless otherwise defined herein or the context
-----------
otherwise requires. terms used in this Agreement. including its preamble and
recitals, have the meanings provided or provided by reference in the Security
Agreement.
SECTION 2. Grant of Security Interest. For good and valuable consideration,
--------------------------
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Obligations of Borrower and all of the obligations of each Guarantor arising
under the Guaranty (collectively, the "LIABILITIES"). Debtors hereby mortgage,
pledge and grant to Agent for the benefit of Lenders a continuing security
interest in, all of the following property (the "PATENT COLLATERAL"), whether
now or hereafter owned, acquired or existing:
(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Attachment 1 hereto;
------ ------------
(b) all patent licenses, including each patent license referred to in
Item B of Attachment 1 hereto;
------- ------------
(c) all reissues, divisions, continuations,-continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
the foregoing clauses (a) and b; and
-----------
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Attachment 1 hereto, and for breach or enforcement
------ ------------
of any patent license, including any patent license referred to in Item B
------
of Attachment 1 hereto, and all rights corresponding thereto throughout the
------------
world.
SECTION 3. Security Agreement. This Agreement has been executed and
------------------
delivered by Debtors for the purpose of registering the security interest of
Agent in the Patent Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Agent under the Security
Agreement. The Security Agreement (and all rights and remedies of Agent
thereunder) shall remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
----------------------------
Liabilities and the termination of all Commitments, Lenders shall, at Debtors'
expense, execute and deliver to Debtors all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Patent Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each Debtor does hereby further
--------------
acknowledge and affirm that the rights and remedies of Lenders with respect to
the security interest in the Patent Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and
<PAGE>
provisions of which (including the remedies provided for therein are
incorporated by reference herein as if full) set forth herein.
SECTION 6. Credit Document, etc. This Agreement is a Credit Document
--------------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed. administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[Remainder of this page intentionally left blank. ]
<PAGE>
WITNESS WHEREOF. the parties hereto have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
MIKOHN NEVADA, a Nevada corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
MGC, INC., a Nevada corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
CASINO EXCITEMENT, INC., a Nevada corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
FIRST SOURCE FINANCIAL LLP, individually and in
its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: ________________________________
Gary L. Francis
Senior Vice President
<PAGE>
STATE OF______________ )
) SS.
COUNTY OF_____________ )
I, ________________________, a notary public in and for said County, in the
State of aforesaid. DO HEREBY CERTIFY that _________________, personally known
to me to be the ___________________ of MIKOHN GAMING CORPORATION. a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument. appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act. and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
----------------------------------
Notary Public
My Commission Expires:
- ------------------------------
<PAGE>
STATE OF______________ )
) SS.
COUNTY OF_____________ )
I, ________________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally known
to me to be the ____________________ of MIKOHN NEVADA, a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
----------------------------------
Notary Public
My Commission Expires:
- --------------------------------
<PAGE>
STATE OF______________ )
) SS.
COUNTY OF_____________ )
I, _______________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally
known to me to be "the __________________ of MGC, INC., a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said
instrument as such officer of said corporation, pursuant to authority given
by the Board of Directors of said corporation as such person's free and
voluntary act, and as the free and voluntary act and deed of said
corporation, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
------------------------------
Notary Public
My Commission Expires:
- ------------------------------
<PAGE>
STATE OF______________ )
) SS.
COUNTY OF_____________ )
I, _________________________, a notary public in and for said County, in
the State of aforesaid. DO HEREBY CERTIFY that _________________, personally
known to me to be "the ___________________ of CASINO EXCITEMENT, INC., a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument. appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
---------------------------
Notary Public
My Commission Expires:
- ---------------------------------
<PAGE>
STATE OF______________ )
) SS.
COUNTY OF_____________ )
I, ________________________, a notary public in and for said County, in the
State of aforesaid. DO HEREBY CERTIFY that _________ personally known to me to
be a __________ of FIRST SOURCE FINANCIAL, INC., a Delaware corporation, the
Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument. appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation. pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-------------------------
Notary Public
My Commission Expires:
- ------------------------------------
<PAGE>
ATTACHMENT 1
to
Agreement
(Patent)
ITEM A. PATENTS
Issued Patents
--------------
*Country Patent No. Issue Date Inventor(s) Title
-------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
*Country Serial No. Filing Date Inventor(s) Title
-------- ---------- ----------- ----------- -----
Patent Applications in Preparation
----------------------------------
Expected
*Country Docket No. Filing Date Inventor(s) Title
-------- ---------- ----------- ----------- -----
ITEM B. PATENT LICENSES
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
--------- -------- -------- ---- ----------- -------
- -------------------
* List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
EXHIBIT D
to
Security Agreement
AGREEMENT (Trademark)
THIS AGREEMENT (TRADEMARK), dated as of October __, 1997 (herein, as the
same from time to time may be amended, modified, restated or supplemented and in
effect. called this "Agreement"), is by and among MIKOHN GAMING CORPORATION, a
Nevada corporation ("Borrower"), MIKOHN NEVADA, a Nevada corporation ("Mikohn
Nevada"), MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a
Nevada corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter
are referred to individually as each "Guarantor" and collectively as
"Guarantors," and Borrower and Guarantors sometimes hereinafter are referred to
individually as each "Debtor" and collectively as "Debtor"), and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("FSFP"), as
"Agent" for all "Lenders."
WITNESSETH:
WHEREAS, pursuant to a Credit Agreement dated as of October __, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Borrower, FSFP, for
itself, as a Lender, and as Agent for all Lenders, and the financial
institutions parties thereto, Lenders have extended Commitments to make Loans to
Borrower; and
WHEREAS, Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as the
same from time to time may be amended, modified, supplemented or restated and in
effect, called the "Guaranty") made by Guarantors in favor of Agent; and
WHEREAS, in connection with the Credit Agreement and the Guaranty, Debtors
have executed and delivered to Lenders a Security Agreement, dated as of October
__, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "Security Agreement"); and
WHEREAS, as a condition precedent to the making of the initial Loans under
the Credit Agreement, Debtors are required to execute and deliver this Agreement
and to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Liabilities; and
WHEREAS, Debtors have duly authorized the execution, delivery and
performance of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce Lenders to make Loans (including
the initial Loans) to
<PAGE>
Borrower pursuant to the Credit Agreement, Debtors agree, for the benefit of
Lenders, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
-----------
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided or provided by reference in the Security
Agreement.
SECTION 2. Grant of Security Interest. For good and valuable consideration,
--------------------------
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Obligations of Borrower and all of the obligations of each Guarantor arising
under the Guaranty (collectively, the "Liabilities"), Debtors does hereby
mortgage, pledge and grant to Agent for the benefit of Lenders a continuing
security interest in, all of the following property (the "Trademark
Collateral"), whether now or hereafter owned, acquired or existing:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress. service marks,
certification marks, collective marks, logos, other sources of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (each of the
foregoing items in this clause (a) being called a "Trademark"), now
---------
existing anywhere in the world or hereafter adopted or acquired, whether
currently in use or not, all registrations and recordings thereof and all
applications in connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any foreign country, including
those referred to in Item A of Attachment 1 hereto;
------ ------------
(b) all Trademark licenses, including each Trademark license referred to
in Item B of Attachment 1 hereto;
------ ------------
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
------- --- ---
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in clauses (a) and (b); and
----------- ---
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by Debtors against third parties for past, present or
future infringement or dilution of any Trademark, Trademark registration,
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Attachment 1 hereto,
------ ------ ------------
or for any injury to the goodwill associated with the use of any Trademark
or for breach or enforcement of any Trademark license.
SECTION 3. Security Agreement. This Agreement has been executed and delivered
------------------
by Debtors for the purpose of registering the security interest of Agent in the
Trademark Collateral with the United States Patent and Trademark Office and
corresponding offices in other countries of the world. The security interest
granted hereby has been granted as a supplement to, and not in limitation of,
the security interest granted to Agent under the Security Agreement. The
<PAGE>
Security Agreement (and all rights and remedies of Lenders thereunder) shall
remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
----------------------------
Liabilities and the termination of all Commitments, Lenders shall, at Debtors'
expense, execute and deliver to Debtors all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Trademark Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each Debtor does hereby further acknowledge and
--------------
affirm that the rights and remedies of Lenders with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which (including the
remedies provided for therein) are incorporated by reference herein as if fully
set forth herein.
SECTION 6. Credit Document, etc. This Agreement is a Credit Document executed
--------------------
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties hereto
------------
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.
MIKOHN GAMING CORPORATION, a Nevada
corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
MIKOHN NEVADA, a Nevada corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
<PAGE>
MGC, INC., a Nevada corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
CASINO EXCITEMENT, INC., a Nevada corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
FIRST SOURCE FINANCIAL LLP, individually
and in its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By:
----------------------------
Gary L. Francis
Senior Vice President
<PAGE>
STATE OF________________ )
) SS.
COUNTY OF ______________ )
I,_________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally known
to me to be the ___________________ of MIKOHN GAMING CORPORATION, a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this ____ day of October, 1997.
--------------------------------
Notary Public
My Commission Expires:
- -----------------------------
<PAGE>
STATE OF________________ )
) SS.
COUNTY OF ______________ )
I, __________________________, a notary public in and for said County, in
the State of aforesaid, DO HEREBY CERTIFY that __________________, personally
known to me to be the ___________________ of MGC, INC., a Nevada corporation,
and personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-----------------------------
Notary Public
My Commission Expires:
- ----------------------------
<PAGE>
STATE OF________________ )
) SS.
COUNTY OF ______________ )
I, ________________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally known
to me to be the ___________________ of CASINO EXCITEMENT, INC., a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
--------------------------------
Notary Public
My Commission Expires:
- -------------------------------
<PAGE>
STATE OF________________ )
) SS.
COUNTY OF ______________ )
I, __________________________, a notary public in and for said County, in
the State of aforesaid, DO HEREBY CERTIFY that ________________ personally known
to me to be a _____ of FIRST SOURCE FINANCIAL, INC., a Delaware corporation, the
Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation, pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
----------------------------
Notary Public
My Commission Expires:
- ------------------------------------
<PAGE>
ATTACHMENT 1 to
Agreement
(Trademark)
ITEM A. Trademarks
Registered Trademarks
---------------------
* Country Trademark Registration No. Registration Date
------- --------- ---------------- -----------------
Pending Trademark Applications
------------------------------
* Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Trademark Applications in Preparation
-------------------------------------
Expected Products/
* Country Trademark Docket No. Filing Date Service
------- --------- ---------- ----------- ---------
ITEM B. TRADEMARK LICENSES
* Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
---------- --------- -------- -------- ---------- ----
- ----------------------
* List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in alphabetical
order by country name.
<PAGE>
EXHIBIT E
to
Security Agreement
AGREEMENT
(Copyright)
THIS AGREEMENT (COPYRIGHT), dated as of October __, 1997 (herein, as the same
from time to time may be amended, modified, restated or supplemented and in
effect, called this "Agreement"), is by and among MIKOHN GAMING CORPORATION, a
Nevada corporation ("Borrower"), MIKOHN NEVADA, a Nevada corporation ("Mikohn
Nevada"), MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a
Nevada corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter
are referred to individually as each "Guarantor" and collectively as
"Guarantors," and Borrower and Guarantors sometimes hereinafter are referred to
individually as each "Debtor" and collectively as "Debtor"), and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("FSFP"),
as "Agent" for all "Lenders."
WITNESSETH:
WHEREAS, pursuant to a Credit Agreement dated as of October __, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Borrower, FSFP, for
itself, as a Lender, and as Agent for all Lenders, and the financial
institutions parties thereto, Lenders have extended Commitments to make Loans to
Borrower; and
WHEREAS, Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as the
same from time to time may be amended, modified, supplemented or restated and in
effect, called the "Guaranty") made by Guarantors in favor of Agent; and
WHEREAS, in connection with the Credit Agreement and the Guaranty, Debtors
have executed and delivered to Lenders a Security Agreement, dated as of October
__, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "Security Agreement"); and
WHEREAS, as a condition precedent to the making of the initial Loans under
the Credit Agreement, Debtors are required to execute and deliver this Agreement
and to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Liabilities; and
WHEREAS, Debtors have duly authorized the execution, delivery and performance
of this Agreement.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in order to induce Lenders to make Loans (including the
initial Loans) to Borrower pursuant to the Credit Agreement, Debtors agree, for
the benefit of Lenders, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
-----------
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided or provided by reference in the Security
Agreement.
SECTION 2. Grant of Security Interest. For good and valuable consideration,
--------------------------
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Obligations of Borrower and all of the obligations of each Guarantor arising
under the Guaranty (collectively, the "Liabilities"), Debtors hereby mortgage,
pledge and grant to Agent for the benefit of Lenders a continuing security
interest in, all of the following property (the "Copyright Collateral"), whether
now or hereafter owned, acquired or existing, being all copyrights and all
semiconductor chip product mask works of Debtors, whether statutory or common
law, registered or unregistered, now or hereafter in force throughout the world,
including, without limitation, all of Debtors' right, title and interest in and
to all copyrights and mask works registered in the United States Copyright
Office or anywhere else in the world and also including, without limitation, the
copyrights and mask works referred to in Item A of Attachment 1 hereto, and all
------ ------------
applications for registration thereof, whether pending or in preparation, all
copyright and mask work licenses, including each copyright and mask work license
referred to in Item B of Attachment 1 attached hereto, the right to sue for
------ ------------
past, present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including, without limitation, licenses, royalties,
income, payments, claims, damages and proceeds of suit.
SECTION 3. Security Agreement. This Agreement has been executed and delivered
------------------
by Debtors for the purpose of registering the security interest of Agent in the
Copyright Collateral with the United States Copyright Office and corresponding
offices in other countries of the world. The security interest granted hereby
has been granted as a supplement to, and not in limitation of, the security
interest granted to Agent under the Security Agreement. The Security Agreement
(and all rights and remedies of Lenders thereunder) shall remain in full force
and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
----------------------------
Liabilities and the termination of all Commitments, Lenders shall, at Debtors'
expense, execute and deliver to Debtors all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Copyright Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each Debtor does hereby further acknowledge and
--------------
affirm that the rights and remedies of Lenders with respect to the security
interest in the Copyright Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which (including the
remedies provided for therein) are incorporated by reference herein as if fully
set forth herein.
SECTION 6. Credit Document, etc. This Agreement is a Credit Document executed
--------------------
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be
<PAGE>
construed, administered and applied in accordance with the terms and provisions
of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties hereto
------------
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.
[Remainder of this page intentionally left blank. ]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.
MIKOHN GAMING CORPORATION, a Nevada
corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
MIKOHN NEVADA, a Nevada corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
MGC, INC., a Nevada corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
CASINO EXCITEMENT, INC., a Nevada
corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
FIRST SOURCE FINANCIAL LLP, individually
and in its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By:
--------------------------
Gary L. Francis
Senior Vice President
<PAGE>
STATE OF ____________ )
) SS
COUNTY OF ___________ )
I, _______________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally known
to me to be the ___________________ of MIKOHN GAMING CORPORATION, a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-------------------------------
Notary Public
My Commission Expires:
- --------------------------------
<PAGE>
STATE OF ____________ )
) SS.
COUNTY OF ___________ )
I, ________________, a notary public in and for said County, in the State
of aforesaid. DO HEREBY CERTIFY that _________________, personally known to me
to be the ___________________ of MIKOHN NEVADA, a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
_____________________________
Notary Public
My Commission Expires:
- -----------------------------
<PAGE>
STATE OF ____________ )
) SS.
COUNTY OF ___________ )
I, ________________________, a notary public in and for said County, in the
State of aforesaid. DO HEREBY CERTIFY that _________________, personally known
to me to be the __________________ of MGC, INC., a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-------------------------------
Notary Public
My Commission Expires:
- ------------------------------
<PAGE>
STATE OF ____________ )
) SS.
COUNTY OF ___________ )
I,________________________, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that _________________, personally known
to me to be the ___________________ of CASINO EXCITEMENT, INC., a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-------------------------------
Notary Public
My Commission Expires:
- ----------------------------
<PAGE>
STATE OF ____________ )
) SS.
COUNTY OF ___________ )
I, _________________, a notary public in and for said County, in the State
of aforesaid, DO HEREBY CERTIFY that _________ personally known to me to be the
____________________ of FIRST SOURCE FINANCIAL, INC., a Delaware corporation,
the Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation, pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this __ day of October, 1997.
-----------------------------
Notary Public
My Commission Expires:
- ----------------------------
<PAGE>
ATTACHMENT 1
to
Agreement
(Copyright)
ITEM A. COPYRIGHTS/MASK WORKS
Registered Copyrights/Mask Works
--------------------------------
* Country Registration No. Registration Date Author(s) Title
------- ---------------- ----------------- --------- -----
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
* Country Serial No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
Copyright/Mask Work Registration Applications in Preparation
------------------------------------------------------------
Expected
* Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
ITEM B. COPYRIGHT/MASK WORK LICENSES
* Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
--------- -------- -------- --------- ---------- -------
- --------------------
* List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS AGREEMENT (TRADEMARK), dated as of October 24, 1997 (herein, as the
same from time to time may be amended, modified, restated or supplemented and in
effect, called this "AGREEMENT"), is by and among MIKOHN GAMING CORPORATION, a
Nevada corporation ("BORROWER"), MIKOHN NEVADA, a Nevada corporation ("MIKOHN
NEVADA"), MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a
Nevada corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter
are referred to individually as each "Guarantor" and collectively as
"Guarantors," and Borrower and Guarantors sometimes hereinafter are referred to
individually as each "Debtor" and collectively as "Debtor"), and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("FSFP"), as
"AGENT" for all "LENDERS."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement dated as of October 24, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among Borrower, FSFP, for
itself, as a Lender, and as Agent for all Lenders, and the financial
institutions parties thereto, Lenders have extended Commitments to make Loans to
Borrower; and
WHEREAS, Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as the
same from time to time may be amended, modified, supplemented or restated and in
effect, called the "Guaranty") made by Guarantors in favor of Agent; and
WHEREAS, in connection with the Credit Agreement and the Guaranty, Debtors
have executed and delivered to Lenders a Security Agreement, dated as of October
24, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "SECURITY AGREEMENT"); and
WHEREAS, as a condition precedent to the making of the initial Loans under
the Credit Agreement, Debtors are required to execute and deliver this Agreement
and to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Liabilities; and
WHEREAS, Debtors have duly authorized the execution, delivery and
performance of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce Lenders to make Loans (including
the initial Loans) to Borrower pursuant to the Credit Agreement, Debtors agree,
for the benefit of Lenders, as follows:
<PAGE>
SECTION 1. Definitions. Unless otherwise defined herein or the context
-----------
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided or provided by reference in the Security
Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
--------------------------
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations of Borrower and all of the obligations of each
Guarantor arising under the Guaranty (collectively, the "LIABILITIES"), Debtors
does hereby mortgage, pledge and grant to Agent for the benefit of Lenders a
continuing security interest in, all of the following property (the "TRADEMARK
COLLATERAL"), whether now or hereafter owned, acquired or existing:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks,
certification marks, collective marks, logos, other sources of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (each of the
foregoing items in this clause (a) being called a "TRADEMARK"), now
----------
existing anywhere in the world or hereafter adopted or acquired, whether
currently in use or not, all registrations and recordings thereof and all
applications in connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any foreign country, including
those referred to in Item A of Attachment 1 hereto;
------ ------------
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Attachment 1 hereto;
------ ------------
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
----------- ---
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in clauses (a) and (b); and
----------- ---
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by Debtors against third parties for past, present or
future infringement or dilution of any Trademark, Trademark registration,
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Attachment 1 hereto,
------ ------ ------------
or for any injury to the goodwill associated with the use of any Trademark
or for breach or enforcement of any Trademark license.
SECTION 3. Security Agreement. This Agreement has been executed and
------------------
delivered by Debtors for the purpose of registering the security interest of
Agent in the Trademark Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Agent under the Security
Agreement. The Security Agreement (and all rights and remedies of Lenders
thereunder) shall remain in full force and effect in accordance with its terms.
<PAGE>
SECTION 4. Release of Security Interest. Upon payment in full of all
----------------------------
Liabilities and the termination of all Commitments, Lenders shall, at Debtors'
expense, execute and deliver to Debtors all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Trademark Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each Debtor does hereby further acknowledge
--------------
and affirm that the rights and remedies of Lenders with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which (including the
remedies provided for therein) are incorporated by reference herein as if fully
set forth herein.
SECTION 6. Credit Document, etc. This Agreement is a Credit Document
--------------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
[remainder of page intentionally left blank]
<PAGE>
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ David J. Thompson
_________________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
MIKOHN NEVADA, a Nevada corporation
By: /s/ David J. Thompson
_________________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
MGC, INC., a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
CASINO EXCITEMENT, INC., a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
FIRST SOURCE FINANCIAL LLP, individually and in
its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Edward A. Szarkowicz
______________________________
Edward A. Szarkowicz
Senior Vice President
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the State
-----------------
of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known to me
-----------------
to be the Chairman & CEO of MIKOHN GAMING CORPORATION, a Nevada corporation, and
--------------
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
----
/s/ Wanda M. Jacobson
----------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the State
-----------------
of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known to me
-----------------
to be the Chairman & CEO of MIKOHN NEVADA, a Nevada corporation, and
--------------
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
----
/s/ Wanda M. Jacobson
----------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the State
-----------------
of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known to me
-----------------
to be the Chairman & CEO of MGC, INC., a Nevada corporation, and
--------------
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
----
/s/ Wanda M. Jacobson
----------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the State
-----------------
of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known to me
-----------------
to be the Chairman & CEO of CASINO EXCITEMENT, INC.,a Nevada corporation, and
--------------
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
----
/s/ Wanda M. Jacobson
----------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
My Commission Expires:
____________________________________
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, O. Lynn Neistein, a notary public in and for said County, in
----------------
the State of aforesaid, DO HEREBY CERTIFY that Ed Szarkowicz personally known
-------------
to me to be a VP of FIRST SOURCE FINANCIAL, INC., a Delaware corporation, the
Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation, pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 29th day of October, 1997.
----
/s/ O. Lynn Neistein
[NOTARY SEAL APPEARS HERE] -----------------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
SCHEDULE I
to
Security Agreement
ITEM A. TRADEMARKS
REGISTERED TRADEMARKS
---------------------
Country/ Trademark Reg. No. Reg. Date
State
- ------- --------- -------- ---------
USA Mini Keno 1,466,437 11/24/87
USA Hold and Draw 1,465,650 11/17/87
USA Hold and Draw Bingo 1,466,436 11/24/87
USA Games of Nevada 2,000,899 09/17/96
USA MVP and design 2,043,083 03/11/97
USA MIKOHNVISION 2,043,081 03/11/97
USA MIKOHN 2,043,082 03/11/97
USA MIKOHN 1,824,259 03/01/94
NEVADA MoneyTime 09/04/97
NEVADA CasinoLink 09/04/97
NEVADA SafeJack 09/04/97
NEVADA Slottrak 09/04/97
NEVADA SuperLink 07/14/97
NEVADA PlayerTrak 09/04/97
NEVADA TableTrak 09/04/98
USA Casino Products 1,769,789
PENDING TRADEMARK APPLICATIONS
------------------------------
Country/State Trademark Serial No. Filing Date
- ------------- --------- ---------- -----------
USA MoneyTime 73/306/162 06/10/97
USA Mystery 75/346/800 08/06/97
<PAGE>
SCHEDULE I
to
Security Agreement
Item A. (Cont.) Trademarks
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Expected Products
Country Trademark Filing Date Services
- ------- --------- ----------- ---------
USA CasinoLink 11/10/97 Computer software and hardware for use
in providing Accounting, security, and
player information and Rating for
gaming and amusement machines and
casino games
USA SlotTrak 11/10/97 Computer software and hardware for use
in providing accounting, security, and
player information and Rating for
gaming and Amusement machines
USA SafeJack 11/10/97 Computer software and hardware for use
in providing accounting, security, and
player information and rating For
card games
USA Safebac 11/10/97 Computer software and hardware for use
in providing accounting, security, and
player information and rating For
card games
USA SuperLink 11/10/97 Computer software and hardware for use
in controlling jackpots in
gaming and amusement machines
<PAGE>
SCHEDULE I
to
Security Agreement
Item A. Trademarks
(Cont.)
USA PlayerTrak 11/14/97 Computer software and hardware for use
in obtaining information about and
rating players of casino table games,
gaming machines and amusement machines
USA TableTrak 11/14/97 Computer software and hardware for use
in obtaining information about and
rating players of casino table games,
gaming machines and Amusement machines
USA InstaTrak 11/14/97 Optical character recognition aparatus
with dot-matrix printer
USA Quickplay 11/14/97 Computer software and hardware for
enabling players to access gaming and
amusement machines through
preestablished credit accounts
USA CaddTrak 11/14/97 Computer software and hardware for
controlling graphic interface used in
providing accounting, security and
player information and rating for gaming
and amusement machines and casino games
<PAGE>
SCHEDULE I
to
Security Agreement
ITEM B. TRADEMARK LICENSES
Effective Expiration
Territory Trademark Licensor Licensee Date Date
--------- --------- -------- -------- ---------- ----
None
<PAGE>
PATENT SECURITY AGREEMENT
-------------------------
THIS AGREEMENT (PATENT), dated as of October 24, 1997 (herein, as the same
from time to time may be amended, modified, restated or supplemented and in
effect, called this "AGREEMENT"), is by and among MIKOHN GAMING CORPORATION, a
Nevada corporation ("BORROWER"), MIKOHN NEVADA, a Nevada corporation ("MIKOHN
NEVADA"), MGC, INC., a Nevada corporation ("MGC"), CASINO EXCITEMENT, INC., a
Nevada corporation ("CEI"), (Mikohn Nevada, MGC and CEI sometimes hereinafter
are referred to individually as each "Guarantor" and collectively as
"Guarantors," and Borrower and Guarantors sometimes hereinafter are referred to
individually as each "Debtor" and collectively as "Debtor"), and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("FSFP"), as
"AGENT" for all "LENDERS."
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Credit Agreement dated as of October 24, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among Borrower, FSFP, for
itself, as a Lender, and as Agent for all Lenders, and the financial
institutions parties thereto, Lenders have extended Commitments to make Loans to
Borrower; and
WHEREAS, Guarantors have guaranteed the payment and performance of the
Obligations pursuant to a certain Guaranty of even date herewith (herein, as the
same from time to time may be amended, modified, supplemented or restated and in
effect, called the "Guaranty") made by Guarantors in favor of Agent; and
WHEREAS, in connection with the Credit Agreement and the Guaranty, Debtors
have executed and delivered to Lenders a Security Agreement, dated as of October
24, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "SECURITY AGREEMENT"); and
WHEREAS, as a condition precedent to the making of the initial Loans under
the Credit Agreement, Debtors are required to execute and deliver this Agreement
and to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Liabilities; and
WHEREAS, Debtors have duly authorized the execution, delivery and
performance of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce Lenders to make Loans (including
the initial Loans) to Borrower pursuant to the Credit Agreement, Debtors agree,
for the benefit of Lenders, as follows:
<PAGE>
SECTION 1. Definitions. Unless otherwise defined herein or the context
-----------
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided or provided by reference in the Security
Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
--------------------------
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations of Borrower and all of the obligations of each
Guarantor arising under the Guaranty (collectively, the "LIABILITIES"), Debtors
hereby mortgage, pledge and grant to Agent for the benefit of Lenders a
continuing security interest in, all of the following property (the "PATENT
COLLATERAL"), whether now or hereafter owned, acquired or existing:
(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Attachment 1 hereto;
------ ------------
(b) all patent licenses, including each patent license referred to in
Item B of Attachment 1 hereto;
------ ------------
(c) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
the foregoing clauses (a) and b; and
----------- -
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Attachment 1 hereto, and for breach or enforcement
------ ------------
of any patent license, including any patent license referred to in Item B
------
of Attachment 1 hereto, and all rights corresponding thereto throughout the
------------
world.
SECTION 3. Security Agreement. This Agreement has been executed and
------------------
delivered by Debtors for the purpose of registering the security interest of
Agent in the Patent Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Agent under the Security
Agreement. The Security Agreement (and all rights and remedies of Agent
thereunder) shall remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
----------------------------
Liabilities and the termination of all Commitments, Lenders shall, at Debtors'
expense, execute and deliver to Debtors all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Patent Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each Debtor does hereby further acknowledge
--------------
and affirm that the rights and remedies of Lenders with respect to the security
interest in the Patent Collateral granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which (including the remedies
provided for therein) are incorporated by reference herein as if fully set forth
herein.
<PAGE>
SECTION 6. Credit Document, etc. This Agreement is a Credit Document
--------------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
MIKOHN NEVADA, a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
MGC, INC., a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
CASINO EXCITEMENT, INC., a Nevada corporation
By: /s/ David J. Thompson
_______________________________
Name: David J. Thompson
______________________________
Title: Chairman of the Board & CEO
______________________________
FIRST SOURCE FINANCIAL LLP, individually and in
its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Edward A. Szarkowicz
______________________________
Edward A. Szarkowicz
Vice President
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known
to me to be the Chairman/CEO of MIKOHN GAMING CORPORATION, a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/Wanda M. Jacobson
[notary seal] -----------------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known
to me to be the Chairman/CEO of MIKOHN NEVADA, a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/Wanda M. Jacobson
[notary seal] ------------------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known
to me to be the Chairman/CEO of MGC, INC., a Nevada corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as such officer of said
corporation, pursuant to authority given by the Board of Directors of said
corporation as such person's free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/Wanda M. Jacobson
[notary seal] ----------------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
I, Wanda M. Jacobson, a notary public in and for said County, in the
State of aforesaid, DO HEREBY CERTIFY that David J. Thompson, personally known
to me to be the Chairman/CEO of CASINO EXCITEMENT, INC., a Nevada
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he/she signed and delivered the said instrument as such
officer of said corporation, pursuant to authority given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 23rd day of October, 1997.
/s/Wanda M. Jacobson
[notary seal] ------------------------------
Notary Public
My Commission Expires:
____________________________________
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, O. Lynn Neistein, a notary public in and for said County, in the State
of aforesaid, DO HEREBY CERTIFY that Edward A. Szarkowicz personally known to me
to be a VP of FIRST SOURCE FINANCIAL, INC., a Delaware corporation, the
Agent/Manager of First Source Financial LLP, an Illinois registered limited
liability partnership, and personally known to me to be the same person whose
name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
such officer of said corporation, pursuant to authority, given by the Board of
Directors of said corporation as such person's free and voluntary act, and as
the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 29th day of October, 1997.
/s/O. Lynn Neistein
________________________
Notary Public
My Commission Expires:
____________________________________
[notary seal]
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM A. PATENTS
<TABLE>
<CAPTION>
PATENTS
-------
<S> <C> <C> <C> <C>
COUNTRY PATENT NO. ISSUE DATE INVENTOR(S) TITLE
- ------- ---------- ---------- ----------- -----
USA 5,096,196 03/17/92 Gutknechtt & Gaming Apparatus
Wichinsky
USA 4,496,160 01/29/85 Wichinsky & Coin Projector and
Gutknecht Target Game Apparatus-
Flip-It
USA Des 272,920 03/06/84 Wichinsky & Gaming Machine
Gutknecht
USA Des 278,069 03/19/85 Wichinsky Slot machine
USA 5,103,081 04/07/92 Fisher, Vedeen Apparatus and Method
& Gutknecht for Reading Data
Encoded on Circular
Objects, such as
Gaming Chips
USA 5,342,049 08/30/94 Wichinsky, Gaming Machine with
Gutknecht & Skill Feature
Fernandez
USA 5,482,289 01/09/96 Weingardt Method of Playing a
Bingo Game with
Progressive Jackpot
USA 5,642,160 06/24/97 Bennett Digital Image Capture
System for Photo
Identification Cards
USA 5,550,359 08/27/96 Bennett Time and Attendance
System and Method
Therefor
USA 5,536,016 07/16/96 Thompson Progressive System for
a Match Number Game
and Method Therefor
</TABLE>
1
<PAGE>
SCHEDULE II
to
Security Agreement
<TABLE>
<CAPTION>
ITEM A. (CON'T.) PATENTS
<S> <C> <C> <C> <C>
USA 5,586,936 12/24/96 Bennett, Nino Automated Gaming Table
& Todoroff Tracking System and Method
Therefor
USA 5,374,061 12/20/94 Albrecht Card Dispensing Shoe
Having a Counting Device
and Method of Using the
Same
USA 5,116,055 05/26/92 Tracy Progressive Jackpot Gaming
System Linking Gaming
Machines with Different Hit
Frequencies and
Denominations
USA 5,280,909 01/25/94 Tracy Gaming System with
Progessive Jackpot
USA 5,344,144 09/06/94 Canon Progressive Jackpot Gaming
System with Enhanced
Accumulator
USA 5,605,334 02/25/97 McCrea, Jr. Secure Multi-Site Progressive
Jackpot System for Live
Card Games
PENDING PATENT APPLICATIONS
---------------------------
COUNTRY SERIAL NO. FILING DATE INVENTOR(S) TITLE
- ------- ---------- ----------- ----------- -----
USA 08/602,074 02/15/96 McCrea, Jr. Jackpot Systems for
08/933,636 09/19/97 McCrea, Jr. Live Card Games
Based Upon Game
Play Wagering And
Method Therefore
</TABLE>
2
<PAGE>
SCHEDULE II
to
Security Agreement
<TABLE>
<CAPTION>
ITEM A. (CON'T.) PATENTS
<S> <C> <C> <C> <C>
USA 08/665,889 06/19/96 Rykowski Improved Lens
Design for Outdoor
Sign
USA 08/665,888 06/19/96 Rykowski Incandescent Visual
Display System
USA 07/577,436 09/04/90 Green, Olsen A Configurable LED
08/893,124 07/15/97 Green, Olsen Matrix Display
USA 08/516,882 08/18/95 Barlow Large Incandescent
Live Image Display
System
USA 08/666,752 06/19/96 Barlow Incandescent Visual
Display System
USA 08/699,151 08/16/96 Barlow Visual Display
Lighting System
Having Front and
Rear Access
USA 60/056,692 08/28/97 Pierce Multi-Player Gaming
Machines
PATENT APPLICATIONS IN PREPARATION
----------------------------------
COUNTRY DOCKET NO. FILING DATE INVENTOR(S) TITLE
- ------- ---------- ----------- ----------- -----
USA 1482/132 10/07/97 Oliver Intelligent Casino
Chip System
USA 1482/134 10/11/97 Pierce Automated Wheel
Game
</TABLE>
3
<PAGE>
SCHEDULE II
to
Security Agreement
<TABLE>
<CAPTION>
ITEM A. (CON'T.) PATENTS
<S> <C> <C> <C> <C>
USA 1482/135 10/11/97 Pierce Stepper Dice Bonus
Game
USA 1482/136 10/11/97 Pierce Wheel with Lighted
Player Table and
Multimedia Effects
USA 1482/137 10/11/97 Pierce Modular Giant
Gaming System
USA 1482/112 10/13/97 Thompson Pari-Mutuel Gaming
Invention
USA 1505/5 12/09/94 Carlson Universal Gaming
Engine
USA 1482/106 06/24/97 Saunders Cashless Method for
a Gaming System
USA 1482/86 06/24/97 Sorenson & Cashless Device for
Saunders a Gaming System
</TABLE>
4
<PAGE>
SCHEDULE II
to
Security Agreement
ITEM B. PATENT LICENSES
---------------
<TABLE>
<CAPTION>
EFFECTIVE EXPIRATION SUBJECT
COUNTRY INVENTOR LICENSEE DATE DATE MATTER
- ------- -------- -------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
USA Weingardt Weingardt 01/09/96 Method of Playing a
Bingo Game with
Progressive Jackpot
USA McCrea, Jr. Mikohn 02/25/97 Secure Multi-Site
Progressive Jackpot
System for Live Card
Games
USA McCrea, Jr. Mikohn 07/03/97 Jackpot System for
Live Card Games
Based Upon Game
Play Wagering and
Method Therefore
</TABLE>
5
<PAGE>
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT, dated as of October __, 1997 (herein, as the same
from time to time may be amended, modified, restated or supplemented and in
effect, called this "AGREEMENT"), is by and between MIKOHN GAMING CORPORATION, a
Nevada corporation, (herein called "PLEDGOR"), and FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership ("FSFP"), as "AGENT" for
all "LENDERS" (as such terms are defined in the Credit Agreement described
below).
BACKGROUND:
1. Pledgor, and FSFP, for itself, as a Lender, and as Agent for all
Lenders, and the financial institutions from time to time party thereto, have
entered into a certain Credit Agreement of even date herewith (herein, as the
same may be amended, restated, supplemented or otherwise modified from time to
time, called the "CREDIT AGREEMENT"), pursuant to which Lenders have agreed to
make certain Loans (as defined in the Credit Agreement) and other financial
accommodations to or for the account of Pledgor.
2. One of the conditions precedent to the obligations of Lenders under
the Credit Agreement is that Pledgor shall have pledged to Agent, as security
for the Obligations, 100% of the issued and outstanding capital stock of CEI and
65% of the issued and outstanding capital stock of each Foreign Subsidiary,
which capital stock is described on Schedule I hereto.
----------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Pledgor agrees with Agent that:
1. DEFINITIONS. Capitalized terms used but not elsewhere defined herein
-----------
shall have the respective meanings ascribed to such terms in the Credit
Agreement. When used herein, the following terms shall have the following
meanings:
COLLATERAL shall have the meaning assigned to such term in Section 2.
---------
ISSUER shall mean the issuer of any Pledged Shares or other Collateral.
PLEDGED SHARES shall have the meaning assigned to such term in Section 2.
---------
2. PLEDGE. To secure the prompt and complete payment and performance of
------
the Obligations and the obligations of Pledgor hereunder, Pledgor hereby
pledges, hypothecates, assigns, transfers, sets over and delivers unto Agent for
the benefit of Lenders and hereby grants to Agent for the benefit of Lenders a
continuing security interest in the following (herein collectively called the
"COLLATERAL"):
(a) the shares of stock described in Schedule I hereto and all shares
----------
of stock of CEI hereafter created or acquired by Pledgor (herein called the
"PLEDGED SHARES") and the certificates representing or evidencing the
Pledged Shares, and all cash, securities, interest, dividends, rights and
other property at any time and from time to time received,
<PAGE>
receivable or otherwise distributed after the Closing Date in respect of or
in exchange for any or all of such Pledged Shares;
(b) all other property hereafter delivered to Pledgor in substitution
for or in addition to any of the foregoing, all certificates and
instruments representing or evidencing such other property and all cash,
securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed after the
Closing Date in respect of or in exchange for any or all thereof; and
(c) all proceeds of all of the foregoing;
TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests,
privileges and preferences appertaining or incidental thereto, for the benefit
of Lenders, their successors and assigns, subject, however, to the terms,
------- -------
covenants and conditions hereafter set forth.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
(a) Pledgor represents and warrants to Lenders that: (i) the Pledged Shares
are duly authorized and validly issued and are fully paid and non-assessable;
(ii) Agent has a valid, first perfected security interest in the Collateral and
the proceeds thereof free of all Liens whatsoever, except the Lien created
hereunder; (iii) the Pledged Shares represent 100% of the issued and outstanding
capital stock of CEI (other than such capital stock issued to the successor in
interest to John Renton Young (deceased) as disclosed in Section 6.11 of the
Credit Agreement) and 65% of the issued and outstanding capital stock of each
Foreign Subsidiary; and (iv) Pledgor will, at all times, keep pledged to Agent
pursuant hereto 100% of the issued and outstanding capital stock of CEI and 65%
of the issued and outstanding capital stock of each Foreign Subsidiary. Pledgor
agrees to endorse and deliver to Lenders for pledge hereunder, promptly upon its
obtaining thereof, any additional Collateral. As of the date of any such
delivery of additional shares, certificates or instruments to Lenders, Pledgor
represents and warrants that (x) Pledgor will own such shares, certificates and
instruments free and clear of any rights of any other Person (other than
pursuant to this Agreement), (y) Pledgor will have good and marketable title to
said shares, certificates and instruments and have the right to pledge such
shares, certificates or instruments to Lenders pursuant to this Agreement and
(z) Pledgor will have pledged to Lenders, as at such date, 100% of the issued
and outstanding capital stock of CEI (other than such capital stock issued to
the successor in interest to John Renton Young (deceased) as disclosed in
Section 6.11 of the Credit Agreement) and 65% of the issued and outstanding
capital stock of each Foreign Subsidiary. Pledgor shall have represented and
warranted, by delivery of any additional shares, certificates or instruments,
that Lenders have a valid, first perfected security interest in said shares,
certificates or instruments and the proceeds thereof free and clear of all Liens
whatsoever. All documentary, stamp or other taxes or fees owing in connection
with the issuance, transfer and/or pledge of the Pledged Shares and other
certificates or instruments have been paid and will hereafter be paid by Pledgor
as such become due and payable.
2
<PAGE>
(b) Pledgor represents and warrants to Lenders that Pledgor is the lawful
owner of the Pledged Shares, free and clear of all Liens, except the Lien
created hereunder, with full right to deliver, pledge, assign and transfer such
Pledged Shares to Lenders as Pledged Shares hereunder.
(c) Until the Obligations have been paid in full and the Commitments have
been terminated in accordance with the Credit Agreement, Pledgor will:
(1) at its sole expense, promptly deliver to Agent, from time to time
upon request of Agent, such assignments separate from certificate and other
documents and instruments, in each case in form and substance satisfactory
to Agent, with respect to the Collateral as Agent may reasonably request,
to preserve and protect, and to enable Agent to enforce for the benefit of
Lenders, its rights and remedies hereunder;
(2) not sell, assign, exchange or otherwise transfer any of its rights
to any of the Collateral;
(3) not create or suffer to exist any Lien against, in or with respect
to any of the Collateral except for the pledge hereunder and the Lien
created hereby;
(4) not make or consent to any amendment or other modification or
waiver with respect to any of the Collateral, or enter into any agreement
or permit to exist any restriction with respect to any of the Collateral
other than pursuant hereto and/or pursuant to applicable securities laws;
and
(5) not take or fail to take any action which would in any manner
impair the enforceability of Agent's Lien in any of the Collateral.
(d) Each representation and warranty made or to be made herein by Pledgor
shall be deemed remade as of and at the date of each Loan made from time to time
under or in connection with the Credit Agreement with the same effect as if made
contemporaneously with the making of such Loan.
4. CARE OF COLLATERAL. Agent shall be deemed to have exercised
------------------
reasonable care in the custody and preservation of the Collateral if Agent takes
such action for that purpose as Pledgor requests in writing, but failure of
Agent to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of Agent to preserve or protect any
rights with respect to the Collateral against prior or other parties, or to do
any act with respect to preservation of the Collateral so requested by Pledgor,
shall be deemed a failure to exercise reasonable care in the custody or
preservation of the Collateral.
3
<PAGE>
5. CERTAIN RIGHTS REGARDING COLLATERAL AND OBLIGATIONS.
---------------------------------------------------
(a) Subject to Sections 5(c) and 6 hereof, Agent from time to time, after
------------- -
the occurrence and during the continuance of an Event of Default, and without
notice to Pledgor, may (i) transfer all or any part of the Collateral into the
name of Agent or its nominee, with or without disclosing that such Collateral is
subject to the Lien hereunder, (ii) notify the parties obligated on any of the
Collateral to make payment directly to Agent of any amounts due or to become due
thereunder, (iii) enforce collection of any of the Collateral by suit or
otherwise, (iv) surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any obligations of any nature of any party with respect thereto
and (v) take control of any proceeds of the Collateral.
(b) Agent, from time to time and without notice to Pledgor, may take any or
all of the following actions (provided that actions taken under clause (v) may
only be taken after an Event of Default has occurred and is continuing): (i)
retain or obtain a Lien upon any property to secure payment and performance of
any of the Obligations or any obligation hereunder, (ii) retain or obtain the
primary or secondary obligation of any obligor or obligors, with respect to any
of the Obligations or any obligation hereunder, (iii) create, extend or renew
for any period (whether or not longer than the original period) or alter or
exchange any of the Obligations, or release or compromise any obligation of
Pledgor hereunder or any obligation of any nature of any other obligor with
respect to any of the Obligations or any obligation hereunder, (iv) release or
fail to perfect its Lien upon, or impair, surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Obligations or any obligation hereunder, or create, extend or renew for any
period (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property and (v) resort to the Collateral for payment of any of the
Obligations or any obligation hereunder, whether or not Agent (A) shall have
resorted to any other property securing any of the Obligations or any obligation
hereunder or (B) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Obligations or any obligation
hereunder (all of the actions referred to in preceding clauses (A) and (B) being
----------- ---
hereby expressly waived by Pledgor).
(c) Agent shall have no right to vote the Pledged Shares or other
Collateral or give consents, waivers or ratifications in respect thereof other
than during the continuance of an Event of Default. After the occurrence and
during the continuance of an Event of Default, unless such Event of Default
shall have been cured or waived, Pledgor shall have the right to vote any and
all of the Pledged Shares and other Collateral and give consents, waivers and
ratifications in respect thereof unless and until it receives notice from Agent
that such right has been terminated. Pledgor agrees to deliver (properly
endorsed when required) to Agent, after the occurrence and during the
continuance of an Event of Default, promptly upon request of Agent, such proxies
and other documents as may be necessary for Agent to exercise the voting power
with respect to the Pledged Shares and other Collateral then or previously owned
by Pledgor.
4
<PAGE>
6. DIVIDENDS, ETC.
--------------
(a) So long as no Event of Default shall have occurred and be continuing:
(1) Pledgor shall be entitled to receive and retain any and all
dividends on the Pledged Shares which it is otherwise entitled to receive.
(2) If the Pledged Shares or any part thereof shall have been
registered in the name of Agent, Agent shall execute and deliver (or cause
to be executed and delivered) to Pledgor all such dividend orders and other
instruments as Pledgor reasonably may request for the purpose of enabling
Pledgor to receive the dividends or other payments which Pledgor is
authorized to receive and retain pursuant to clause (i) above.
----------
(b) Upon the occurrence and during the continuance of an Event of Default
(i) all rights of Pledgor pursuant to Section 6(a)(i) hereof shall cease and
---------------
Agent shall have the sole and exclusive right and authority to receive and
retain the dividends which Pledgor would otherwise be authorized to retain, (ii)
all such dividends, and all other distributions and payments made on or in
respect of the Collateral which may at any time and from time to time be held by
Pledgor, shall, until delivery to Agent, be held by Pledgor separate and apart
from its other property in trust for Agent and (iii) any and all money and other
property paid over to or received by Agent pursuant to the provisions of this
paragraph (b) shall be retained by Agent as additional Collateral hereunder and
- -------------
be applied in accordance with the provisions hereof.
7. EVENT OF DEFAULT.
----------------
(a) Upon the occurrence and during the continuance of an Event of Default,
Agent may exercise from time to time any rights and remedies available to it
under the Uniform Commercial Code as in effect from time to time in Illinois or
otherwise available to it, including, without limitation, sale, assignment, or
other disposal of the Collateral in exchange for cash or credit. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if sent at least ten (10) days before such disposition, postage prepaid,
addressed to Pledgor either at the address of Pledgor shown below, or at any
other address of Pledgor appearing on the records of Agent. Any proceeds of any
disposition of Collateral shall be applied as provided in Section 8 hereof. No
---------
rights and remedies of Agent expressed hereunder are intended to be exclusive of
any other right or remedy, but every such right or remedy shall be cumulative
and shall be in addition to all other rights and remedies herein conferred, or
conferred upon Lenders under any other agreement or instrument relating to any
of the Obligations or security therefor or now or hereafter existing at law or
in equity or by statute. No delay on the part of Agent in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No action of
Agent permitted hereunder shall impair or affect the rights of Agent in and to
the Collateral.
5
<PAGE>
(b) Pledgor agrees that in any sale of any of the Collateral, Agent is
authorized to comply with any limitation or restriction in connection with such
sale as counsel may advise Agent is necessary to avoid any violation of
applicable law (including, without limitation, compliance with such procedures
as may restrict the number of prospective bidders and purchasers, require that
such prospective bidders and purchasers have certain qualifications, and
restrict such prospective bidders and purchasers to persons who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or resale of such Collateral), or in order to
obtain any required approval of the sale or of the purchaser by any governmental
regulatory authority or official, and Pledgor further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall Agent or any Lender be
liable nor accountable to Pledgor for any discount allowed by reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.
8. APPLICATION OF PROCEEDS. The proceeds of sale of Collateral sold
-----------------------
pursuant to the terms of Section 7 hereof and any cash held as Collateral
---------
hereunder shall be applied by Agent as set forth in Section 4.2 of the Credit
Agreement.
9. AUTHORITY OF AGENT. Agent shall have, and be entitled to exercise,
------------------
all such powers hereunder as are specifically delegated to Agent by the terms
hereof, together with such powers as are incidental thereto. Agent may execute
any of its duties hereunder by or through agents or employees and shall be
entitled to retain one counsel and to act in reliance upon the advice of such
counsel concerning all matters pertaining to its duties hereunder. Neither
Agent nor any director, officer or employee of Agent shall be liable for any
action taken or omitted to be taken by it hereunder or in connection herewith,
except for their own gross negligence or willful misconduct. Pledgor hereby
agrees to reimburse Agent, on demand, for all reasonable costs and expenses
incurred by Agent in connection with the enforcement of this Agreement
(including, without limitation, reasonable costs and expenses incurred by any
agent employed by Agent) and agrees to indemnify (which indemnification shall
survive any termination of this Agreement) and hold harmless Agent (and any such
agent) from and against any and all liability incurred by Agent (or such agent)
hereunder or in connection herewith, unless such liability shall be due to gross
negligence or willful misconduct on the part of Agent or such agent, as the case
may be.
10. TERMINATION. Subject to Section 16(e), Pledgor agrees that its pledge
----------- -------------
hereunder shall (notwithstanding, without limitation, that at any time or from
time to time all Obligations may have been paid in full) terminate only when all
Obligations (including, without limitation, any extensions or renewals of any
thereof) and all interest thereon and all expenses (including, without
limitation, reasonable attorneys' fees and legal expenses) paid or incurred by
Agent or the holder or the holders of the Notes in endeavoring to enforce this
Agreement, the Credit Agreement and the Credit Documents to which Lenders are a
party or of which Lenders are beneficiaries shall have been finally paid in full
and all Commitments under the Credit Agreement have been terminated, at which
time Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to Pledgor, or to such Person or Persons as Pledgor shall
designate, such of the Collateral (if any) as shall not have been sold or
otherwise applied by Lenders pursuant to the terms hereof and shall still be
6
<PAGE>
held by Lenders hereunder, together with appropriate instruments of termination,
reassignment and release, together with the cancellation and return of the
Notes. Any such reassignment shall be without recourse upon, or representation
or warranty (other than as to title and the absence of liens) by, Agent and at
the sole cost and expense of Pledgor.
11. NOTICES. All notices or other communications hereunder shall be given
-------
in the manner specified under Section 11.7 of the Credit Agreement.
12. BINDING AGREEMENT; ASSIGNMENT. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and assigns, except that
(i) Pledgor shall not assign this Agreement nor any interest herein nor in the
Collateral, nor any part thereof, nor otherwise pledge, encumber or grant any
option with respect to the Collateral, nor any part thereof.
13. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS. WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER
SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION
OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT.
14. SUBMISSION TO JURISDICTION. ALL DISPUTES ARISING UNDER THIS
--------------------------
AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT AGENT
ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST PLEDGOR OR ITS PROPERTY IN ANY LOCATION
REASONABLY SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY AGENT OR ANY LENDER. PLEDGOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
15. SERVICE OF PROCESS. PLEDGOR HEREBY WAIVES PERSONAL SERVICE UPON IT
------------------
AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, HEREBY IRREVOCABLY DESIGNATES
AND APPOINTS CT CORPORATION SYSTEM, WITH AN OFFICE ON THE DATE HEREOF AT 208
SOUTH LASALLE STREET,
7
<PAGE>
CHICAGO, ILLINOIS 60604, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS ISSUED BY ANY COURT IN ANY LEGAL
ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS AGREEMENT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO AGENT AT ITS ADDRESS AS PROVIDED IN SECTION 11.7 OF THE CREDIT AGREEMENT
EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY PLEDGOR REFUSES TO ACCEPT SERVICE, PLEDGOR HEREBY AGREES THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
16. JURY TRIAL. PLEDGOR AND AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY
----------
JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
17. LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY
-----------------------
LIABILITY TO PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR
LOSSES SUFFERED BY ANY SUCH PERSON IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT,
OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON AGENT OR ANY SUCH LENDER, THAT THE LOSSES
WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
18. FILING AS A FINANCING STATEMENT. At the option of the Agent, this
-------------------------------
Agreement, or a carbon, photographic or other reproduction of this Agreement or
of any Uniform Commercial Code financing statement covering the Collateral or
any portion thereof, shall be sufficient as a Uniform Commercial Code financing
statement and may be filed as such.
19. MISCELLANEOUS.
-------------
(a) No amendment to, modification or waiver of, or consent with respect to,
any provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed and delivered by Agent and Pledgor and then any
such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
8
<PAGE>
(b) The section headings in this Agreement are inserted for convenience of
reference and shall not be considered a part of this Agreement or used in its
interpretation.
(c) Except as otherwise set forth in the Credit Agreement and the Credit
Documents, Pledgor hereby expressly waives to the fullest extent permitted by
law: (i) notice of the acceptance by Agent or Lenders of this Agreement, (ii)
notice of the existence or creation or nonpayment of all or any of the
Obligations, (iii) presentment, demand, notice of dishonor, protest, and all
other notices whatsoever and (iv) all diligence in collection or protection of
or realization upon the Obligations or any portion thereof, any obligation
hereunder, or any security for or guaranty of any of the foregoing.
(d) Subject to the terms of the Credit Agreement, each Lender may, from
time to time, without notice to Pledgor, assign or transfer any or all of the
Obligations or any interest therein; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer thereof, such Obligations
shall be and remain Obligations for the purposes of this Agreement, and each and
every immediate and successive assignee or transferee of any of the Obligations
or of any interest therein shall, to the extent of the interest of such assignee
or transferee in the Obligations, be entitled to the benefits of this Agreement
to the same extent as if such assignee or transferee were a Lender.
(e) Pledgor agrees that, if at any time all or any part of any payment
theretofore applied by Lenders to any of the Obligations is or must be rescinded
or returned by Lenders for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of any Borrower), such Obligations
shall, for the purposes of this Agreement, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by Lenders, and the pledge by Pledgor hereunder
shall continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though such application by Lenders had not been made.
(f) No action of Agent permitted hereunder shall in any way affect or
impair the rights of Agent and the obligations of Pledgor under this Agreement.
Pledgor hereby acknowledges that there are no conditions to the effectiveness of
this Agreement.
(g) All obligations of Pledgor and rights of Agent, Lenders and any other
holder of any Note or a portion of the Obligations expressed in this Agreement
shall be in addition to and not in limitation of those provided under applicable
law or in any other written instrument or agreement relating to any of the
Obligations.
(h) This Agreement may be executed in any number of counterparts, each of
which shall for all purposes be deemed an original, but all such counterparts
shall constitute but one and the same Agreement. Pledgor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.
(i) Lenders are the current holder of all Obligations but may in the future
transfer, assign or sell certain Obligations, subject to the provisions of the
Credit Agreement.
[remainder of this page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
MIKOHN GAMING CORPORATION, a Nevada corporation
By: /s/ Don W. Stevens
-----------------------------
Name: Don W. Stevens
-----------------------------
Title: EVP
-----------------------------
FIRST SOURCE FINANCIAL LLP, individually and in
its capacity as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Edward A. Szarkowicz
------------------------
Edward A. Szarkowicz
Vice President
10
<PAGE>
SCHEDULE I
TO
PLEDGE AGREEMENT
STOCK OF CASINO EXCITEMENT, INC.
AND FOREIGN SUBSIDIARIES
LISTING OF STOCK PLEDGED
<TABLE>
<CAPTION>
NUMBER OF
CERTIFICATE SHARES OF
PLEDGED COMPANY NUMBER CAPITAL STOCK % OWNERSHIP
- --------------- ------ ------------- -----------
<S> <C> <C> <C>
Casino Excitement, Inc. 3 1 100%
Casino Excitement, Inc. 4 266,949 100%
Mikohn Europe B.V. uncertificated * 65%
security
Mikohn Gaming *
Australasia Pty. Ltd. * 65%
Mikohn South
America, S.A. * * 65%
</TABLE>
* Information to be furnished post closing
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF
NEVADA
[ART]
NUMBER SHARES
3 **1*****
CASINO EXCITEMENT, INC.
Capitalization 10,000,000 Shares Common Stock $0.01 Par Value
THIS CERTIFIES THAT MIKOHN GAMING CORPORATION is the
-------------------------
registered holder of One******************************* Shares
----------------------------------
CASINO EXCITEMENT, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this 29th day of August A.D. 1994
---- ------ --
/s/ David J. Thompson [SEAL] /s/ David J. Thompson
- --------------------- ---------------------
David J. Thompson SECRETARY David J. Thompson PRESIDENT
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, the undersigned hereby sell, assign and transfer unto:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------
- --------------------------------------------
--------------------------------------------
266,999 Shares of the Common Stock of Casino Excitement, Inc. standing in the
name of Mikohn Gaming Corporation on the books of said Corporation represented
by Certificate No. 4 herewith and do hereby irrevocably constitute and appoint
______________________, attorney to transfer said stock on the books of the
within named Corporation with full power of substitution.
MIKOHN GAMING CORPORATION
Dated: October 24, 1997 By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Its: Secretary
-------------------------------
<PAGE>
BANK AGENCY AGREEMENT
TO: Bank of America October 24, 1997
101 N. 1st Avenue
Phoenix, Arizona 85003
Attn: Gary L. Richerson
Vice President
Ladies and Gentlemen:
This Letter Agreement, between your bank, Bank of America National Trust
and Savings Association (the "Bank"), Mikohn Gaming Corporation and its
------
subsidiaries Casino Excitement, Inc. and Mikohn Nevada (collectively, the
"COMPANY"), First Source Financial LLP (the "LENDER"), First Source Financial,
Inc. (the "SERVICER") and The Bank of New York (the "COLLATERAL AGENT") shall
serve as instructions regarding the operation and procedures for the Accounts
specifically identified in Paragraph 2 below.
1. Effectiveness. This Agreement shall take effect immediately upon
-------------
written notice to you from the Servicer as to the occurrence of the closings
under the Credit Agreement dated as of October 24, 1997 (such Credit Agreement,
as the same may be amended, restated, supplemented or otherwise modified from
time to time hereinafter is referred to as the "Credit Agreement") between the
Company, the Lender and the other financial institutions which now or may
hereafter become party thereto.
2. Account Identification. This Agreement applies to Account Nos. 990-
----------------------
084-774, 990-084-873 and 990-111-882 (individually, each an "ACCOUNT" and
collectively, the "ACCOUNTS"), maintained by the Company at the Bank. No other
bank accounts (except for payroll accounts, petty cash accounts and that certain
certificate of deposit account no. 190-309-062 opened by Company with Bank which
has been pledged and assigned to Bank as security for a letter of credit issued
by Bank for the account of Company) shall be opened by the Company at the Bank
without Lender's prior written consent.
3. Security Interest; Agency. (a) The Company has granted, and does
-------------------------
hereby grant, to the Lender a continuing lien upon, and security interest in,
all right, title and interest of the Company in and to all funds, items,
instruments, investments, securities and other things of value at any time paid,
deposited, credited or held (whether for collection, provisionally or otherwise)
in each Account (collectively, the "ACCOUNT COLLATERAL").
(b) The Lender hereby appoints the Bank as the Lender's pledgee-in-
possession for the Accounts and all of the Account Collateral, and the Bank by
its execution and delivery of this Agreement hereby accepts such appointment and
agrees to be bound by the terms of this Agreement. The Company hereby agrees to
such appointment of the Bank and further agrees that the Bank, on behalf of the
Lender, shall be entitled to exercise, upon the instructions of the Lender or
the Servicer, acting in its capacity as agent on behalf of the Lender, any and
all rights
<PAGE>
which the Lender may have under or in connection with the Credit Agreement, all
promissory notes, all agreements pursuant to which security interests and liens
are granted to the Lender or under applicable law with respect to the Accounts
and all other Account collateral. Upon written notice (a "Company Default
Notice") from the Lender or the Servicer to the Bank of the occurrence of an
Event of Default under the Credit Agreement, the Bank shall take such action,
without any cost or expense to the Bank, as from time to time shall be specified
in writing from the Lender, or the Servicer, acting in its capacity as agent on
behalf of the Lender, to enable the Lender to exercise its rights and remedies
with respect to the lien and security interest described in this Section 3.
---------
(c) The Lender and the Servicer have entered into certain financing
arrangements with the Collateral Agent, and certain other financial institutions
on whose behalf the Collateral Agent is authorized to act (the "FINANCING"). As
part of the Financing, the Lender has granted to the Collateral Agent a
continuing lien upon, and security interest in, all of the Lender's interests in
the property of the Company, including, without limitation, all of the Lender's
interest in the Accounts and the Account Collateral. The Collateral Agent holds
its lien and security interest described in this Section 3 on behalf of certain
---------
other "SECURED CREDITORS" (as such term is defined in the various agreements
evidencing the Financing) and as such, acts as the contractual representative
for such Secured Creditors. Any other provision of this Agreement to the
contrary notwithstanding, each of the Lender, the Servicer and the Company
hereby authorize the Bank after it has received notice from the Collateral Agent
that an Event of Termination has occurred under the Financing, to take such
action, without any cost or expense to the Bank, as shall from time to time
thereafter be specified in writing by the Collateral Agent to enable the
Collateral Agent to exercise its rights and remedies with respect to the lien
and security interest granted to the Collateral Agent as part of the Financing,
provided that such action is not in contravention of Section 4 of this
-
Agreement.
(d) Any other provision of this Agreement to the contrary notwithstanding,
each of the Lender, the Servicer, the Company and the Bank hereby agree that
after the Bank has received notice from the Collateral Agent that an "EVENT OF
TERMINATION" under the Financing has occurred (i) any instructions given to the
Bank by the Collateral Agent shall supersede those given by the Lender or the
Servicer acting on the Lender's behalf and (ii) the Bank shall not comply with
any instructions given by the Lender or the Servicer unless otherwise authorized
to do so by the Collateral Agent.
4. Events of Default and Termination. (a) At all times after the Bank's
---------------------------------
receipt of any Company Default Notice from the Lender or the Servicer, the Bank
shall follow the instructions of the Lender and the Servicer as to the holding,
investment and transfer of all collected amounts from time to time on deposit in
the Accounts. In addition, the Company agrees that the Bank may act as the agent
of Lender in exercising, as to any funds or items from time to time on deposit
in any of the Accounts, any rights of setoff provided by applicable law or by
the Credit Agreement or any other right or remedy. The Bank shall be entitled to
rely, without independent investigation, on any statement of the Lender or the
Servicer to the effect that an Event of Default under the Credit
-2-
<PAGE>
Agreement has occurred and is continuing or to the effect that any exercise of
set-off or any other right or remedy requested by the Lender or the Servicer is
permitted under applicable law or the Credit Agreement.
(b) Any other provision of this Agreement to the contrary notwithstanding,
at all times after the Bank's receipt of written notice from the Collateral
Agent that an Event of Termination under the Financing has occurred, the Bank
shall no longer follow any instructions given to the Bank by the Servicer or the
Lender, but shall thereafter act only upon the express instructions of the
Collateral Agent. All of the rights and remedies granted to the Lender or the
Servicer hereunder shall immediately upon such notice of an Event of Termination
under the Financing become available to the Collateral Agent at such time. Each
of the Company, the Lender and the Servicer agrees that the Bank shall be
entitled to rely, without independent investigation, on any statement of the
Collateral Agent to the effect that an Event of Termination has occurred and is
continuing or to the effect that any exercise of set-off requested by the
Collateral Agent is permitted under applicable law or the agreements executed
and delivered in connection with the Financing.
5. Information. The Bank shall provide the Lender and the Servicer with
-----------
(a) copies of any periodic statements with respect to each Account which are
delivered to the Company and (b) such information with respect to the Accounts
as the Lender or the Servicer may from time to time reasonably request, and
following notice from the Collateral Agent that an Event of Termination under
the Financing has occurred, such information as the Collateral Agent shall
reasonably request, and the Company hereby consents to such information being
provided to the Lender, the Servicer or the Collateral Agent, as the case may
be. Bank shall simultaneously notify the Company in writing that such
information has been requested by the Lender, the Servicer and/or the Collateral
Agent.
6. Compensation. Compensation to the Bank for providing the services
------------
contemplated herein shall be mutually agreed upon between the Bank and the
Company from time to time.
7. Exculpation. The Bank undertakes to perform only such duties as are
-----------
expressly set forth herein. Notwithstanding any other provision of this
Agreement, it is agreed by the parties hereto that the Bank shall not be liable
for any action taken at the request of the Lender, the Servicer or the
Collateral Agent, except for the Bank's own gross negligence or willful
misconduct. In no event shall the Bank be liable for losses or delays resulting
from computer malfunction, interruption of communication facilities, labor
difficulties or other causes beyond the Bank's reasonable control or for
indirect, special or consequential damages. Notwithstanding anything contained
herein to the contrary, the Bank is authorized to follow its usual procedures in
the event any of the Accounts or any check, draft, or other order for payment of
money should be or become the subject of any writ, levy, order or other similar
judicial or regulatory order or process.
8. Irrevocable Agreements. Each of the Company, the Lender and the
----------------------
Servicer acknowledges that the agreements made by it and the authorizations
granted by it herein are
-3-
<PAGE>
irrevocable and that the authorizations granted in Sections 3, 4 and 5 are
-------- - - -
powers coupled with an interest.
9. Setoff. All funds deposited into the Accounts shall not be subject to
------
deductions, setoff, banker's liens or any other right in favor of any person
other than the Lender or the Collateral Agent, except that (i) the Bank may
setoff against the Accounts the face amount of any check deposited in and
credited to such Account which is subsequently returned for any reason, (ii) for
all past due compensation and expenses with respect to the Accounts as provided
in Section 6 and (iii) for any compensation or expenses due from Company under
---------
any deposit or cash management service agreements between Company and the Bank
related to the Accounts.
10. Miscellaneous. This Agreement shall be effective as provided in
------------- --
Section 1 hereof. This Agreement shall supersede any other agreement relating
- ------- -
to the matters referred to herein, including, without limitation, any other
account agreement between the Lender and the Bank. This Agreement constitutes
the entire agreement with respect to the services provided hereunder and is
binding upon the parties hereto and their respective successors and assigns
(including any trustee of the Company appointed or elected in any action under
the Bankruptcy Reform Act of 1978, as amended) and shall inure to their benefit.
The Lender may act as agent for other certain financial institutions which may
hold indebtedness secured by the security interest and lien described in Section
-------
3, and the Lender and other such holders may in the future transfer, assign or
- -
sell all or a part of their respective interests. Neither this Agreement nor
any provision hereof maybe changed, amended, modified or waived orally, but only
by an instrument in writing signed by the parties hereto, provided that such
--------
instrument need be signed only by the Bank, the Lender, the Servicer and the
Collateral Agent if it does not in any manner change any rights or obligations
of, or authorizations granted by, the Company hereunder and written notice
thereof (together with a copy of such instrument) is promptly thereafter
provided by the Lender, the Servicer or the Collateral Agent to the Company.
THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT THAT
THE RIGHTS, DUTIES AND OBLIGATIONS OF THE COLLATERAL AGENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE RIGHTS, DUTIES AND
OBLIGATIONS OF THE BANK SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEVADA. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. All obligations and rights of the
parties hereto expressed herein shall be in addition to and not in limitation of
those provided by applicable law. This Agreement may be executed in any number
of counterparts which together shall constitute, one and the same instrument.
11. Termination. This Agreement may be terminated by the Lender (or the
-----------
Servicer acting on behalf of the Lender) or the Bank upon 30 days' advance
written notice to the other parties hereto. All rights of the Bank under
Sections 6 and 7, and rights of any party for any breach of this Agreement, for
- -------- - -
the period prior to any such termination shall survive such
-4-
<PAGE>
termination (or any termination pursuant to the immediately succeeding
sentence). Upon payment in full of all Obligations (as defined in the Credit
Agreement) and the termination of the obligation of the Lenders to lend any
funds to the Company pursuant to the Credit Agreement, the Agent, Servicer
and/or Collateral Agent, as the case may be, shall so notify the Bank that this
Letter Agreement shall terminate and be of no further force or effect.
12. Notices. All notices, requests or other communications required or
-------
desired to be given to the Company, the Lender, the Servicer, the Collateral
Agent or the Bank hereunder shall be given in writing (including facsimile
transmission or similar writing) at the address or facsimile number specified
below:
Lender: First Source Financial LLP
c/o First Source Financial, Inc.
2850 West Golf Road, 5th Floor
Rolling Meadows, Illinois 60008
Attention: Loan Administration
Telephone: (847) 734-4040
Facsimile: (847) 734-7911
Servicer: First Source Financial, Inc.
2850 West Golf Road 5th Floor
Rolling Meadows, Illinois 60008
Attention: Loan Administration
Telephone: (847) 734-4040
Facsimile: (847) 734-7911
Bank: Bank of America
101 N. 1st Avenue
Phoenix, Arizona 85003
Attention: Gary Richerson
Telephone: 602-594-2147
Facsimile: 602-594-2750
Collateral Agent: The Bank of New York
101 Barclay, Floor 12E
New York, New York 10286
Attention: Corporate Trust -- Cheryl L. Laser
Telephone: (212) 815-5286
Facsimile: (212) 815-5999
-5-
<PAGE>
Company: Mikohn Gaming Corporation
1045 Palms Airport Drive
Las Vegas, Nevada 89119
Attention: Charles McCrea, Jr., General Counsel
Telephone: (702) 896-3890
Facsimile: (702) 263-1661
Any party may change its address or facsimile number for notices hereunder
by notice to each other party hereunder. Each notice, request or other
communication shall be effective (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and
confirmation of receipt is made by the appropriate party, (b) if given by mail,
72 hours after such communication is deposited in the mails with registered
first class postage prepaid, addressed as aforesaid or (c) if given by any other
means, when delivered at the address specified in this Section.
[SIGNATURE PAGE FOLLOWS]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed and delivered by their duly
authorized representatives as of the date first set forth above.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/Gary Richerson
-------------------------------
Name: Gary Richerson
---------------------------
Title: Vice President
--------------------------
FIRST SOURCE FINANCIAL LLP
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
FIRST SOURCE FINANCIAL, INC.
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
THE BANK OF NEW YORK
as Collateral Agent
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
Accepted and Agreed to as of
the date first above written:
MIKOHN GAMING CORPORATION
By:/s/Dan Stevens
----------------------
Name: Dan Stevens
------------------
Title: EVP & CFO
-----------------
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed and delivered by their duly
authorized representatives as of the date first set forth above.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
FIRST SOURCE FINANCIAL LLP
By:/s/
-------------------------------
Name:
---------------------------
Title:
--------------------------
FIRST SOURCE FINANCIAL, INC.
By:/s/
-------------------------------
Name:
--------------------------
Title:
-------------------------
THE BANK OF NEW YORK
as Collateral Agent
By:/s/Cheryl L. Laser
-------------------------------
Name: Cheryl L. Laser
--------------------------
Title: Assistant Vice President
-------------------------
Accepted and Agreed to as of
the date first above written:
MIKOHN GAMING CORPORATION
By:/s/Don W. Stevens
----------------------
Name: Don W. Stevens
------------------
Title: EVP & CFO
-----------------
<PAGE>
BANK AGENCY AGREEMENT
---------------------
TO: U.S. Bank National Association October 24, 1997
2300 W. Sahara Avenue
Suite 120
Las Vegas, Nevada 89102
Attn: Terry Gentry
Ladies and Gentlemen:
This Letter Agreement, between your bank (the "BANK"), Mikohn Gaming
Corporation (the "COMPANY"), First Source Financial LLP (the "LENDER"), First
Source Financial, Inc. (the "SERVICER") and The Bank of New York (the
"COLLATERAL AGENT") shall serve as instructions regarding the operation and
procedures for the Accounts specifically identified herein, maintained at the
Bank by, or for the deposit, credit or custody of property of, the Company.
1. Effectiveness. This Agreement shall take effect immediately upon
-------------
written notice to you from the Servicer as to the occurrence of the closings
under the Credit Agreement dated as of October __, 1997 (such Credit Agreement,
as the same may be amended, restated, supplemented or otherwise modified from
time to time hereinafter is referred to as the "Credit Agreement") between the
Company, the Lender and the other financial institutions which now or may
hereafter become party thereto.
2. Account Identification. This Agreement applies to Account Nos.
----------------------
33352031 (Inves) and 8470000178 (DDA) (individually, each an "ACCOUNT" and
collectively, the "ACCOUNTS"), maintained by the Company at the Bank. No other
bank accounts shall be opened by the Company at the Bank without Lender's prior
written consent.
3. Security Interest; Agency. (a) The Company has granted, and
-------------------------
does hereby grant, to the Lender a continuing lien upon, and security interest
in, all right, title and interest of the Company in and to all funds, items,
instruments, investments, securities and other things of value at any time paid,
deposited, credited or held (whether for collection, provisionally or otherwise)
in each Account and all other property of the Company from time to time in the
possession or under the control of, or in transit to the Bank or any agent,
bailee or custodian thereof, and all proceeds and products of all of the
foregoing, including, without limitation, any of the foregoing from time to time
paid, deposited, or held in any Account (collectively, the "ACCOUNT
COLLATERAL").
(b) The Lender hereby appoints the Bank as the Lender's pledgee-in-
possession for the Accounts and all of the Account Collateral, and the Bank by
its execution and delivery of this Agreement hereby accepts such appointment and
agrees to be bound by the terms of this Agreement. The Company hereby agrees to
such appointment of the Bank and further agrees that the Bank, on behalf of the
Lender, shall be entitled to exercise, upon the instructions of the Lender or
the Servicer, acting in its capacity as agent on behalf of the
<PAGE>
Lender, any and all rights which the Lender may have under or in connection with
the Credit Agreement, all promissory notes, all agreements pursuant to which
security interests and liens are granted to the Lender or under applicable law
with respect to the Accounts and all other Account collateral. Upon written
notice (a "Company Default Notice") from the Lender or the Servicer to the Bank
of the occurrence of an Event of Default under the Credit Agreement, the Bank
shall take such action as from time to time shall be specified in writing from
the Lender, or the Servicer, acting in its capacity as agent on behalf of the
Lender, to enable the Lender to exercise its rights and remedies with respect to
the lien and security interest described in this Section 3.
---------
(c) The Lender and the Servicer have entered into certain financing
arrangements with the Collateral Agent, and certain other financial institutions
on whose behalf the Collateral Agent is authorized to act (the "FINANCING"). As
part of the Financing, the Lender has granted to the Collateral Agent a
continuing lien upon, and security interest in, all of the Lender's interests in
the property of the Company, including, without limitation, all of the Lender's
interest in the Accounts and the Account Collateral. The Collateral Agent holds
its lien and security interest described in this Section 3 on behalf of certain
---------
other "SECURED CREDITORS" (as such term is defined in the various agreements
evidencing the Financing) and as such, acts as the contractual representative
for such Secured Creditors. Any other provision of this Agreement to the
contrary notwithstanding, each of the Lender, the Servicer and the Company
hereby authorize the Bank after it has received notice from the Collateral Agent
that an Event of Termination has occurred under the Financing, to take such
action as shall from time to time thereafter be specified in writing by the
Collateral Agent to enable the Collateral Agent to exercise its rights and
remedies with respect to the lien and security interest granted to the
Collateral Agent as part of the Financing, provided that such action is not in
contravention of Section 4 of this Agreement.
-
(d) Any other provision of this Agreement to the contrary
notwithstanding, each of the Lender, the Servicer, the Company and the Bank
hereby agree that after the Bank has received notice from the Collateral Agent
that an "EVENT OF TERMINATION" under the Financing has occurred (i) any
instructions given to the Bank by the Collateral Agent shall supersede those
given by the Lender or the Servicer acting on the Lender's behalf and (ii) the
Bank shall not comply with any instructions given by the Lender or the Servicer
unless otherwise authorized to do so by the Collateral Agent.
4. Events of Default and Termination. (a) At all times after the
---------------------------------
Bank's receipt of any Company Default Notice from the Lender or the Servicer,
the Bank shall follow the instructions of the Lender and the Servicer as to the
holding, investment and transfer of all collected amounts from time to time on
deposit in the Accounts. In addition, the Company agrees that the Bank may act
as the agent of Lender in exercising, as to any funds or items from time to time
on deposit in any of the Accounts, any rights of setoff provided by applicable
law or by the Credit Agreement or any other right or remedy. The Bank shall be
entitled to rely, without independent investigation, on any statement of the
Lender or the Servicer to the effect that an Event of Default under the Credit
Agreement has
-2-
<PAGE>
occurred and is continuing or to the effect that any exercise of set-off or any
other right or remedy requested by the Lender or the Servicer is permitted under
applicable law or the Credit Agreement.
(b) Any other provision of this Agreement to the contrary
notwithstanding, at all times after the Bank's receipt of written notice from
the Collateral Agent that an Event of Termination under the Financing has
occurred, the Bank shall no longer follow any instructions given to the Bank by
the Servicer or the Lender, but shall thereafter act only upon the express
instructions of the Collateral Agent. All of the rights and remedies granted to
the Lender or the Servicer hereunder shall immediately upon such notice of an
Event of Termination under the Financing become available to the Collateral
Agent at such time. Each of the Company, the Lender and the Servicer agrees
that the Bank shall be entitled to rely, without independent investigation, on
any statement of the Collateral Agent to the effect that an Event of Termination
has occurred and is continuing or to the effect that any exercise of set-off
requested by the Collateral Agent is permitted under applicable law or the
agreements executed and delivered in connection with the Financing.
5. Information. The Bank shall provide the Lender and the Servicer
-----------
with (a) copies of any periodic statements with respect to each Account which
are delivered to the Company and (b) such information with respect to the
Accounts as the Lender or the Servicer may from time to time reasonably request,
and following notice from the Collateral Agent that an Event of Termination
under the Financing has occurred, such information as the Collateral Agent shall
reasonably request, and the Company hereby consents to such information being
provided to the Lender, the Servicer or the Collateral Agent, as the case may
be. Bank shall simultaneously notify the Company in writing that such
information has been requested by the Lender, the Servicer and/or the Collateral
Agent.
6. Compensation. Compensation to the Bank for providing the
------------
services contemplated herein shall be mutually agreed upon between the Bank and
the Company from time to time.
7. Exculpation. The Bank undertakes to perform only such duties as
-----------
are expressly set forth herein. Notwithstanding any other provision of this
Agreement, it is agreed by the parties hereto that the Bank shall not be liable
for any action taken at the request of the Lender, the Servicer or the
Collateral Agent, except for the Bank's own gross negligence or willful
misconduct. In no event shall the Bank be liable for losses or delays resulting
from computer malfunction, interruption of communication facilities, labor
difficulties or other causes beyond the Bank's reasonable control or for
indirect, special or consequential damages.
8. Irrevocable Agreements. Each of the Company, the Lender and the
----------------------
Servicer acknowledges that the agreements made by it and the authorizations
granted by it herein are irrevocable and that the authorizations granted in
Sections 3, 4 and 5 are powers coupled with an interest.
- ---------- - -
-3-
<PAGE>
9. Setoff. All funds deposited into the Accounts shall not be
------
subject to deductions, setoff, banker's liens or any other right in favor of any
person other than the Lender or the Collateral Agent, except that (i) the Bank
may setoff against the Accounts the face amount of any check deposited in and
credited to such Account which is subsequently returned for any reason and (ii)
for all past due compensation and expenses with respect to the Accounts as
provided in Section 6.
---------
10. Miscellaneous. This Agreement shall be effective as provided in
-------------
Section 1 hereof. This Agreement shall supersede any other agreement relating
- ---------
to the matters referred to herein, including, without limitation, any other
account agreement between the Lender and the Bank. This Agreement constitutes
the entire agreement with respect to the services provided hereunder and is
binding upon the parties hereto and their respective successors and assigns
(including any trustee of the Company appointed or elected in any action under
the Bankruptcy Reform Act of 1978, as amended) and shall inure to their benefit.
The Lender may act as agent for other certain financial institutions which may
hold indebtedness secured by the security interest and lien described in Section
-------
3, and the Lender and other such holders may in the future transfer, assign or
- -
sell all or a part of their respective interests. Neither this Agreement nor
any provision hereof maybe changed, amended, modified or waived orally, but only
by an instrument in writing signed by the parties hereto, provided that such
--------
instrument need be signed only by the Bank, the Lender, the Servicer and the
Collateral Agent if it does not in any manner change any rights or obligations
of, or authorizations granted by, the Company hereunder and written notice
thereof (together with a copy of such instrument) is promptly thereafter
provided by the Lender, the Servicer or the Collateral Agent to the Company.
THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT THAT
THE RIGHTS, DUTIES AND OBLIGATIONS OF THE COLLATERAL AGENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations and rights of the parties hereto expressed herein
shall be in addition to and not in limitation of those provided by applicable
law. This Agreement may be executed in any number of counterparts which
together shall constitute, one and the same instrument.
-4-
<PAGE>
11. Termination. This Agreement may be terminated by the Lender (or
-----------
the Servicer acting on behalf of the Lender) or the Bank upon 30 days' advance
written notice to the other parties hereto. All rights of the Bank under
Sections 6 and 7, and rights of any party for any breach of this Agreement, for
- ---------- -
the period prior to any such termination shall survive such termination (or any
termination pursuant to the immediately succeeding sentence). Upon payment in
full of all Obligations (as defined in the Credit Agreement) and the termination
of the obligation of the Lenders to lend any funds to the Company pursuant to
the Credit Agreement, the Agent, Servicer and/or Collateral Agent, as the case
may be, shall so notify the Bank that this Letter Agreement shall terminate and
be of no further force or effect.
12. Notices. All notices, requests or other communications required
-------
or desired to be given to the Company, the Lender, the Servicer, the Collateral
Agent or the Bank hereunder shall be given in writing (including facsimile
transmission or similar writing) at the address or facsimile number specified
below:
Lender: First Source Financial LLP
c/o First Source Financial, Inc.
2850 West Golf Road 5th Floor
Rolling Meadows, Illinois 60008
Attention: Loan Administration
Telephone: (847) 734-4040
Facsimile: (847) 734-7911
Servicer: First Source Financial, Inc.
2850 West Golf Road 5th Floor
Rolling Meadows, Illinois 60008
Attention: Loan Administration
Telephone: (847) 734-4040
Facsimile: (847) 734-7911
Bank: U.S. Bank National Association
2300 W. Sahara Avenue
Suite 120
Las Vegas, Nevada 89102
Attention: Account Officer
Telephone: 702-386-3906
Facsimile: 702-386-3619
-5-
<PAGE>
Collateral Agent: The Bank of New York
101 Barclay
Floor 12E
New York, New York 10286
Attention: Corporate Trust -- Cheryl L. Laser
Telephone: (212) 815-5286
Facsimile: (212) 815-5999
Company: Mikohn Gaming Corporation
1045 Palms Airport Drive
Las Vegas, Nevada 89119
Attention: Charles McCrea, Jr., General Counsel
Telephone: (702) 896-3890
Facsimile: (702) 263-1661
Any party may change its address or facsimile number for notices
hereunder by notice to each other party hereunder. Each notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
confirmation of receipt is made by the appropriate party, (b) if given by mail,
72 hours after such communication is deposited in the mails with registered
first class postage prepaid, addressed as aforesaid or (c) if given by any other
means, when delivered at the address specified in this Section.
[SIGNATURE PAGE FOLLOWS]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed and delivered by their duly authorized
representatives as of the date first set forth above.
U.S. Bank National Association
---------------------------------
By: /s/ Terry A. Gentry
------------------------------
Name: Terry A. Gentry
--------------------------
Title: Assistant Vice President
-------------------------
FIRST SOURCE FINANCIAL LLP
By: (Name Illegible)
------------------------------
Name:
--------------------------
Title:
-------------------------
FIRST SOURCE FINANCIAL, INC.
By: (Name Illegible)
------------------------------
Name:
--------------------------
Title:
-------------------------
THE BANK OF NEW YORK
as Collateral Agent
By: /s/ Cheryl L. Laser
------------------------------
Name: Cheryl L. Laser
--------------------------
Title: Assistant Vice President
-------------------------
Accepted and Agreed to as of
the date first above written:
MIKOHN GAMING CORPORATION
By: /s/ Don W. Stevens
------------------------------
Name: Don W. Stevens
--------------------------
Title: Executive Vice President
-------------------------
<PAGE>
POST-CLOSING AGREEMENT
October 24, 1997
First Source Financial LLP, as Agent
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Re: Credit Agreement dated as of October 24, 1997 (the "Credit
Agreement") among Mikohn Gaming Corporation, the financial
institutions party thereto, as Lenders thereunder, and First Source
Financial LLP, as Agent for such Lenders
Ladies and Gentlemen:
Reference is made to the Credit Agreement. All capitalized terms used but
not elsewhere defined herein shall have the respective meanings ascribed to such
terms in the Credit Agreement.
Certain items required to be delivered to Agent and Lenders, and certain
approvals required to be obtained, as conditions precedent to the obligations of
Lenders under the Credit Agreement, have not been delivered to Agent and Lenders
as of the Closing Date. Therefore, with respect to the items and approvals
described on Exhibit A attached hereto, Borrower hereby requests your limited
---------
consent to the delivery of such items and the obtaining of such approvals
subsequent to the Closing Date, provided such items are delivered and approvals
are obtained within the applicable time periods set forth on Exhibit A.
---------
Borrower acknowledges and agrees that the failure of Borrower to deliver
any of the items or obtain any of the approvals described on Exhibit A within
---------
the applicable time periods set forth on Exhibit A shall constitute an Event of
---------
Default under the Credit Agreement without notice from Agent or any Lender.
Please indicate your agreement to and acceptance of the foregoing by
signing and dating a copy of this letter in the space provided below.
Very truly yours,
Mikohn Gaming Corporation
By: /s/ Charles H. McCrea, Jr.
______________________________
Name: Charles H. McCrea, Jr.
______________________________
Title: Secretary
______________________________
<PAGE>
First Source Financial LLP
October 24, 1997
Page 2
ACCEPTED and AGREED this
24th day of October, 1997
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.,
its Agent/Manager
By: /s/ Edward A. Szarkowicz
__________________________
Name: Edward A. Szarkowicz
__________________________
Title: Vice President
__________________________
<PAGE>
EXHIBIT A
1. Stock Pledge of Mikohn Nevada and MGC.
-------------------------------------
a. Within 180 days after the Closing Date, Borrower shall obtain the
requisite approvals (the "Requisite Approvals") of all applicable
Gaming Authorities under all Applicable Gaming Laws to (i) the pledge
to Agent, for the benefit of Lenders, of 100% of the issued and
outstanding capital stock of Mikohn Nevada and MGC pursuant to the
form of Pledge Agreement (the "Pledge Agreement") attached hereto and
(ii) the provisions of the Credit Agreement and the other Credit
Documents which prohibit Borrower from granting any Liens on such
capital stock other than Liens in favor of Agent.
b. Within 10 Business Days after the end of each month during which the
Requisite Approvals have not been obtained, Borrower shall deliver to
Agent a reasonably detailed report concerning the status of Borrower's
efforts to obtain the Requisite Approvals.
c. Within 10 Business Days after obtaining the Requisite Approvals,
Borrower shall execute and deliver the Pledge Agreement to Agent
together with the original stock certificates evidencing 100% of the
issued and outstanding capital stock of Mikohn Nevada and MGC and duly
executed, undated assignments separate from certificate with respect
to each such stock certificate.
d. Within 10 Business Days after obtaining the Requisite Approvals,
Borrower shall cause its regulatory counsel, Schreck Morris, to
deliver to Agent an opinion in form and substance reasonably
satisfactory to Agent, to the effect that the Requisite Approvals have
been obtained.
2. Stock Pledge of Foreign Subsidiaries.
------------------------------------
a. Within 60 days after the Closing Date, Borrower shall deliver to Agent
original stock certificates evidencing 65% of the issued and
outstanding capital stock of Mikohn Gaming Australasia Pty. Ltd and
Mikohn South America, S.A. and duly executed, undated assignments
separate from certificate with respect to each such stock certificate.
b. Within 180 days after the Closing Date, Borrower shall (i) take all
actions and deliver to Agent all documents necessary to perfect the
Lien granted to Agent on the issued and outstanding capital stock of
Borrower's Foreign Subsidiaries under the laws of the jurisdictions in
which such Foreign Subsidiaries are incorporated and (ii) deliver to
Agent opinions, in form and substance reasonably satisfactory to
Agent, of counsel licensed under the laws of such jurisdictions to the
effect that all such actions have been taken, and such documents are
in form sufficient, to perfect such Lien under such laws to the extent
such laws govern such perfection.
Exhibit A - Page 1 of 3
<PAGE>
3. Collateral Access Agreement/Landlord Consent. Within 90 days after the
--------------------------------------------
Closing Date, if Borrower is still leasing the JRY Property, Borrower shall
deliver to Agent (i) a Collateral Access Agreement/Landlord Consent in form
and substance reasonably satisfactory to Agent executed by The Young Group
covering the JRY Property and (ii) a collateral assignment of lease in form
and substance reasonably satisfactory to Agent executed by Borrower with
respect to its lease of the JRY Property.
4. Owned Real Estate - 4181 Oquendo Road, Las Vegas, Nevada (the "Oquendo Real
---------------------------------------------------------------------------
Estate").
--------
a. Within 30 days after the Closing Date, Borrower shall deliver to Agent
or Nevada Title Company (i) a release or reconveyance of the Deed of
Trust made by Borrower in favor of Bank of America and recorded
September 12, 1997 in Book 970912 as Document No. 00587 of the
Official Records of Clark County, Nevada and (ii) a release of the
financing statement recorded on October 13, 1997 in Book 97013 as
Document No. 00534 of the Official Records of Clark County, Nevada.
b. Within 30 days after the Closing Date, Borrower shall deliver to Agent
an American Land Title Association Title Insurance Policy issued by
Nevada Title Company in favor of Agent in the amount of $1,700,000
covering the Oquendo Real Estate (i) insuring that title to the
Oquendo Real Estate is vested in Borrower and that the Lien of the
Deed of Trust granted by Borrower to Agent as a first priority Lien on
the Oquendo Real Estate, subject only to Exception Nos. 1 - 11, 14 and
17 reflected on Schedule B of that certain Commitment No. 97-10-0954
dated October 16, 1997 based upon a title search conducted on October
13, 1997 and any other survey exceptions and (ii) containing such
affirmative endorsements as Agent reasonably may require, to the
extent available under applicable Nevada law.
5. Owned Real Estate - 405 12th Street, Rapid City, South Dakota (the "Rapid
-------------------------------------------------------------------------
City Real Estate").
------------------
a. Within 30 days after the Closing Date, Borrower shall deliver to Agent
or Nevada Title Company a release of the Mortgage, Assignment of Rents
and Leases, Security Agreement and Fixture Filing made by Borrower in
favor of Bank of America and recorded September 10, 1997 in Book 68,
Page 6864 of the Official Records of Pennington County, South Dakota.
b. Within 30 days after the Closing Date, Borrower shall deliver to Agent
an American Land Title Association Title Insurance Policy issued by
Nevada Title Company in favor of Agent in the amount of $900,000
covering the Rapid City Real Estate (i) insuring that title to the
Rapid City Real Estate is vested in Borrower and that the Lien of the
Mortgage granted by Borrower to Agent as a first priority Lien on the
Rapid City Real Estate, subject only to Exception Nos. 1, 3, 4, 5, 7,
9 and 10 reflected on Schedule B - Section 2
Exhibit A - Page 2 of 3
<PAGE>
of that certain Commitment No. 35144-SD based upon a title search
conducted on October 9, 1997 and any other survey exceptions and (ii)
containing such affirmative endorsements as Agent reasonably may
require, to the extent available under applicable South Dakota law.
6. Owned Real Estate - 4708 Hewes Avenue, Gulfport, Mississippi (the "Gulfport
---------------------------------------------------------------------------
Real Estate").
-------------
a. Within 30 days after the Closing Date, Borrower shall deliver to Agent
or Nevada Title Company a release or reconveyance of the Deeds of
Trust made by Borrower in favor of Bank of Mississippi and recorded in
Book 1617 at Page 559, Book 1653 at Page 662 and Book 1670 at Page 493
of the Records of Mortgages and Deeds of Trust on Land in the First
Judicial District of Harrison County, Mississippi.
b. Within 30 days after the Closing Date, Borrower shall deliver to Agent
an American Land Title Association Title Insurance Policy issued by
Nevada Title Company in favor of Agent in the amount of $700,000
covering the Gulfport Real Estate (i) insuring that title to the
Gulfport Real Estate is vested in Borrower and that the Lien of the
Deed of Trust granted by Borrower to Agent as a first priority Lien on
the Gulfport Real Estate, subject only to Exception Nos. 1, 5, 6, 7, 8
(other than rights of parties in possession or matters as would be
revealed by an inspection of the premises), 10 and 11 set forth in the
title report dated October 16, 1997 issued by Estes and Estes, P.A. to
Nevada Title Company and any other survey exceptions and (ii)
containing such affirmative endorsements as Agent reasonably may
require, to the extent available under applicable Mississippi law.
7. Miscellaneous. Within 60 days after the Closing Date, Borrower shall
-------------
deliver to Agent evidence that the following UCC financing statements have
been terminated:
<TABLE>
<CAPTION>
DEBTOR SECURED PARTY JURISDICTION DATE FILING NO.
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trans Sierra Panasonic Nevada 05/24/91 91-04876
Communications, Communications & Sec of State
a division of Systems Company
Mikohn Gaming
Corporation
Trans Sierra Matsushita Electric "" 02/16/88 88-01596
Communications Corp. of America
Trans Sierra Toshiba America "" 03/06/95 95-03088
Communications Consumer Products
=================================================================================
</TABLE>
Exhibit A - Page 3 of 3
<PAGE>
FEE LETTER
----------
October 24, 1997
First Source Financial LLP
c/o First Source Financial, Inc.
2850 West Golf Road, 5th Floor
Rolling Meadows, Illinois 60008
Attention: Loan Administration
Ladies and Gentlemen:
Reference is made to the Credit Agreement of even date herewith (the
"CREDIT AGREEMENT") among Mikohn Gaming Corporation, a Nevada corporation, the
financial institutions party thereto, and First Source Financial LLP, an
Illinois registered limited liability partnership, as agent for such financial
institutions. Capitalized terms used but not elsewhere defined herein shall
have the respective meanings ascribed to such terms in the Credit Agreement.
In consideration of the extension of the Revolving Loan Commitments by the
Revolving Lenders, on the Closing Date Borrower agrees to pay to Agent, for the
account of the Revolving Lenders, a non-refundable closing fee of $62,500.
In consideration of the making of Term Loan A by the Term Loan A Lenders,
on the Closing Date Borrower agrees to pay to Agent, for the account of the Term
Loan A Lenders, a non-refundable closing fee of $150,000.
Borrower acknowledges that such closing fees will be fully earned upon the
disbursement of Term Loan A.
Very truly yours,
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: /s/ CHARLES H. MCCREA, JR.
--------------------------
Name: CHARLES H. MCCREA, JR.
----------------------
Title: Secretary
---------
<PAGE>
FUNDING AGREEMENT
Reference is made to the Credit Agreement dated as of October 24, 1997
(the "Credit Agreement") among Mikohn Gaming Corporation, the financial
institutions party thereto, as Lenders thereunder, and First Source Financial
LLP, as Agent for such Lenders. Capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
Borrower hereby requests the Term Loan Lenders to send to Agent by wire
transfer on Friday morning, October 24, 1997, in accordance with the wire
transfer instructions given by Agent, funds in the full amount of their Term
Loan A Commitment or Term Loan B Commitment, as applicable, for further
disbursement pursuant to instructions given by Borrower to Agent. In order to
induce the Term Loan Lenders to send such funds to Agent, Borrower agrees that
in the event the initial Loans are not made on Friday, October 24, 1997,
Borrower will pay to the Term Loan Lenders interest on the amount of funds sent
to Agent for the days of October 24-26, 1997 at the applicable rate set forth in
the Credit Agreement.
Dated: October 23, 1997
MIKOHN GAMING CORPORATION
By: /s/ CHARLES H. MCCREA, JR.
--------------------------
Name: CHARLES H. MCCREA, JR.
----------------------
Title: Secretary
---------
Agent hereby undertakes to return any funds sent to it by the Term Loan
Lenders pursuant to the foregoing request of Borrower by 12:00 noon, Chicago
time, on Monday, October 27, 1997 in the event the initial Loans have not been
made by such time.
Dated: October 23, 1997
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent Manager
By: /s/
--------------------------
Name:
------------------------
Title: Vice President
-----------------------
<PAGE>
EXHIBIT 10.47
DEED OF TRUST,
ASSIGNMENT OF LEASES
AND RENTS, AND SECURITY AGREEMENT
---------------------------------
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
("DEED OF TRUST") is made as of the 24th day of October, 1997, by MIKOHN GAMING
CORPORATION, a Nevada corporation, with its principal place of business at 1045
Palms Airport Drive, Las Vegas, Nevada 89119 ("TRUSTOR"), to Nevada Title
Company, with a place of business at 3320 West Sahara Avenue, Suite 200, Las
Vegas, Nevada 89102 ("TRUSTEE"), for the benefit of FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership, with an office at 2850
West Golf Road, 5th Floor, Rolling Meadows, Illinois 60008 ("BENEFICIARY"), in
its capacity as Agent (as defined below) for the benefit of Lenders (as defined
below).
RECITALS:
A. Trustor is the owner of the Premises (this and all other capitalized
terms used but not elsewhere defined herein are defined in Section 1.1) and the
Improvements.
B. Pursuant to the terms of the Credit Agreement, Lenders have agreed to
make certain loans and other financial accomodations to Trustor.
C. The Loans are evidenced by the Notes.
D. One of the conditions precedent to the obligation of Lenders to make
the Loans is the execution and delivery by Trustor of this Deed of Trust.
ARTICLE I
---------
DEFINITIONS AND DETERMINATIONS
------------------------------
1.1 DEFINITIONS. Capitalized terms used but not elsewhere defined in this
-----------
Deed of Trust shall have the meanings ascribed thereto in the Credit Agreement.
When used in this Deed of Trust, the following terms shall have the following
meanings:
Agent: Beneficiary, in its capacity as agent for Lenders under the
-----
Credit Agreement.
Construction Contracts: any contracts executed by Trustor with any
----------------------
provider of goods or services in connection with any construction
undertaken on, or services performed in connection with, the Premises or
the Improvements.
Credit Agreement: that certain Credit Agreement dated as of October
----------------
24, 1997 among Borrower, Lenders and Agent, as the same may be amended,
modified
<PAGE>
or supplemented after the date hereof.
Deed of Trust Lien: the Lien in favor of Trustee, for the benefit of
------------------
Beneficiary, represented by this Deed of Trust.
Deposits: all deposits (i) received by Trustor from third parties
--------
(including all earnest money sales deposits) or (ii) deposited by Trustor
with Beneficiary or third parties, including deposits pertaining to utility
services, real estate taxes, special assessments and payment of insurance
premiums.
Documents: any mortgage, deed of trust, assignment of leases,
---------
assignment of rents, note, indemnification agreement, security agreement,
financing statement, affidavit, assignment of insurance, loss payee
endorsement, mortgage title insurance policy, opinion letter, waiver
letter, estoppel letter, consent letter, insurance certificate and any
other similar documents.
Equipment: all apparatus, machinery, equipment, furniture, fixtures,
---------
fittings, goods, materials, supplies and chattels of any and every kind and
nature whatsoever now or hereafter used, attached to, installed or located
in or on the Premises and/or the Improvements, including any item used to
supply heat, gas, air conditioning, water, light, electricity, power,
plumbing, refrigeration, sprinkling, ventilation, mobility, communication,
incineration, recreation, laundry service or any other related services.
Event of Default: each of the Events of Default set forth in the
----------------
Credit Agreement.
Future Advances: all advances made by Lenders under the Credit
---------------
Agreement after the Closing Date to or on behalf of Trustor.
Imposts: any disbursements made in accordance with the terms hereof
-------
for the payment of taxes, levies or insurance on the Premises.
Improvements: the buildings and improvements now or hereafter located
------------
on the Premises, all tenements, easements, rights-of-way, hereditaments and
appurtenances now and/or at any time hereafter situated on such real estate
and all roads, alleys, streets, passages and other public ways abutting
such real estate, whether before or after vacation thereof and whether in
existence as of the date hereof or created after the date hereof.
Leases: collectively, all (i) present and future leases, subleases,
------
agreements, tenancies, subtenancies, licenses, occupancy agreements,
concessions and franchises of Trustor's present and future right, title,
and interest in and to the Premises and/or the Improvements, (ii) deposits
of money as advance rent or for security under any
2
<PAGE>
of the Leases and (iii) guaranties of performance under the items described
in clauses (i) and (ii) preceding.
Lenders: the financial institutions from time to time party to the Credit
-------
Agreement.
Permits: all permits, certificates, approvals, licenses, applications
-------
and authorizations used in the operation of the Premises, Improvements
and/or the Leases.
Plans: all plans and specifications, designs, surveys, drawings, soil
-----
reports and other matters prepared for any construction on the Premises.
Premises: the real property legally described in EXHIBIT A.
--------
Rents: all present and future rents, royalties, issues, avails,
-----
profits and proceeds of or from the Premises, the Improvements, the Leases
and/or the Equipment.
Trust Property: collectively, all of Trustor's present and future
--------------
estate, right, title, and interest in and to the following:
(a) the Premises;
(b) the Improvements;
(c) the Rents;
(d) the Leases;
(e) all Plans;
(f) all Deposits;
(g) all Permits;
(h) all Equipment;
(i) all Construction Contracts;
(j) all present and future judgments, awards of damages and
settlements made as a result or in lieu of any taking of all or any
part of the Premises, Improvements, Equipment and/or Leases under the
power of eminent domain, or for any damage thereto as a result of any
such taking;
3
<PAGE>
(k) all insurance policies in force or effect insuring the
Premises, the Improvements, the Rents, the Leases or the Equipment;
(l) rights arising out of Trustor's interest in the Premises and
the Improvements to (i) the payment of money, (ii) accounts
receivable, (iii) reserves, (iv) deferred payments, (v) refunds and
(vi) cost savings;
(m) all development and use rights with respect to the Premises,
the Improvements and/or the Leases;
(n) all chattel paper, instruments, documents, notes, drafts and
letters of credit, other than letters of credit in favor of
Beneficiary, which arise from or relate to (i) construction on the
Premises or (ii) the Premises and Improvements generally;
(o) all causes of action and proceeds thereof for any damage or
injury to the Premises or the Improvements or any other portion of the
Trust Property described above, in addition to those described in
clause (j) above, or breach of warranty in connection with the
construction of all or any portion of the Improvements; and
(p) all proceeds (including condemnation and insurance proceeds)
of, additions to, substitutions for, and changes in each and every one
of the foregoing.
Trustor's Obligations: (i) any and all Indebtedness due or to
---------------------
become due, now existing or howsoever arising of Trustor to Agent and
Lenders pursuant to the terms of the Credit Agreement, including, without
limitation, all (A) advances made in accordance with the terms hereof to
protect and preserve the value of the Trust Property and the priority of
the Deed of Trust Lien and (B) Future Advances and (ii) the performance of
the covenants of Trustor contained in the Credit Documents.
1.2 CERTAIN TERMS. Wherever used in this Deed of Trust:
-------------
1.2.1 AND/OR. The term "and/or" means one or the other or both.
------
1.2.2 REFERENCES. All references to "Article", "Section",
----------
"subsection", "Subparagraph", "Clause" or "Exhibit", unless otherwise
stated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Deed of Trust.
1.2.3 EXHIBITS. Each reference to an "Exhibit" to this Deed of Trust
--------
is to an Exhibit which is attached to this Deed of Trust, each of which
Exhibits is deemed to
4
<PAGE>
be a part hereof.
ARTICLE II
----------
CONVEYANCE
----------
2.1 TRUST PROPERTY. To secure the payment and performance of
--------------
Trustor's Obligations, subject to the terms, covenants and provisions contained
herein, Trustor hereby irrevocably GRANTS, BARGAINS, WARRANTS, GIVES, ASSIGNS,
SETS OVER, TRANSFERS, REMISES, RELEASES, ALIENATES, SELLS AND CONVEYS the Trust
Property to Trustee, its successors and/or assigns hereunder, in trust, with
power of sale, for the benefit of Beneficiary. Trustee, its successors and
assigns, subject to the terms of this Deed of Trust, are to have and to hold all
such Trust Property for the benefit of Beneficiary for the purposes and uses set
forth in this Deed of Trust.
2.2 SECURITY AGREEMENT AND FIXTURE FILING. This Deed of Trust
-------------------------------------
constitutes a security agreement with respect to the portion of the Trust
Property which consists of personal property and a financing statement filed as
a fixture filing under the Uniform Commercial Code of the State in which the
Premises are located, covering any property which now is or later may become a
fixture attached to the Premises or the Improvements.
2.3 ABSOLUTE ASSIGNMENT. This Deed of Trust is a present and
-------------------
absolute assignment with respect to the Leases and the Rents.
ARTICLE III
-----------
FUTURE ADVANCES; LIMITATION ON AMOUNT SECURED
---------------------------------------------
3.1 FUTURE ADVANCES. This Deed of Trust is given to secure not only
---------------
Trustor's Obligations which exist as of the Closing Date, but also the payment
of any and all Future Advances, whether such Future Advances are obligatory or
are to be made at the option of Beneficiary.
3.2 LIMITATION ON AMOUNT SECURED. The total amount of Indebtedness
----------------------------
secured by this Deed of Trust may decrease or increase from time to time, but
the total unpaid balance so secured at one time shall not exceed the sum of (i)
$60,000,000, plus (ii) interest thereon, plus (iii) any Imposts, plus (iv) any
amounts paid by Beneficiary pursuant to Section 10.2 hereof, plus (v) all costs
and expenses incurred by Beneficiary in enforcing its rights and remedies under
this Deed of Trust, plus (vi) interest on the disbursements described in clauses
(iii), (iv) and (v) preceding, which interest shall be calculated at 12% per
annum.
5
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Trustor represents and warrants to Trustee and
Beneficiary as follows:
4.1 TITLE. Trustor (i) has full legal power and authority to
-----
mortgage and convey the Premises and (ii) is the holder of fee simple title to
the Premises, free and clear of all Liens except Permitted Liens and the
exceptions to title listed on EXHIBIT B.
4.2 LOCATION, USE OF PREMISES, IMPROVEMENTS AND EQUIPMENT. To the
-----------------------------------------------------
best knowledge of Trustor, the location and use of the Premises, the
Improvements and the Equipment are in compliance with all applicable laws,
rules, ordinances and regulations, including, but not limited to, building and
zoning laws, and all covenants and restrictions of record, the failure to comply
with which would have a Material Adverse Effect. No notice of violation of such
laws, rules and/or ordinances has been issued and received by Trustor which
remains uncorrected.
4.3 CREDIT AGREEMENT. All representations and warranties of Trustor
----------------
set forth in the Credit Agreement are true and correct and are deemed to be
remade herein, including, without limitation, those with respect to (i) Liens,
(ii) hazardous materials, environmental laws and other environmental matters
affecting the Trust Property and (iii) taxes, assessments, levies, impositions
and charges that have been or hereafter may be imposed or assessed against all
or any portion of the Trust Property.
4.4 COPY OF DEED OF TRUST. Trustor has been
---------------------
furnished with a true, correct and complete copy of this Deed of Trust.
4.5 LEGAL COUNSEL. Throughout the transaction contemplated by this
-------------
Deed of Trust, Trustor has retained and has been represented by legal counsel of
its own choosing.
4.6 BUSINESS LOAN. The (i) Loans constitute business loans
-------------
transaction and (ii) proceeds of such Loans are to be utilized solely for the
purpose of carrying on the business of Trustor.
4.7 NO AGRICULTURAL PURPOSES. No part of the Trust Property is used
------------------------
principally or primarily for agricultural or farm purposes.
6
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ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Until Trustor's Obligations are paid and
performed in full, Trustor agrees it shall:
5.1 PAYMENT AND PERFORMANCE OF TRUSTOR'S OBLIGATIONS. Promptly pay
------------------------------------------------
or perform, or cause to be paid or performed, when due all of Trustor's
Obligations.
5.2 MAINTENANCE OF RIGHTS. Maintain the standing, right, power and
---------------------
lawful authority to do the following: (i) own good title to the Trust Property,
(ii) carry on the business of and operate the Trust Property, (iii) enter into,
execute and deliver this Deed of Trust, (iv) convey and assign the interests of
Trustor in the Trust Property to Trustee for the benefit of Beneficiary, (v)
encumber the Trust Property to Trustee for the benefit of Beneficiary as
provided herein and (vi) consummate all of the transactions described in or
contemplated by this Deed of Trust to be consummated by Trustor.
5.3 MAINTENANCE OF PERMITS. Obtain and maintain all Permits where
----------------------
the failure to obtain and/or maintain any such Permit would have a Material
Adverse Effect.
5.4 PEACEFUL POSSESSION. Remain in peaceful possession of the Trust
-------------------
Property and take all actions necessary to maintain and preserve the Deed of
Trust Lien.
5.5 PAYMENT OF LIENS. Promptly pay or cause to be paid, as and when
----------------
due and payable or when declared due and payable, any Indebtedness which may
become or be secured by any Lien on any Trust Property and, immediately upon
request by Beneficiary, deliver to Beneficiary evidence satisfactory to
Beneficiary of the payment and discharge thereof.
5.6 REPAIRS. Make all necessary repairs, replacements and renewals
-------
(including the replacement of any items of Equipment) to the Trust Property so
that the value thereof shall not be impaired, including, without limitation,
repairing, restoring or rebuilding any building or improvement now or hereafter
on the Premises which may become damaged or destroyed (provided Beneficiary has
made all insurance proceeds received on account of any such damage or
destruction available to Trustor for such purpose), and if any portion of the
Trust Property becomes damaged or destroyed, Trustor permit Beneficiary, and its
agents, upon prior notice and demand, access to the Trust Property for the
purpose of inspection thereof.
5.7 BUILDINGS AND IMPROVEMENTS. Pay for and complete, within a
--------------------------
reasonable time, any building or improvement at any time in the process of being
erected upon the Premises.
5.8 EXECUTION OF DOCUMENTS. Immediately upon request by Beneficiary,
----------------------
at Trustor's sole expense, make, execute and
7
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deliver and/or cause to be made, executed and delivered to Trustee and/or
Beneficiary, in form and substance acceptable to Beneficiary, all Documents that
Beneficiary deems necessary to evidence, document and/or conclude the
transactions described in and/or contemplated by this Deed of Trust, or
reasonably required to perfect or continue perfected the Deed of Trust Lien.
5.9 COMPLIANCE WITH LAWS. Comply with all applicable laws, rules,
--------------------
ordinances and regulations, including, without limitation, building and zoning
laws, and all covenants and restrictions of record, the failure to comply with
which would have a Material Adverse Effect.
5.10 CREDIT AGREEMENT. Comply with all covenants, agreements and
----------------
indemnifications contained in the Credit Agreement, including those with respect
to (i) taxes, assessments, levies, impositions and charges as they relate to
Trustor or the Trust Property, (ii) delivery of financial statements, reports
and other information, (iii) insurance policies to be maintained for the Trust
Property and the settlement, receipt and application of insurance proceeds
arising under such insurance policies and (iv) hazardous materials,
environmental laws and other environmental matters as they relate to Trustor or
the Trust Property.
5.11 STAMP TAX; EFFECT OF CHANGE IN LAWS
-----------------------------------
REGARDING TAXATION.
- ------------------
5.11.1 PAYMENT OF STAMP TAX. If, by the laws of the United States of
--------------------
America or of any state or subdivision thereof having jurisdiction over
Trustor, any tax is due or becomes due (other than Beneficiary's income,
franchise or transfer taxes) in respect of the issuance of the Notes or the
recording of this Deed of Trust or any of the other Credit Documents and
unless such laws prohibit Trustor from paying such tax, (i) pay such tax in
the manner required by any such law and (ii) reimburse Lenders for any sums
which Lenders may expend by reason of the imposition of any tax on the
issuance of the Notes.
5.11.2 PAYMENT OF TAXES IMPOSED ON BENEFICIARY. In the event of the
---------------------------------------
enactment, after this date, of any law, statute, rule or regulation of the
United States of America or of the State in which the Premises are located
or any other state or subdivision thereof imposing upon Beneficiary the
payment of the whole or any part of the taxes, assessments or Liens herein
required to be paid by Trustor, or changing in any way the laws relating to
the taxation of mortgages or debts secured by mortgages or Beneficiary's
interest in the Premises or any other portion of the Trust Property, or the
manner of collection of taxes, so as to affect this Deed of Trust or
Trustor's Obligations or the holder thereof, then, and in any such event,
upon demand by Beneficiary, pay such taxes or assessments or reimburse
Beneficiary therefor; provided, however, that if the opinion of counsel for
Beneficiary, (i) it might be unlawful to require Trustor to make such
payment, or (ii) the making of such payment might result in the imposition
of interest beyond the maximum amount permitted by law, then and in any
such event, Beneficiary may elect, by notice in
8
<PAGE>
writing given to Trustor, to declare all of Trustor's Obligations to be and
become due and payable thirty (30) days from the date of giving of such
notice.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Until Trustor's Obligations are paid and
performed in full, Trustor agrees it will not:
6.1 ADDITIONAL LIMITATIONS. Execute, file or record any notice
----------------------
limiting the maximum principal amount that may be secured by this Deed of Trust.
6.2 SALE OR TRANSFER. Sell, transfer, exchange, convey, remove or
----------------
otherwise dispose of all or any portion of the Trust Property or legal or
equitable interest therein, except to the extent permitted by the Credit
Agreement.
6.3 LIENS. Permit any Liens to exist on the Trust Property except
-----
(i) Permitted Liens, (ii) the exceptions to title set forth on EXHIBIT B and
(iii) Leases, if any.
6.4 USE OF TRUST PROPERTY. Substantially or materially change the
---------------------
use or character of any portion of the Trust Property, permit any excavation,
construction, site work or other lienable work to be performed on any portion of
the Trust Property which is not paid for as such work is completed, initiate or
acquiesce in any zoning variation or reclassification of any portion of the
Trust Property or commit or suffer any waste to exist on any portion of the
Trust Property.
6.5 INSURANCE. Purchase any separate insurance concurrent in form or
---------
contributing in the event of loss with that required to be maintained under the
Credit Documents unless (i) Beneficiary receives prompt notice thereof and is
included thereon under a standard non-contributory mortgagee clause acceptable
to Beneficiary, (ii) such separate insurance otherwise complies with all of the
requirements of the Credit Documents and (iii) Trustor delivers to Beneficiary
promptly the original policy or policies of such insurance.
ARTICLE VII
-----------
INSURANCE
---------
7.1 ADJUSTMENT OF LOSSES; COLLECTION OF PROCEEDS. In case of loss or
--------------------------------------------
damage by fire or other insured casualty to all or any portion of the Trust
Property, Beneficiary is authorized and empowered to (i) participate in the
making or filing of proofs of loss, and settling and adjusting any claim under
insurance policies which insure against such risks, or
9
<PAGE>
(ii) direct Trustor to agree with each insurance company on the amount to be
paid as a result of such loss. If the insurance proceeds paid for such loss are
equal to or less than $25,000, Trustor may collect such proceeds so long as (x)
Trustor uses such proceeds to repair, restore or rebuild the Trust Property, in
such manner and under such conditions as Beneficiary may require and (y) no
Event of Default or Default exists. If the insurance proceeds paid for such loss
are greater than $25,000, or if an Event of Default or Default then exists, then
Beneficiary is authorized to collect such proceeds.
7.2 APPLICATION OF PROCEEDS. Beneficiary may elect, if any Event of
-----------------------
Default exists and is continuing, to apply insurance proceeds received by
Beneficiary to the payment of Trustor's Obligations then due. If no Event of
Default exists and is continuing, Beneficiary, after the payment of all expenses
incurred by Beneficiary in connection with the collection of such insurance
proceeds, including, without limitation, attorneys' fees, shall make such
insurance proceeds available to Trustor for repair, restoration or rebuilding of
the Trust Property, under conditions akin to those in the Security Agreement.
In the event that Beneficiary has permitted the insurance proceeds to be used to
restore the Trust Property, Trustor shall (x) pay the amount of any deficiency
in such insurance proceeds in order to restore the Trust Property fully to its
condition immediately prior to the loss or damage to which such insurance
proceeds relate and (y) deliver to Beneficiary any surplus which may remain out
of such proceeds after payment of the cost of restoration to be applied to the
payment of Trustor's Obligations.
7.3 FAILURE TO COLLECT PROCEEDS. Beneficiary shall not be held
---------------------------
responsible for (i) any failure to collect any insurance proceeds due under the
terms of any policy, regardless of the cause of such failure, (ii) the amount of
any such proceeds ultimately paid, regardless of any negotiation by Beneficiary
of such amount, or (iii) any use by Trustor of such proceeds as Beneficiary may
pay over to Trustor.
ARTICLE VIII
------------
CONDEMNATION
------------
8.1 NOTICE; ASSIGNMENT OF PROCEEDS. Trustor shall notify Beneficiary
------------------------------
immediately of the institution or threat of institution of any proceeding
pertaining to the condemnation of any portion of the Trust Property.
Beneficiary is authorized to participate in the settlement of all claims for
damages to any portion of the Trust Property which relate to, and to collect any
proceeds of any award which may be the result of, any eminent domain or
condemnation proceeding.
8.2 APPLICATION OF PROCEEDS. Beneficiary may elect, if any Event of
-----------------------
Default exists and is continuing, to apply the proceeds of the award or claim
received by Beneficiary described in Section 8.1 to the payment of Trustor's
Obligations then due. If no Event of Default exists and is continuing,
Beneficiary, after the payment of all expenses incurred by Beneficiary in
connection with the collection of such proceeds, including, without limitation,
10
<PAGE>
attorneys' fees, shall make such proceeds available to Trustor for replacement
of the condemned portion of the Trust Property, under conditions akin to those
in the Security Agreement. In the event that Beneficiary has permitted the
proceeds of the award or claim to be used to replace the condemned portion of
the Trust Property, Trustor shall (x) pay the amount of any deficiency in such
proceeds in order to complete such replacement and (y) deliver to Beneficiary
any surplus which may remain out of such proceeds after payment of the cost of
replacement to be applied to the payment of Trustor's Obligations.
8.3 FAILURE TO COLLECT PROCEEDS. Beneficiary shall not be held
---------------------------
responsible for (i) any failure to collect any condemnation proceeds, regardless
of the cause of such failure, (ii) the amount of any such proceeds ultimately
paid, regardless of any negotiation by Beneficiary of such amount, or (iii) any
use by Trustor of such proceeds as Beneficiary may pay over to Trustor.
ARTICLE IX
----------
LEASES AND RENTS
----------------
9.1 LICENSE TO COLLECT. Subject to Beneficiary's rights under
------------------
Article XI, Trustee and Beneficiary hereby confer upon Trustor a revocable, non-
exclusive license to collect and retain the Rents as they become due and
payable.
9.2 RENT ROLL, COPIES OF LEASES. Upon Beneficiary's request, Trustor
---------------------------
shall deliver to Beneficiary (i) a rent roll pertaining to all Leases, (ii)
copies of all Leases and (iii) such other matters and information relating to
any Lease as Beneficiary may request.
ARTICLE X
---------
CERTAIN RIGHTS OF BENEFICIARY
-----------------------------
10.1 DOCUMENTS. In case Trustor fails to execute or obtain any
---------
Documents required by Beneficiary for the perfection or continuation of the Deed
of Trust Lien, Trustor hereby appoints Beneficiary as its true and lawful
attorney-in-fact to execute or obtain any such Documents on its behalf.
10.2 MAINTENANCE OF TRUST PROPERTY. If Trustor, within thirty (30)
-----------------------------
days after receipt of written demand from Beneficiary (except in cases of
emergency, when no demand shall be required), shall neglect or refuse to (i)
keep the Trust Property in good operating condition and repair, (ii) replace or
maintain the same as herein agreed, (iii) pay the premiums for the insurance
which is required to be maintained hereunder, (iv) pay and discharge all Liens
as herein agreed or (v) otherwise perform Trustor's Obligations within the time
periods specified therefor (including any applicable cure periods), Beneficiary,
at
11
<PAGE>
its option and sole election, may cause such repairs or replacements to be made,
obtain such insurance, pay such Liens or perform such Trustor's Obligations. Any
amounts paid by Beneficiary in taking such action, together with interest
thereon at 12% per annum until repaid by Trustor to Beneficiary, shall be due
and payable by Trustor to Beneficiary upon demand, and, until paid, shall
constitute a part of Trustor's Obligations secured by this Deed of Trust.
Beneficiary shall not be liable to Trustor for failure or refusal to exercise
any such right. In making any payments pursuant to the exercise of any such
right, Beneficiary may rely upon any bills delivered to it by Trustor or any
such payee.
ARTICLE XI
----------
DEFAULT AND REMEDIES
--------------------
The occurrence of an Event of Default under the Credit Agreement shall
constitute an Event of Default under this Deed of Trust. Upon the occurrence of
an Event of Default, Beneficiary, in its sole discretion and at its sole
election, without notice of such election, and without further demand, may
exercise any one or more of the following rights and remedies:
11.1 ACCELERATION. Beneficiary may declare all of Trustor's
------------
Obligations immediately due and payable, whereupon Trustor's Obligations
immediately shall mature and become due and payable.
11.2 OTHER REMEDIES. To the extent permitted by applicable law,
--------------
Beneficiary may exercise any one or more of the following remedies, whether or
not Trustor's Obligations have been accelerated:
11.2.1 TAKING OF POSSESSION. Beneficiary, by itself or by such
--------------------
officers or agents as it may appoint, may enter and take exclusive
possession of all or any part of the Trust Property, including all books,
papers and accounts of Trustor relating to the business of Trustor
conducted at such Trust Property, and may expel, remove and exclude
Trustor, its agents and employees and any persons, goods and chattels
occupying the Trust Property. If Trustor for any reason fails to surrender
or deliver the Trust Property or any part thereof after such demand by
Beneficiary, Beneficiary may obtain a judgment or decree conferring on
Beneficiary the right to immediate possession or requiring the delivery to
Beneficiary of the Trust Property, and Trustor specifically consents to the
entry of such judgment or decree. Upon every such taking of possession,
Beneficiary may (i) hold, store, use, operate, manage and control the Trust
Property and conduct the business of Trustor thereon, (ii) perform all
necessary and proper maintenance and make all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty
and other Property, (iii) keep the Trust Property insured, (iv) manage and
operate the Trust Property and exercise all of the rights and powers of
Trustor to the same extent as
12
<PAGE>
Trustor could in its own name, (v) enter into any agreements with respect
to the exercise by others of any of the powers granted to Beneficiary
herein, in such manner as Beneficiary shall elect, (vi) collect and receive
all of the Rents, including those past due as well as those accruing after
the occurrence of any such Event of Default and (vii) after deducting (A)
all expenses of taking, holding, holding, managing and operating the Trust
Property (including compensation for the services of all Persons employed
for such purposes), (B) the cost of all such maintenance, repairs,
renewals, replacements, additions, betterments, improvements and purchases
and acquisitions, (C) the cost of such insurance, (D) such taxes,
assessments and other similar charges as Beneficiary may determine to pay,
(E) other proper charges upon the Trust Property or any part thereof and
(F) the compensation, expenses and disbursements of the attorneys and
agents of Beneficiary, apply the remainder of the monies and proceeds so
received by Beneficiary as described in Section 11.8 hereof.
11.2.2 DEPOSITS FOR TAXES AND INSURANCE. Beneficiary may require
--------------------------------
Trustor to deposit with Beneficiary, commencing 10 days following such
request and on the first day of each month thereafter, a sum equal to the
amount of all insurance premiums next due in respect of the insurance
policies required to be maintained under the Credit Documents and all
general and special real estate taxes and assessments next due upon or for
the Trust Property (the amount of such insurance premiums, taxes and
assessments next due to be based upon Beneficiary's reasonable estimate,
but shall include all taxes or assessments not levied, charged, assessed or
imposed separately upon the Trust Property), reduced by the amount, if any,
then on deposit with Beneficiary for such purpose, divided by the number of
months to elapse before one month prior to the date when such insurance
premiums, taxes and assessments will become due and payable. If such
Deposits are insufficient to pay any such insurance premiums, taxes or
assessments when the same become due and payable, Trustor, within 10 days
after receipt of demand therefor from Beneficiary, shall deposit such
additional funds as may be necessary to pay such insurance premiums in
full. If such Deposits exceed the amount required to pay such insurance
premiums, taxes or assessments for any year, the excess shall be credited
against the next succeeding deposit or deposits to be made by Trustor.
Such Deposits need not be kept separate and apart from any other funds of
Beneficiary, shall be held without any allowance of interest to Trustor and
shall be used for the payment of insurance premiums, taxes and assessments
on the Trust Property next due and payable when they become due; provided
that Beneficiary shall not be liable for any failure to apply such Deposits
to the payment of such insurance premiums, taxes and assessments unless
Beneficiary shall have received from Trustor a request for payment
accompanied by the bills for such insurance premiums, taxes and assessments
not less than thirty days prior to the date due.
11.2.3 LEASES AND RENTS. Beneficiary may, with or without taking
----------------
possession of the Trust Property, as attorney and agent-in-fact for Trustor
constituted and appointed by Trustor with full power of substitution (which
power is coupled with an
13
<PAGE>
interest and is irrevocable), in the name of Trustor, Beneficiary, or both:
(a) demand, collect, settle, adjust, compromise, and enforce, by
legal proceedings or otherwise, payment of the Rents, endorse the name
of Trustor upon any payments or proceeds of the Rents and deposit the
same for the account of Beneficiary and do all other acts and things
necessary, in Beneficiary's sole discretion, to obtain control and use
of the Rents;
(b) terminate the license granted to Trustor hereunder to collect
the Rents and thereafter Beneficiary shall have all right, title and
interest in and to the Leases and the Rents by virtue of the present
assignment thereof granted to Trustee for the benefit of Beneficiary
hereunder;
(c) require Trustor to deliver to Beneficiary the originals of
the Leases, with appropriate endorsement and/or other specific
evidence of assignment thereto to Beneficiary, which endorsement
and/or assignment shall be in form and substance acceptable to
Beneficiary;
(d) notify any of the obligors under the Leases that the Leases
have been assigned to Beneficiary and direct such obligors thereafter
to make all payments due from them under the Leases directly to
Beneficiary; and
(e) require Trustor to direct all obligors of the Leases to make
all payments due them under the Leases directly to Beneficiary.
Notwithstanding anything in this subsection 11.2.3 to the contrary, under
no circumstances shall Beneficiary have any duty to produce Rents from the
Trust Property. Regardless of whether or not Beneficiary, in person or by
agent, takes actual possession of the Premises and Improvements,
Beneficiary is not and shall not be deemed to be (i) a "mortgagee in
possession" for any purpose; (ii) responsible for performing any of the
obligations of the lessor under any Lease; (iii) responsible for any waste
committed by lessees or any other parties, any dangerous or defective
condition of the Trust Property, or any negligence in the management,
upkeep, repair or control of the Trust Property; or (iv) liable in any
manner for the Trust Property or the use, occupancy, enjoyment or operation
of all or any part thereof.
11.2.4 APPOINTMENT OF RECEIVER. Upon application to a court of
-----------------------
competent jurisdiction, Beneficiary may appoint a receiver to take
possession of and to operate the Trust Property and to collect and apply
the Rents, without notice and without regard to the occupancy or value of
any security for Trustor's Obligations or the solvency of Trustor. The
receiver shall have all rights and powers necessary or usual for the
protection, possession, control, management and operation of the Trust
Property during the period of receivership, to the fullest extent permitted
by law.
14
<PAGE>
11.2.5 OTHER REMEDIES. Beneficiary may exercise any other rights and
--------------
remedies then available to Trustee or Beneficiary under this Deed of Trust,
the Note, the other Credit Documents and any applicable laws.
11.3 REMEDIES UPON ACCELERATION. If Trustor's Obligations have been
--------------------------
accelerated pursuant to Section 11.1, in addition to Beneficiary's rights under
Section 11.2, Beneficiary may exercise any one or more of the following
remedies:
11.3.1 COMMENCE FORECLOSURE PROCEEDINGS. Beneficiary may commence a
--------------------------------
civil action to foreclose the Deed of Trust Lien for payment of Trustor's
Obligations, or any part thereof, and obtain an order or judgment of
foreclosure and sale of the Trust Property. In any civil action to
foreclose the Deed of Trust Lien or otherwise enforce Beneficiary's rights,
there shall be allowed and included as part of Trustor's Obligations in the
order or judgment for foreclosure and sale (or other order), all
expenditures and expenses which may be paid or incurred by or on behalf of
Beneficiary for attorneys' fees, costs and expenses, appraiser's fees,
engineer's fees, out-lays for documentary and expert evidence, receiver's
fees, stenographers' charges, publication costs, and costs (which may be
estimates as to items to be expended after entry of such order or judgment)
of procuring all such abstracts of title, title searches and examinations,
title insurance policies and similar data and assurances with respect to
the title of the Trust Property as Beneficiary may deem necessary either to
prosecute such civil action or to evidence to bidders at any sale which may
be had pursuant to such order or judgment the true condition of the title
to, or the value of, the Trust Property.
11.3.2 BID AT FORECLOSURE SALE. Beneficiary may bid for and purchase
-----------------------
the Trust Property at any foreclosure or trustee's sale and apply all or
any part of Trustor's Obligations as a credit to the purchase price in lieu
of paying cash therefor.
11.3.3 RIGHTS UNDER UNIFORM COMMERCIAL CODE. Beneficiary may exercise
------------------------------------
all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State in which the Premises are located with respect
to the Collateral. Pursuant to Section 9-501(4) of such Uniform Commercial
Code, Beneficiary shall have an option to proceed with respect to both the
real property portion of the Trust Property and the Collateral, in
accordance with its rights, powers and remedies with respect to the real
property, in which event the remedy and enforcement provisions of this Deed
of Trust in lieu of the remedy and enforcement provisions of such Uniform
Commercial Code shall apply. Such Section 9-501(4) also permits
Beneficiary to proceed separately against the Collateral in accordance with
the remedy and enforcement provisions of such Uniform Commercial Code. If
Beneficiary shall elect to proceed against the Collateral separately from
any proceeding with respect to the real property, Trustor agrees that 10
days notice of the sale of the Collateral shall be reasonable notice.
15
<PAGE>
11.3.4 TRUSTEE'S SALE. Beneficiary may effect a trustee's sale of the
--------------
Trust Property in whole or in part in lieu of judicial foreclosure to the
extent and in any manner permitted by, and otherwise in accordance with,
applicable law.
11.3.5 STATE STATUTES. Beneficiary may exercise all rights and
--------------
remedies under the statutes in the State where the Premises are located,
subject to the following:
(a) if any provision in this Deed of Trust is inconsistent with
any applicable statute in the State where the Premises are located,
such statute shall take precedence over the provisions of this Deed of
Trust, but shall not invalidate or render unenforceable any other
provision of this Deed of Trust that can be construed in a manner
consistent with such statute; and
(b) if any provision of this Deed of Trust shall grant to
Beneficiary any rights or remedies upon default of Trustor which are
more limited than the rights that otherwise would be vested in
Beneficiary under such statute in the absence of such provision,
Beneficiary shall be vested with the rights granted in such statute to
the full extent permitted by law.
Without limiting the generality of the foregoing, all expenses incurred by
Beneficiary to the extent reimbursable under such statute, whether incurred
before or after any decrees or judgment of foreclosure or any trustee's
sale, and whether or not provided for elsewhere in this Deed of Trust,
shall be added to Trustor's Obligations or to the judgment of foreclosure,
as described more fully in Section 11.4.
11.4 ADDITIONS TO TRUSTOR'S OBLIGATIONS. Upon the occurrence of an Event
----------------------------------
of Default, there will be added to and included as part of Trustor's Obligations
(and allowed in any sale or decree for sale of the Trust Property or in any
judgment rendered upon this Deed of Trust, the Notes or the other Credit
Documents) all of the costs and expenses incurred by Beneficiary in exercising
its rights and remedies under this Deed of Trust. All of such costs and
expenses, including attorneys' fees, shall (i) be secured by this Deed of Trust,
(ii) be payable upon demand and (iii) bear interest at 12% per annum from the
date incurred by Beneficiary until paid.
11.5 PROCEEDINGS DISCONTINUED. In case Trustee or Beneficiary shall have
------------------------
proceeded to enforce any right under this Deed of Trust by foreclosure, entry or
otherwise and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to Beneficiary, then, except as
otherwise determined in such proceeding, Trustor, Trustee and Beneficiary shall
be restored to their former positions and rights hereunder with respect to the
Trust Property, and all rights, remedies, and powers of Trustee and Beneficiary
shall continue as though no such proceedings had been commenced.
11.6 DEFICIENCY.
----------
16
<PAGE>
11.6.1 SALE AND FORECLOSURE. If the Trust Property (or any part
--------------------
thereof which remains subject to this Deed of Trust) is sold pursuant to
foreclosure proceedings or a trustee's sale, and if the net proceeds of any
such sale are not sufficient to pay all of Trustor's Obligations then
outstanding and any other amounts provided for in any the decree or
judgment of foreclosure or provided for by applicable law (the amount of
such deficiency and the deficiency described in subsection 11.6.2
hereinafter collectively referred to as the "BALANCE OWED"), then the
Indebtedness evidenced by the Notes shall not be satisfied to the extent of
the Balance Owed, but such Indebtedness shall continue in existence and
shall continue to be evidenced by the Notes and shall continue to be
secured by all of the other Credit Documents which were in existence prior
to any such decree or judgment of foreclosure or trustee's sale, except
this Deed of Trust. Subject to the requirements of applicable law, if
Beneficiary shall acquire the Trust Property as a result of any such
foreclosure sale or trustee's sale (whether by bidding all or any of
Trustor's Obligations or otherwise), the proceeds of such sale shall not be
deemed to include (and Trustor shall not be entitled to any benefit or
credit on account of) proceeds of any subsequent sale of the Trust Property
by Beneficiary.
11.6.2 FORECLOSURE OF OTHER CREDIT DOCUMENTS. Notwithstanding the
-------------------------------------
provisions of subsection 11.6.1, Trustor further agrees that if any other
portion of the Collateral is foreclosed judicially and such Collateral is
sold pursuant to foreclosure proceedings, and if the proceeds of such sale
(after application of such proceeds as provided for herein and after
deducting all accrued and general and special taxes and assessments) are
not sufficient to pay Trustor's Obligations and any other amounts provided
for in the decree or judgment of foreclosure or provided for by applicable
law, then Trustor's Obligations then outstanding shall not be satisfied to
the extent of such Balance Owed, but such Indebtedness shall continue in
existence and continue to be evidenced by the Notes and shall continue to
be secured by this Deed of Trust and all of the other Credit Documents,
which were in existence immediately prior to any such decree or judgment of
foreclosure, except each such Credit Document which pertains to the portion
of the Collateral which was the subject of any such foreclosure sale.
11.8 APPLICATION OF PROCEEDS. The proceeds of any foreclosure sale or
-----------------------
trustee's sale of the Trust Property or any other proceeds received hereunder
shall be applied in accordance with the provisions of Section 4.2 of the Credit
Agreement.
ARTICLE XII
-----------
RECONVEYANCE
------------
Trustee shall reconvey to Trustor the Trust Property, or such portion
thereof as previously shall not have been sold pursuant to the terms of this
Deed of Trust, by proper
17
<PAGE>
instrument upon payment and discharge of all of Trustor's Obligations.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 NOTICES. All notices and communications under this Deed of Trust
-------
shall be in writing and shall be (i) delivered in person, or (ii) mailed,
postage prepaid, either by registered or certified mail, return receipt
requested, or by overnight express carrier, addressed in each case as follows:
To Trustor: Mikohn Gaming Corporation
4181 West Oquendo Road
Las Vegas, Nevada 89118
Attention: Charles McCrea, Jr.
To Beneficiary: First Source Financial LLP
2850 W. Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
or to any other address, as to any such party, as such party shall designate in
a written notice to the other party hereto. All notices sent pursuant to the
terms of this Section 13.1 shall be deemed received (i) if personally delivered,
then on the date of delivery, (ii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iii) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received.
13.2 COVENANTS RUN WITH LAND. All the covenants contained in this Deed of
-----------------------
Trust shall run with the land. Time is of the essence for the performance by
Trustor of its obligations under this Deed of Trust.
13.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
DEED OF TRUST SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT
OF LAWS PROVISIONS, EXCEPT TO THE EXTENT THAT IT IS MANDATORY THAT THE LAWS OF
THE STATE WHERE THE PREMISES ARE LOCATED APPLY TO THE CREATION, PRIORITY,
PERFECTION AND MAINTENANCE OF THE DEED OF TRUST LIEN AND TO THE ENFORCEMENT OF
THE REMEDIES OF BENEFICIARY HEREUNDER AND ANY OF ITS SUCCESSORS AND ASSIGNS.
18
<PAGE>
13.4 SUBMISSION TO JURISDICTION. ALL DISPUTES ARISING UNDER THIS DEED OF
--------------------------
TRUST, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT AGENT
ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST TRUSTOR OR ITS PROPERTIES IN ANY LOCATION
REASONABLY SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
TRUSTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY AGENT OR ANY LENDER. TRUSTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
13.5 SERVICE OF PROCESS. TRUSTOR HEREBY WAIVES PERSONAL SERVICE UPON IT
------------------
AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, HEREBY IRREVOCABLY DESIGNATES
AND APPOINTS CT CORPORATION SYSTEM, WITH AN OFFICE ON THE DATE HEREOF AT 208
SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604, AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO
SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS ISSUED BY
ANY COURT IN ANY LEGAL ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS DEED OF
TRUST, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO TRUSTOR AT ITS ADDRESS PROVIDED HEREIN EXCEPT THAT,
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
TRUSTOR REFUSES TO ACCEPT SERVICE, TRUSTOR HEREBY AGREES THAT SERVICE UPON IT BY
MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR SHALL LIMIT THE
RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST TRUSTOR IN THE COURTS
OF ANY OTHER JURISDICTION.
13.6 JURY TRIAL. TRUSTOR, AGENT AND THE LENDERS HEREBY WAIVE ANY RIGHT TO
----------
A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
19
<PAGE>
13.6 LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY
-----------------------
LIABILITY TO TRUSTOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR
LOSSES SUFFERED BY ANY SUCH PERSON IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS DEED OF
TRUST, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS
IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON
AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
13.7 SUCCESSORS AND ASSIGNS. This Deed of Trust will be binding upon and
----------------------
inure to the benefit of the successors and assigns of each of Trustor, Trustee
and Beneficiary.
13.8 SEVERABILITY. Any provision of this Deed of Trust that is
------------
unenforceable in any state in which this Deed of Trust may be filed or recorded
or is invalid or contrary to the law of such state, shall be of no effect, and
in such case all the remaining terms and provisions of this Deed of Trust shall
continue to be fully effective in accordance with the terms and provisions of
this Deed of Trust, all as though no such invalid portion ever had been included
herein.
13.9 REMEDIES CUMULATIVE. All rights and remedies of Trustee and
-------------------
Beneficiary under this Deed of Trust and any of the other Credit Documents are
cumulative and concurrent and may be exercised singularly, successively or
concurrently and Trustee and Beneficiary shall have all rights, remedies and
recourse available at law or equity.
13.10 SUBROGATION. To the extent that any of Trustor's Obligations
-----------
represent funds utilized to satisfy any outstanding Indebtedness secured by
Liens against all or any part of the Trust Property, to the extent permitted
thereby and by applicable law, Beneficiary shall be subrogated to any and all
Liens owned or claimed by the holder of any such outstanding Indebtedness so
satisfied, regardless of whether such Liens are assigned to Beneficiary or
released by the holder(s) thereof.
13.11 INDEMNIFICATION. Trustor will save and hold Trustee and Beneficiary
---------------
harmless of and from any and all damage, loss, cost and expense, including, but
not limited to, attorneys' fees, costs and expenses, incurred by reason of or
arising from or on account of or in connection with any suit or proceeding
threatened, filed and/or pending brought by anyone other than Trustee or
Beneficiary, in or to which Trustee or Beneficiary is or may become a party by
reason of or arising from Trustor's Obligations, this Deed of Trust or the other
Credit Documents.
13.12 CONFLICTS. In the event of any conflict or inconsistency between
---------
the terms of this Deed of Trust and the terms of the Credit Agreement, the terms
of the Credit Agreement shall prevail.
20
<PAGE>
13.13 NO PARTNER, JOINT VENTURER. Trustor and Beneficiary agree that in
--------------------------
no event shall Beneficiary be deemed to be a partner or a joint venturer with
Trustor. Without limiting the foregoing, Beneficiary shall not be deemed to be
such a partner or joint venturer on account of becoming a mortgagee in
possession or exercising any rights pursuant to this Deed of Trust or pursuant
to any other instrument or document evidencing or securing any of Trustor's
Obligations.
13.14 WAIVERS. Trustor, on behalf of itself, its successors and assigns,
-------
to the extent permitted by law, hereby (i) waives any and all rights of
appraisement, valuation, stay, extension and (to the extent permitted by law)
redemption from sale under any order or decree of foreclosure of this Deed of
Trust or in connection with any trustee's sale of the Trust Property, (ii)
waives any equitable, statutory or other right available to it, pertaining to
marshalling of assets hereunder, so as to require the separate sales of
interests in the Trust Property before proceeding against any other interest in
the Trust Property, (iii) consents to and authorizes, at the option of
Beneficiary, the sale, either separately or together, of any and all interests
in the Trust Property, (iv) agrees that in no event shall Beneficiary be
required to allocate any proceeds received by Beneficiary from foreclosure sale
or otherwise, to any particular interest in the Trust Property and (v) agrees
that when a sale is consummated under any decree of foreclosure of this Deed of
Trust or in connection with any trustee's sale of the Trust Property, upon
confirmation of such sale, the master in chancery, the sheriff, Trustee or other
Person making such sale, or his successor in office, shall be and is authorized
immediately to execute and deliver to the purchaser at such sale a deed
conveying the Trust Property, showing the amount paid therefor, or if purchased
by the Person in whose favor the order or decree is entered, the amount of his
bid therefor.
13.15 REMEDIES NOT EXCLUSIVE. No right or remedy of Beneficiary hereunder
----------------------
is exclusive of any other right or remedy hereunder or now or hereafter existing
at law or in equity or under the Notes or the other Credit Documents, but is
cumulative and in addition thereto and Beneficiary may recover judgment thereon,
issue execution therefor, and resort to every other right or remedy available at
law or in equity or under the Notes or the other Credit Documents, without first
exhausting or affecting or impairing the security or any right or remedy
afforded this Deed of Trust. No delay in exercising, or omission to exercise,
any such right or remedy will impair any such right or remedy or will be
construed to be a waiver of any default by Trustor hereunder, or acquiescence
therein, and such waiver will not affect any subsequent default hereunder by
Trustor of the same or different nature. Every such right or remedy may be
exercised independently or concurrently, and when and so often as may be deemed
expedient by Beneficiary. No term or condition contained in this Deed of Trust
may be waived, altered or changed except as evidenced in writing signed by
Trustor and Beneficiary.
13.16 NO WAIVER BY BENEFICIARY. Any failure of Beneficiary to insist upon
------------------------
the strict performance by Trustor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any such terms and
provisions, and Beneficiary,
21
<PAGE>
notwithstanding any such failure, shall have the right at any time thereafter to
insist upon the strict performance by Trustor of any and all of the terms and
provisions hereof.
13.17 NO RELEASE. Except as may be provided otherwise by applicable law,
----------
neither Trustor, nor any other Person now or hereafter obligated for the payment
of the whole or any part of Trustor's Obligations, shall be relieved of such
obligation by reason of (i) the sale, conveyance or other transfer of the Trust
Property, (ii) the failure of Beneficiary to comply with any request of Trustor,
or of any other Person, to take action to foreclose this Deed of Trust or
otherwise enforce any of the provisions of this Deed of Trust, the Notes or the
other Credit Documents, (iii) the release, regardless of consideration, of the
whole or any part of the Collateral, or (iv) any agreement or stipulation
between any subsequent owner of the Trust Property and Beneficiary extending the
time of payment under or modifying the terms of the Note, the other Credit
Documents or this Deed of Trust without first having obtained the consent of
Trustor or such other Person. If Beneficiary shall enter into any agreement
described in clause (iv) hereof, then, notwithstanding any such agreement,
Trustor and all such other Persons shall continue to be liable on account of
Trustor's Obligations and shall continue to make such payments according to the
terms of any such agreement of extension or modification unless expressly
released and discharged in writing by Beneficiary.
13.18 RELEASE OF SECURITY. Beneficiary, without notice, may release,
-------------------
regardless of consideration, any part of the Collateral, without impairing or
affecting the Deed of Trust Lien of or the priority of such Deed of Trust Lien
over any subordinate Lien.
13.19 SUBSTITUTION OF TRUSTEE. Beneficiary, or any successor to
-----------------------
Beneficiary, at its sole discretion, from time to time and with or without
cause, by an instrument in writing, may substitute a successor or successors to
any Trustee named herein or acting hereunder, which instrument, executed by
Beneficiary and duly acknowledged and recorded in the office of the recorder of
the county where the Premises are located, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall, without
conveyance from the predecessor Trustee, succeed to all of such predecessor
Trustee's title, estate, rights, powers and duties hereunder.
13.20 TRUSTEE'S POWERS. The Trustee named herein or any successor Trustee
----------------
shall be clothed with full power to act when action hereunder shall be required
and to execute any conveyance of the Trust Property. In the event that the
substitution of Trustee shall become necessary for any reason, the substitution
of one trustee in the place of the Trustee named herein shall be sufficient.
The necessity of the Trustee herein named, or any successor to such Trustee,
making oath or giving bond is expressly waived. Trustee or any one acting in
Trustee's stead shall have, in such Person's discretion, authority to employ all
proper agents and attorneys in the execution of this Deed of Trust and/or in the
conducting of any sale made pursuant to the terms hereof, and to pay for such
services rendered out of the proceeds of the sale of the Trust Property, should
any be realized; and if no sale be made then Trustor hereby undertakes and
agrees to pay the cost of such services rendered
22
<PAGE>
to Trustee.
13.21 SUBJECT TO GAMING LAWS. To the extent the prior approval of the
----------------------
gamin authorities of the State of Nevada is required pursuant to applicable law
for the exercise, operation and effectiveness of any remedy hereunder or under
the Purchase Agreement or any related document, or the taking of any action that
may e taken by Beneficiary or Trustee hereunder or under the Purchase Agreement
or any other related document, including without limitation the taking of
possession and disposition of collateral consisting of gaming devices, cashless
wagering systems and associated equipment (as those terms are defined in Chapter
463 of the NRS), such remedy or actio shall be subject to being called forward
for licensing or a finding of suitability. All rights, remedies and powers
provided in this Deed of Trust may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of the gaming laws of
the State of Nevada and the rules and regulations promulgated thereunder, and
all provisions of this Agreement are intended to be subject to all such
applicable laws, rules and regulations.
[remainder of this page intentionally left blank]
23
<PAGE>
IN WITNESS WHEREOF, this Deed of Trust, Assignment of Leases and Rents, and
Security Agreement has been duly executed by Trustor by its duly authorized
representative as of the day and year first above written.
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: /s/ Don W. Stevens
_________________________
Name: Don W. Stevens
________________________
Title: Executive Vice President
________________________
24
<PAGE>
STATE OF ___________)
) SS:
COUNTY OF __________)
On this 23rd day of October, 1997, before me, a Notary Public in
and for the State of Nevada, in the County aforesaid, personally appeared Don W.
Stevens, to me known to be the Executive Vice President of Mikohn Gaming
Corporation, a Nevada, corporation, the corporation that executed the foregoing
instrument, and upon oath did depose that he is the Executive Vice President of
such corporation, that the signature to said instrument was made by the
Executive Vice President of said corporation as indicated after said signature,
and that the corporation executed the said instrument freely and voluntarily for
the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
/s/ Wanda M. Jacobson
________________________________________
NOTARY PUBLIC in and for said State and County
My commission expires: _________________
[Seal of Wanda M. Jacobson]
THIS DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Michael L. Owen, Esq.
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
25
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
THAT PORTION OF THE SOUTH HALF (S 1/2) OF THE NORTHEAST QUARTER (NE 1/4) OF
SECTION 31, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.B. & M., DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF THE SOUTH HALF (S 1/2) OF THE NORTHEAST
QUARTER (NE 1/4) OF SAID SECTION 31; THENCE NORTH 89 DEGREES 58 MINUTES 09
SECONDS WEST ALONG THE NORTH LINE THEREOF A DISTANCE OF 686.67 FEET; THENCE
SOUTH 00 DEGREES 24 MINUTES 45 SECONDS WEST A DISTANCE OF 331.20 FEET; THENCE
NORTH 89 DEGREES 58 MINUTES 52 SECONDS WEST A DISTANCE OF 686.16 FEET TO THE
TRUE POINT OF BEGINNING; THENCE SOUTH 00 DEGREES 19 MINUTES 30 SECONDS WEST A
DISTANCE OF 232.31 FEET; THENCE NORTH 58 DEGREES 07 MINUTES 33 SECONDS WEST A
DISTANCE OF 55.15 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTHEAST
HAVING A RADIUS OF 835.22 FEET; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE
THROUGH A CENTRAL ANGLE OF 17 DEGREES 43 MINUTES 24 SECONDS AN ARC LENGTH OF
258.36 FEET; THENCE NORTH 49 DEGREES 35 MINUTES 51 SECONDS EACH A DISTANCE OF
54.50 FEET; THENCE SOUTH 89 DEGREES 58 MINUTES 52 SECONDS EAST A DISTANCE OF
201.63 FEET TO THE TRUE POINT OF BEGINNING.
TOGETHER WITH AND RESERVING THEREFROM A NON-EXCLUSIVE RIGHT-OF-WAY AND EASEMENT
FOR ROAD AND UTILITY PURPOSES OVER AND ACROSS THE FOLLOWING PARCEL:
COMMENCING AT THE NORTHEAST CORNER OF THE SOUTH HALF (S 1/2) OF THE NORTHEAST
QUARTER (NE 1/4) OF SAID SECTION 31; THENCE NORTH 89 DEGREES 58 MINUTES 09
SECONDS WEST ALONG THE NORTH LINE THEREOF A DISTANCE OF 1869.10 FEET TO A POINT
ON A NONTANGENT CURVE CONCAVE TO THE NORTHEAST HAVING A RADIUS OF 70.00 FEET, A
RADIAL LINE TO SAID POINT BEARS NORTH 89 DEGREES 58 MINUTES 09 SECONDS WEST;
THENCE SOUTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 78
DEGREES 58 MINUTES 00 SECONDS AN ARC LENGTH OF 96.37 FEET TO THE TRUE POINT OF
BEGINNING, BEARING A POINT ON A REVERSE CURVE CONCAVE TO THE SOUTHWEST HAVING A
RADIUS OF 15.00 FEET, A RADIAL LINE TO SAID POINT BEARS NORTH 11 DEGREES 08
MINUTES 51 SECONDS EAST, THENCE SOUTHEASTERLY ALONG THE ARC OF SAID CURVE
THROUGH A CENTRAL ANGLE OF 61 DEGREES 39 MINUTES 07 SECONDS AN ARC LENGTH OF
16.14 FEET TO A POINT ON A REVERSE CURVE CONCAVE TO THE NORTHEAST HAVING A
RADIUS OF 856.22 FEET; THENCE SOUTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH
A CENTRAL ANGLE OF 37 DEGREES 17 MINUTES 03 SECONDS AN ARC LENGTH OF 557.82 FEET
TO A POINT ON A REVERSE CURVE CONCAVE TO THE SOUTHWEST HAVING A RADIUS OF 25.00
FEET; THENCE SOUTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE
OF 47 DEGREES 27 MINUTES 04 SECONDS AN ARC LENGTH OF 20.70 FEET TO A POINT ON A
REVERSE CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 47.00 FEET; THENCE
SOUTHERLY, EASTERLY AND NORTHERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL
ANGLE OF 278 DEGREES 26 MINUTES 27 SECONDS AN ARC LENGTH OF 228.41 FEET TO A
POINT OF REVERSE CURVE CONCAVE TO THE NORTH HAVING A RADIUS OF 25.00 FEET;
THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 51
DEGREES 12 MINUTES 03 SECONDS AN ARC LENGTH OF 22.24 FEET TO A POINT ON A
COMPOUND CURVE CONCAVE TO THE NORTHEAST HAVING A RADIUS OF 813.22 FEET; THENCE
NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE 36 DEGREES 50
MINUTES 23 SECONDS AN ARC LENGTH OF 522.88 FEET TO A POINT ON A COMPOUND CURVE
CONCAVE TO THE SOUTHEAST HAVING A RADIUS OF 15.00 FEET; THENCE NORTHEASTERLY
ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 66 DEGREES 54 MINUTES 59
SECONDS AN ARC LENGTH OF 17.52 FEET; THENCE SOUTH 75 DEGREES 18 MINUTES 52
SECONDS WEST A DISTANCE OF 61.01 FEET TO THE POINT OF BEGINNING;
26
<PAGE>
EXHIBIT B
---------
PERMITTED EXCEPTIONS
General real estate taxes not yet due and payable and other exceptions set
forth in the title insurance policy issued to Beneficiary insuring the lien of
this instrument.
DOCUMENT #: CHGO05A (06163-00028-1) 322985.1;DATE:11/10/97/TIME:15:20
27
<PAGE>
EXHIBIT 10.48
DEED OF TRUST,
ASSIGNMENT OF LEASES
AND RENTS, AND SECURITY AGREEMENT
---------------------------------
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
("DEED OF TRUST") is made as of the 24th day of October, 1997, by MIKOHN GAMING
CORPORATION, a Nevada corporation, with its principal place of business at 1045
Palms Airport Drive, Las Vegas, Nevada 89119 ("TRUSTOR"), to Dan Hise, a
resident of Mississippi ("TRUSTEE"), for the benefit of FIRST SOURCE FINANCIAL
LLP, an Illinois registered limited liability partnership, with an office at
2850 West Golf Road, 5th Floor, Rolling Meadows, Illinois 60008 ("BENEFICIARY"),
in its capacity as Agent (as defined below) for the benefit of Lenders (as
defined below).
RECITALS:
A. Trustor is the owner of the Premises (this and all other capitalized
terms used but not elsewhere defined herein are defined in Section 1.1) and the
Improvements.
B. Pursuant to the terms of the Credit Agreement, Lenders have agreed to
make certain loans and other financial accomodations to Trustor.
C. The Loans are evidenced by the Notes.
D. One of the conditions precedent to the obligation of Lenders to make
the Loans is the execution and delivery by Trustor of this Deed of Trust.
ARTICLE I
---------
DEFINITIONS AND DETERMINATIONS
------------------------------
1.1 DEFINITIONS. Capitalized terms used but not elsewhere defined in this
-----------
Deed of Trust shall have the meanings ascribed thereto in the Credit Agreement.
When used in this Deed of Trust, the following terms shall have the following
meanings:
Agent: Beneficiary, in its capacity as agent for Lenders under the
-----
Credit Agreement.
Construction Contracts: any contracts executed by Trustor with any
----------------------
provider of goods or services in connection with any construction
undertaken on, or services performed in connection with, the Premises or
the Improvements.
Credit Agreement: that certain Credit Agreement dated as of October
----------------
24, 1997 among Borrower, Lenders and Agent, as the same may be amended,
modified or supplemented after the date hereof.
<PAGE>
Deed of Trust Lien: the Lien in favor of Trustee, for the benefit of
------------------
Beneficiary, represented by this Deed of Trust.
Deposits: all deposits (i) received by Trustor from third parties
--------
(including all earnest money sales deposits) or (ii) deposited by Trustor
with Beneficiary or third parties, including deposits pertaining to utility
services, real estate taxes, special assessments and payment of insurance
premiums.
Documents: any mortgage, deed of trust, assignment of leases,
---------
assignment of rents, note, indemnification agreement, security agreement,
financing statement, affidavit, assignment of insurance, loss payee
endorsement, mortgage title insurance policy, opinion letter, waiver
letter, estoppel letter, consent letter, insurance certificate and any
other similar documents.
Equipment: all apparatus, machinery, equipment, furniture, fixtures,
---------
fittings, goods, materials, supplies and chattels of any and every kind and
nature whatsoever now or hereafter used, attached to, installed or located
in or on the Premises and/or the Improvements, including any item used to
supply heat, gas, air conditioning, water, light, electricity, power,
plumbing, refrigeration, sprinkling, ventilation, mobility, communication,
incineration, recreation, laundry service or any other related services.
Event of Default: each of the Events of Default set forth in the
----------------
Credit Agreement.
Future Advances: all advances made by Lenders under the Credit
---------------
Agreement after the Closing Date to or on behalf of Trustor.
Imposts: any disbursements made in accordance with the terms hereof
-------
for the payment of taxes, levies or insurance on the Premises.
Improvements: the buildings and improvements now or hereafter located
------------
on the Premises, all tenements, easements, rights-of-way, hereditaments and
appurtenances now and/or at any time hereafter situated on such real estate
and all roads, alleys, streets, passages and other public ways abutting
such real estate, whether before or after vacation thereof and whether in
existence as of the date hereof or created after the date hereof.
Leases: collectively, all (i) present and future leases, subleases,
------
agreements, tenancies, subtenancies, licenses, occupancy agreements,
concessions and franchises of Trustor's present and future right, title,
and interest in and to the Premises and/or the Improvements, (ii) deposits
of money as advance rent or for security under any of the Leases and (iii)
guaranties of performance under the items described in clauses (i) and (ii)
preceding.
Lenders: the financial institutions from time to time party to the
-------
Credit
2
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Agreement.
Permits: all permits, certificates, approvals, licenses, applications
-------
and authorizations used in the operation of the Premises, Improvements
and/or the Leases.
Plans: all plans and specifications, designs, surveys, drawings, soil
-----
reports and other matters prepared for any construction on the Premises.
Premises: the real property legally described in EXHIBIT A.
--------
Rents: all present and future rents, royalties, issues, avails,
-----
profits and proceeds of or from the Premises, the Improvements, the Leases
and/or the Equipment.
Trust Property: collectively, all of Trustor's present and future
--------------
estate, right, title, and interest in and to the following:
(a) the Premises;
(b) the Improvements;
(c) the Rents;
(d) the Leases;
(e) all Plans;
(f) all Deposits;
(g) all Permits;
(h) all Equipment;
(i) all Construction Contracts;
(j) all present and future judgments, awards of damages and
settlements made as a result or in lieu of any taking of all or any
part of the Premises, Improvements, Equipment and/or Leases under the
power of eminent domain, or for any damage thereto as a result of any
such taking;
(k) all insurance policies in force or effect insuring the
Premises, the Improvements, the Rents, the Leases or the Equipment;
(l) rights arising out of Trustor's interest in the Premises and
the Improvements to (i) the payment of money, (ii) accounts
receivable, (iii) reserves,
3
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(iv) deferred payments, (v) refunds and (vi) cost savings;
(m) all development and use rights with respect to the Premises,
the Improvements and/or the Leases;
(n) all chattel paper, instruments, documents, notes, drafts and
letters of credit, other than letters of credit in favor of
Beneficiary, which arise from or relate to (i) construction on the
Premises or (ii) the Premises and Improvements generally;
(o) all causes of action and proceeds thereof for any damage or
injury to the Premises or the Improvements or any other portion of the
Trust Property described above, in addition to those described in
clause (j) above, or breach of warranty in connection with the
construction of all or any portion of the Improvements; and
(p) all proceeds (including condemnation and insurance proceeds)
of, additions to, substitutions for, and changes in each and every one
of the foregoing.
Trustor's Obligations: (i) any and all Indebtedness due or to
---------------------
become due, now existing or howsoever arising of Trustor to Agent and
Lenders pursuant to the terms of the Credit Documents, including, without
limitation, all (A) advances made in accordance with the terms hereof to
protect and preserve the value of the Trust Property and the priority of
the Deed of Trust Lien and (B) Future Advances and (ii) the performance of
the covenants of Trustor contained in the Credit Documents.
1.2 CERTAIN TERMS. Wherever used in this Deed of Trust:
-------------
1.2.1 AND/OR. The term "and/or" means one or the other or both.
------
1.2.2 REFERENCES. All references to "Article", "Section",
----------
"subsection", "Subparagraph", "Clause" or "Exhibit", unless otherwise
stated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Deed of Trust.
1.2.3 EXHIBITS. Each reference to an "Exhibit" to this Deed of Trust
--------
is to an Exhibit which is attached to this Deed of Trust, each of which
Exhibits is deemed to be a part hereof.
4
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ARTICLE II
----------
CONVEYANCE
----------
2.1 TRUST PROPERTY. To secure the payment and performance of
--------------
Trustor's Obligations, subject to the terms, covenants and provisions contained
herein, Trustor hereby irrevocably GRANTS, BARGAINS, WARRANTS, GIVES, ASSIGNS,
SETS OVER, TRANSFERS, REMISES, RELEASES, ALIENATES, SELLS AND CONVEYS the Trust
Property to Trustee, its successors and/or assigns hereunder forever, in trust,
with power of sale, for the benefit of Beneficiary. Trustee, its successors and
assigns, subject to the terms of this Deed of Trust, are to have and to hold all
such Trust Property forever for the benefit of Beneficiary for the purposes and
uses set forth in this Deed of Trust.
2.2 SECURITY AGREEMENT AND FIXTURE FILING. This Deed of Trust
-------------------------------------
constitutes a security agreement with respect to the portion of the Trust
Property which consists of personal property and a financing statement filed as
a fixture filing under the Uniform Commercial Code of the State in which the
Premises are located, covering any property which now is or later may become a
fixture attached to the Premises or the Improvements.
2.3 ABSOLUTE ASSIGNMENT. This Deed of Trust is a present and
-------------------
absolute assignment with respect to the Leases and the Rents.
ARTICLE III
-----------
FUTURE ADVANCES; LIMITATION ON AMOUNT SECURED
---------------------------------------------
3.1 FUTURE ADVANCES. This Deed of Trust is given to secure not only
---------------
Trustor's Obligations which exist as of the Closing Date, but also the payment
of any and all Future Advances, whether such Future Advances are obligatory or
are to be made at the option of Beneficiary.
3.2 LIMITATION ON AMOUNT SECURED. The total amount of Indebtedness
----------------------------
secured by this Deed of Trust may decrease or increase from time to time, but
the total unpaid balance so secured at one time shall not exceed the sum of (i)
$60,000,000, plus (ii) interest thereon, plus (iii) any Imposts, plus (iv) any
amounts paid by Beneficiary pursuant to Section 10.2 hereof, plus (v) all costs
and expenses incurred by Beneficiary in enforcing its rights and remedies under
this Deed of Trust, plus (vi) interest on the disbursements described in clauses
(iii), (iv) and (v) preceding, which interest shall be calculated at 12% per
annum. The final maturity of the indebtedness is October 1, 2004.
5
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Trustor represents and warrants to Trustee and
Beneficiary as follows:
4.1 TITLE. Trustor (i) has full legal power and authority to
-----
mortgage and convey the Premises and (ii) is the holder of fee simple title to
the Premises, free and clear of all Liens except Permitted Liens and the
exceptions to title listed on EXHIBIT B.
4.2 LOCATION, USE OF PREMISES, IMPROVEMENTS AND EQUIPMENT. The
-----------------------------------------------------
location and use of the Premises, the Improvements and the Equipment are in
compliance with all applicable laws, rules, ordinances and regulations,
including, but not limited to, building and zoning laws, and all covenants and
restrictions of record, the failure to comply with which would have a Material
Adverse Effect. No notice of violation of such laws, rules and/or ordinances
has been issued and received by Trustor which remains uncorrected.
4.3 CREDIT AGREEMENT. All representations and warranties of Trustor
----------------
set forth in the Credit Agreement are true and correct and are deemed to be
remade herein, including, without limitation, those with respect to (i) Liens,
(ii) hazardous materials, environmental laws and other environmental matters
affecting the Trust Property and (iii) taxes, assessments, levies, impositions
and charges that have been or hereafter may be imposed or assessed against all
or any portion of the Trust Property.
4.4 COPY OF DEED OF TRUST. Trustor has been
---------------------
furnished with a true, correct and complete copy of this Deed of Trust.
4.5 LEGAL COUNSEL. Throughout the transaction contemplated by this
-------------
Deed of Trust, Trustor has retained and has been represented by legal counsel of
its own choosing.
4.6 BUSINESS LOAN. The (i) Loans constitute business loans
-------------
transaction and (ii) proceeds of such Loans are to be utilized solely for the
purpose of carrying on the business of Trustor.
4.7 NO AGRICULTURAL PURPOSES. No part of the Trust Property is used
------------------------
principally or primarily for agricultural or farm purposes.
6
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ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Until Trustor's Obligations are paid and
performed in full, Trustor agrees it shall:
5.1 PAYMENT AND PERFORMANCE OF TRUSTOR'S OBLIGATIONS. Promptly pay
------------------------------------------------
or perform, or cause to be paid or performed, when due all of Trustor's
Obligations.
5.2 MAINTENANCE OF RIGHTS. Maintain the standing, right, power and
---------------------
lawful authority to do the following: (i) own good title to the Trust Property,
(ii) carry on the business of and operate the Trust Property, (iii) enter into,
execute and deliver this Deed of Trust, (iv) convey and assign the interests of
Trustor in the Trust Property to Trustee for the benefit of Beneficiary, (v)
encumber the Trust Property to Trustee for the benefit of Beneficiary as
provided herein and (vi) consummate all of the transactions described in or
contemplated by this Deed of Trust to be consummated by Trustor.
5.3 MAINTENANCE OF PERMITS. Obtain and maintain all Permits where
----------------------
the failure to obtain and/or maintain any such Permit would have a Material
Adverse Effect.
5.4 PEACEFUL POSSESSION. Remain in peaceful possession of the Trust
-------------------
Property and take all actions necessary to maintain and preserve the Deed of
Trust Lien.
5.5 PAYMENT OF LIENS. Promptly pay or cause to be paid, as and when
----------------
due and payable or when declared due and payable, any Indebtedness which may
become or be secured by any Lien on any Trust Property and, immediately upon
request by Beneficiary, deliver to Beneficiary evidence satisfactory to
Beneficiary of the payment and discharge thereof.
5.6 REPAIRS. Make all necessary repairs, replacements and renewals
-------
(including the replacement of any items of Equipment) to the Trust Property so
that the value thereof shall not be impaired, including, without limitation,
repairing, restoring or rebuilding any building or improvement now or hereafter
on the Premises which may become damaged or destroyed, and if any portion of the
Trust Property becomes damaged or destroyed, Trustor permit Beneficiary, and its
agents, upon prior notice and demand, access to the Trust Property for the
purpose of inspection thereof.
5.7 BUILDINGS AND IMPROVEMENTS. Pay for and complete, within a
--------------------------
reasonable time, any building or improvement at any time in the process of being
erected upon the Premises.
5.8 EXECUTION OF DOCUMENTS. Immediately upon request by Beneficiary,
----------------------
at Trustor's sole expense, make, execute and deliver and/or cause to be made,
executed and delivered to Trustee and/or Beneficiary, in form and substance
acceptable to Beneficiary, all Documents that Beneficiary deems necessary to
evidence, document and/or conclude the transactions described in and/or
contemplated by this Deed of Trust, or reasonably required to perfect or
continue
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perfected the Deed of Trust Lien.
5.9 COMPLIANCE WITH LAWS. Comply with all applicable laws, rules,
--------------------
ordinances and regulations, including, without limitation, building and zoning
laws, and all covenants and restrictions of record, the failure to comply with
which would have a Material Adverse Effect.
5.10 CREDIT AGREEMENT. Comply with all covenants, agreements and
----------------
indemnifications contained in the Credit Agreement, including those with respect
to (i) taxes, assessments, levies, impositions and charges as they relate to
Trustor or the Trust Property, (ii) delivery of financial statements, reports
and other information, (iii) insurance policies to be maintained for the Trust
Property and the settlement, receipt and application of insurance proceeds
arising under such insurance policies and (iv) hazardous materials,
environmental laws and other environmental matters as they relate to Trustor or
the Trust Property.
5.11 STAMP TAX; EFFECT OF CHANGE IN LAWS
-----------------------------------
REGARDING TAXATION.
- ------------------
5.11.1 PAYMENT OF STAMP TAX. If, by the laws of the United States of
--------------------
America or of any state or subdivision thereof having jurisdiction over
Trustor, any tax is due or becomes due in respect of the issuance of the
Notes or the recording of this Deed of Trust or any of the other Credit
Documents and unless such laws prohibit Trustor from paying such tax, (i)
pay such tax in the manner required by any such law and (ii) reimburse
Lenders for any sums which Lenders may expend by reason of the imposition
of any tax on the issuance of the Notes.
5.11.2 PAYMENT OF TAXES IMPOSED ON BENEFICIARY. In the event of the
---------------------------------------
enactment, after this date, of any law, statute, rule or regulation of the
United States of America or of the State in which the Premises are located
or any other state or subdivision thereof imposing upon Beneficiary the
payment of the whole or any part of the taxes, assessments or Liens herein
required to be paid by Trustor, or changing in any way the laws relating to
the taxation of mortgages or debts secured by mortgages or Beneficiary's
interest in the Premises or any other portion of the Trust Property, or the
manner of collection of taxes, so as to affect this Deed of Trust or
Trustor's Obligations or the holder thereof, then, and in any such event,
upon demand by Beneficiary, pay such taxes or assessments or reimburse
Beneficiary therefor; provided, however, that if the opinion of counsel for
Beneficiary, (i) it might be unlawful to require Trustor to make such
payment, or (ii) the making of such payment might result in the imposition
of interest beyond the maximum amount permitted by law, then and in any
such event, Beneficiary may elect, by notice in writing given to Trustor,
to declare all of Trustor's Obligations to be and become due and payable
thirty (30) days from the date of giving of such notice.
8
<PAGE>
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Until Trustor's Obligations are paid and
performed in full, Trustor agrees it will not:
6.1 ADDITIONAL LIMITATIONS. Execute, file or record any notice
----------------------
limiting the maximum principal amount that may be secured by this Deed of Trust.
6.2 SALE OR TRANSFER. Sell, transfer, exchange, convey, remove or
----------------
otherwise dispose of all or any portion of the Trust Property or legal or
equitable interest therein, except to the extent permitted by the Credit
Agreement.
6.3 LIENS. Permit any Liens to exist on the Trust Property except
-----
(i) Permitted Liens, (ii) the exceptions to title set forth on EXHIBIT B and
(iii) Leases, if any.
6.4 USE OF TRUST PROPERTY. Substantially or materially change the
---------------------
use or character of any portion of the Trust Property, permit any excavation,
construction, site work or other lienable work to be performed on any portion of
the Trust Property which is not paid for as such work is completed, initiate or
acquiesce in any zoning variation or reclassification of any portion of the
Trust Property or commit or suffer any waste to exist on any portion of the
Trust Property.
6.5 INSURANCE. Purchase any separate insurance concurrent in form or
---------
contributing in the event of loss with that required to be maintained under the
Credit Documents unless (i) Beneficiary receives prompt notice thereof and is
included thereon under a standard non-contributory mortgagee clause acceptable
to Beneficiary, (ii) such separate insurance otherwise complies with all of the
requirements of the Credit Documents and (iii) Trustor delivers to Beneficiary
promptly the original policy or policies of such insurance.
ARTICLE VII
-----------
INSURANCE
---------
7.1 ADJUSTMENT OF LOSSES; COLLECTION OF PROCEEDS. In case of loss or
--------------------------------------------
damage by fire or other insured casualty to all or any portion of the Trust
Property, Beneficiary is authorized and empowered to (i) make or file proofs of
loss, and settle and adjust any claim under insurance policies which insure
against such risks, or (ii) direct Trustor to agree with each insurance company
on the amount to be paid as a result of such loss. If the insurance proceeds
paid for such loss are equal to or less than $25,000, Trustor may collect such
proceeds so long as (x) Trustor uses such proceeds to repair, restore or rebuild
the Trust Property, in such manner and under such conditions as Beneficiary may
require and (y) no Event of Default or Default exists. If the insurance
proceeds paid for such loss are greater than $25,000, or if an
9
<PAGE>
Event of Default or Default then exists, then Beneficiary is authorized to
collect such proceeds.
7.2 APPLICATION OF PROCEEDS. Beneficiary may elect (i) to apply
-----------------------
insurance proceeds received by Beneficiary to the payment of Trustor's
Obligations, whether or not then due, or (ii) after the payment of all expenses
incurred by Beneficiary in connection with the collection of such insurance
proceeds, including, without limitation, attorneys' fees, to make such insurance
proceeds available to Trustor for repair, restoration or rebuilding of the Trust
Property, in such manner and under such conditions as Beneficiary may require.
In the event that Beneficiary has permitted the insurance proceeds to be used to
restore the Trust Property, Trustor shall (x) pay the amount of any deficiency
in such insurance proceeds in order to restore the Trust Property fully to its
condition immediately prior to the loss or damage to which such insurance
proceeds relate and (y) deliver to Beneficiary any surplus which may remain out
of such proceeds after payment of the cost of restoration to be applied to the
payment of Trustor's Obligations.
7.3 FAILURE TO COLLECT PROCEEDS. Beneficiary shall not be held
---------------------------
responsible for (i) any failure to collect any insurance proceeds due under the
terms of any policy, regardless of the cause of such failure, (ii) the amount of
any such proceeds ultimately paid, regardless of any negotiation by Beneficiary
of such amount, or (iii) any use by Trustor of such proceeds as Beneficiary may
pay over to Trustor.
ARTICLE VIII
------------
CONDEMNATION
------------
8.1 NOTICE; ASSIGNMENT OF PROCEEDS. Trustor shall notify Beneficiary
------------------------------
immediately of the institution or threat of institution of any proceeding
pertaining to the condemnation of any portion of the Trust Property.
Beneficiary is authorized to settle all claims for damages to any portion of the
Trust Property which relate to, and collect any proceeds of any award which may
be the result of, any eminent domain or condemnation proceeding.
8.2 APPLICATION OF PROCEEDS. Beneficiary may elect (i) to apply the
-----------------------
proceeds of the award or claim received by Beneficiary described in Section 8.1
to the payment of Trustor's Obligations in accordance with the provisions of the
Credit Agreement, whether due or not, or (ii) after the payment of all expenses
incurred by Beneficiary in connection with the collection of such proceeds,
including, without limitation, attorneys' fees, to make such proceeds available
to Trustor for replacement of the condemned portion of the Trust Property, in
such manner and under such conditions as Beneficiary may require. In the event
that Beneficiary has permitted the proceeds of the award or claim to be used to
replace the condemned portion of the Trust Property, Trustor shall (x) pay the
amount of any deficiency in such proceeds in order to complete such replacement
and (y) deliver to Beneficiary any surplus which may remain out of such proceeds
after payment of the cost of replacement to be applied to the payment of
Trustor's Obligations.
8.3 FAILURE TO COLLECT PROCEEDS. Beneficiary shall not be held
---------------------------
responsible for (i) any
10
<PAGE>
failure to collect any condemnation proceeds, regardless of the cause of such
failure, (ii) the amount of any such proceeds ultimately paid, regardless of any
negotiation by Beneficiary of such amount, or (iii) any use by Trustor of such
proceeds as Beneficiary may pay over to Trustor.
ARTICLE IX
----------
LEASES AND RENTS
----------------
9.1 LICENSE TO COLLECT. Subject to Beneficiary's rights under
------------------
Section 11, Trustee and Beneficiary hereby confer upon Trustor a revocable, non-
exclusive license to collect and retain the Rents as they become due and
payable.
9.2 RENT ROLL, COPIES OF LEASES. Upon Beneficiary's request, Trustor
---------------------------
shall deliver to Beneficiary (i) a rent roll pertaining to all Leases, (ii)
copies of all Leases and (iii) such other matters and information relating to
any Lease as Beneficiary may request.
ARTICLE X
---------
CERTAIN RIGHTS OF BENEFICIARY
-----------------------------
10.1 DOCUMENTS. In case Trustor fails to execute or obtain any
---------
Documents required by Beneficiary for the perfection or continuation of the Deed
of Trust Lien, Trustor hereby appoints Beneficiary as its true and lawful
attorney-in-fact to execute or obtain any such Documents on its behalf.
10.2 MAINTENANCE OF TRUST PROPERTY. If Trustor, within thirty (30)
-----------------------------
days after receipt of written demand from Beneficiary (except in cases of
emergency, when no demand shall be required), shall neglect or refuse to (i)
keep the Trust Property in good operating condition and repair, (ii) replace or
maintain the same as herein agreed, (iii) pay the premiums for the insurance
which is required to be maintained hereunder, (iv) pay and discharge all Liens
as herein agreed or (v) otherwise perform Trustor's Obligations within the time
periods specified therefor (including any applicable cure periods), Beneficiary,
at its option and sole election, may cause such repairs or replacements to be
made, obtain such insurance, pay such Liens or perform such Trustor's
Obligations. Any amounts paid by Beneficiary in taking such action, together
with interest thereon at 12% per annum until repaid by Trustor to Beneficiary,
shall be due and payable by Trustor to Beneficiary upon demand, and, until paid,
shall constitute a part of Trustor's Obligations secured by this Deed of Trust.
Beneficiary shall not be liable to Trustor for failure or refusal to exercise
any such right. In making any payments pursuant to the exercise of any such
right, Beneficiary may rely upon any bills delivered to it by Trustor or any
such payee.
11
<PAGE>
ARTICLE XI
----------
DEFAULT AND REMEDIES
--------------------
The occurrence of an Event of Default under the Credit Agreement shall
constitute an Event of Default under this Deed of Trust. Upon the occurrence of
an Event of Default, Beneficiary, in its sole discretion and at its sole
election, without notice of such election, and without further demand, may
exercise any one or more of the following rights and remedies:
11.1 ACCELERATION. Beneficiary may declare all of Trustor's
------------
Obligations immediately due and payable, whereupon Trustor's Obligations
immediately shall mature and become due and payable.
11.2 OTHER REMEDIES. To the extent permitted by applicable law,
--------------
Beneficiary may exercise any one or more of the following remedies, whether or
not Trustor's Obligations have been accelerated:
11.2.1 TAKING OF POSSESSION. Beneficiary, by itself or by such
--------------------
officers or agents as it may appoint, may enter and take exclusive
possession of all or any part of the Trust Property, including all books,
papers and accounts of Trustor relating to the business of Trustor
conducted at such Trust Property, and may expel, remove and exclude
Trustor, its agents and employees and any persons, goods and chattels
occupying the Trust Property. If Trustor for any reason fails to surrender
or deliver the Trust Property or any part thereof after such demand by
Beneficiary, Beneficiary may obtain a judgment or decree conferring on
Beneficiary the right to immediate possession or requiring the delivery to
Beneficiary of the Trust Property, and Trustor specifically consents to the
entry of such judgment or decree. Upon every such taking of possession,
Beneficiary may (i) hold, store, use, operate, manage and control the Trust
Property and conduct the business of Trustor thereon, (ii) perform all
necessary and proper maintenance and make all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty
and other Property, (iii) keep the Trust Property insured, (iv) manage and
operate the Trust Property and exercise all of the rights and powers of
Trustor to the same extent as Trustor could in its own name, (v) enter into
any agreements with respect to the exercise by others of any of the powers
granted to Beneficiary herein, in such manner as Beneficiary shall elect,
(vi) collect and receive all of the Rents, including those past due as well
as those accruing after the occurrence of any such Event of Default and
(vii) after deducting (A) all expenses of taking, holding, holding,
managing and operating the Trust Property (including compensation for the
services of all Persons employed for such purposes), (B) the cost of all
such maintenance, repairs, renewals, replacements, additions, betterments,
improvements and purchases and acquisitions, (C) the cost of such
insurance, (D) such taxes, assessments and other similar charges as
Beneficiary may determine to pay, (E) other proper charges upon the Trust
Property or any part thereof and (F) the compensation, expenses and
disbursements of the attorneys
12
<PAGE>
and agents of Beneficiary, apply the remainder of the monies and proceeds
so received by Beneficiary as described in Section 11.8 hereof.
11.2.2 DEPOSITS FOR TAXES AND INSURANCE. Beneficiary may require
--------------------------------
Trustor to deposit with Beneficiary, commencing 10 days following such
request and on the first day of each month thereafter, a sum equal to the
amount of all insurance premiums next due in respect of the insurance
policies required to be maintained under the Credit Documents and all
general and special real estate taxes and assessments next due upon or for
the Trust Property (the amount of such insurance premiums, taxes and
assessments next due to be based upon Beneficiary's reasonable estimate,
but shall include all taxes or assessments not levied, charged, assessed or
imposed separately upon the Trust Property), reduced by the amount, if any,
then on deposit with Beneficiary for such purpose, divided by the number of
months to elapse before one month prior to the date when such insurance
premiums, taxes and assessments will become due and payable. If such
Deposits are insufficient to pay any such insurance premiums, taxes or
assessments when the same become due and payable, Trustor, within 10 days
after receipt of demand therefor from Beneficiary, shall deposit such
additional funds as may be necessary to pay such insurance premiums in
full. If such Deposits exceed the amount required to pay such insurance
premiums, taxes or assessments for any year, the excess shall be credited
against the next succeeding deposit or deposits to be made by Trustor.
Such Deposits need not be kept separate and apart from any other funds of
Beneficiary, shall be held without any allowance of interest to Trustor and
shall be used for the payment of insurance premiums, taxes and assessments
on the Trust Property next due and payable when they become due; provided
that Beneficiary shall not be liable for any failure to apply such Deposits
to the payment of such insurance premiums, taxes and assessments unless
Beneficiary shall have received from Trustor a request for payment
accompanied by the bills for such insurance premiums, taxes and assessments
not less than thirty days prior to the date due.
11.2.3 LEASES AND RENTS. Beneficiary may, with or without taking
----------------
possession of the Trust Property, as attorney and agent-in-fact for Trustor
constituted and appointed by Trustor with full power of substitution (which
power is coupled with an interest and is irrevocable), in the name of
Trustor, Beneficiary, or both:
(a) demand, collect, settle, adjust, compromise, and enforce, by
legal proceedings or otherwise, payment of the Rents, endorse the name
of Trustor upon any payments or proceeds of the Rents and deposit the
same for the account of Beneficiary and do all other acts and things
necessary, in Beneficiary's sole discretion, to obtain control and use
of the Rents;
(b) terminate the license granted to Trustor hereunder to collect
the Rents and thereafter Beneficiary shall have all right, title and
interest in and to the Leases and the Rents by virtue of the present
assignment thereof granted to Trustee for the benefit of Beneficiary
hereunder;
13
<PAGE>
(c) require Trustor to deliver to Beneficiary the originals of the Leases,
with appropriate endorsement and/or other specific evidence of
assignment thereto to Beneficiary, which endorsement and/or assignment
shall be in form and substance acceptable to Beneficiary;
(d) notify any of the obligors under the Leases that the Leases
have been assigned to Beneficiary and direct such obligors thereafter
to make all payments due from them under the Leases directly to
Beneficiary; and
(e) require Trustor to direct all obligors of the Leases to make
all payments due them under the Leases directly to Beneficiary.
Notwithstanding anything in this subsection 11.2.3 to the contrary, under
no circumstances shall Beneficiary have any duty to produce Rents from the
Trust Property. Regardless of whether or not Beneficiary, in person or by
agent, takes actual possession of the Premises and Improvements,
Beneficiary is not and shall not be deemed to be (i) a "mortgagee in
possession" for any purpose; (ii) responsible for performing any of the
obligations of the lessor under any Lease; (iii) responsible for any waste
committed by lessees or any other parties, any dangerous or defective
condition of the Trust Property, or any negligence in the management,
upkeep, repair or control of the Trust Property; or (iv) liable in any
manner for the Trust Property or the use, occupancy, enjoyment or operation
of all or any part thereof.
11.2.4 APPOINTMENT OF RECEIVER. Upon application to a court of
-----------------------
competent jurisdiction, Beneficiary may appoint a receiver to take
possession of and to operate the Trust Property and to collect and apply
the Rents, without notice and without regard to the occupancy or value of
any security for Trustor's Obligations or the solvency of Trustor. The
receiver shall have all rights and powers necessary or usual for the
protection, possession, control, management and operation of the Trust
Property during the period of receivership, to the fullest extent permitted
by law.
11.2.5 OTHER REMEDIES. Beneficiary may exercise any other rights and
--------------
remedies then available to Trustee or Beneficiary under this Deed of Trust,
the Note, the other Credit Documents and any applicable laws.
11.3 REMEDIES UPON ACCELERATION. If Trustor's Obligations have been
--------------------------
accelerated pursuant to Section 11.1, in addition to Beneficiary's rights under
Section 11.2, Beneficiary may exercise any one or more of the following
remedies:
11.3.1 COMMENCE FORECLOSURE PROCEEDINGS. Beneficiary may commence a
--------------------------------
civil action to foreclose the Deed of Trust Lien for payment of Trustor's
Obligations, or any part thereof, and obtain an order or judgment of
foreclosure and sale of the Trust Property. In any civil action to
foreclose the Deed of Trust Lien or otherwise enforce Beneficiary's rights,
there shall be allowed and included as part of Trustor's Obligations
14
<PAGE>
in the order or judgment for foreclosure and sale (or other order), all
expenditures and expenses which may be paid or incurred by or on behalf of
Beneficiary for attorneys' fees, costs and expenses, appraiser's fees,
engineer's fees, out-lays for documentary and expert evidence, receiver's
fees, stenographers' charges, publication costs, and costs (which may be
estimates as to items to be expended after entry of such order or judgment)
of procuring all such abstracts of title, title searches and examinations,
title insurance policies and similar data and assurances with respect to
the title of the Trust Property as Beneficiary may deem necessary either to
prosecute such civil action or to evidence to bidders at any sale which may
be had pursuant to such order or judgment the true condition of the title
to, or the value of, the Trust Property.
11.3.2 BID AT FORECLOSURE SALE. Beneficiary may bid for and purchase
-----------------------
the Trust Property at any foreclosure or trustee's sale and apply all or
any part of Trustor's Obligations as a credit to the purchase price in lieu
of paying cash therefor.
11.3.3 RIGHTS UNDER UNIFORM COMMERCIAL CODE. Beneficiary may exercise
------------------------------------
all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State in which the Premises are located with respect
to the Trust Property. Pursuant to Section 9-501(4) of such Uniform
Commercial Code, Beneficiary shall have an option to proceed with respect
to both the real property portion of the Trust Property and the Collateral,
in accordance with its rights, powers and remedies with respect to the real
property, in which event the remedy and enforcement provisions of this Deed
of Trust in lieu of the remedy and enforcement provisions of such Uniform
Commercial Code shall apply. Such Section 9-501(4) also permits
Beneficiary to proceed separately against the Collateral in accordance with
the remedy and enforcement provisions of such Uniform Commercial Code. If
Beneficiary shall elect to proceed against the Collateral separately from
any proceeding with respect to the real property, Trustor agrees that 10
days notice of the sale of the Collateral shall be reasonable notice.
11.3.4 TRUSTEE'S SALE. Beneficiary may effect a trustee's sale of the
--------------
Trust Property in whole or in part in lieu of judicial foreclosure to the
extent and in any manner permitted by, and otherwise in accordance with,
applicable law. The Beneficiary shall have the right forthwith, at the
Beneficiary's election, by and through the Trustee or otherwise, to sell or
offer for sale the Trust Property in such portions, order and parcels as
the Beneficiary may determine, with or without having first taken
possession of same, at public auction for cash or cash equivalent,
including, without limitation, for certified checks, bank drafts, wire
transfer funds, cashier checks and any other method of payment which, in
the sole discretion of the Beneficiary, is "cash equivalent", to the
highest and best bidder during legal hours, at any front door of the county
courthouse of the county in which the Premises are situated after having
advertised and given notice of said sale, giving the time, place and terms
thereof, together with a description of the Premises according to the laws
of the State of Mississippi governing sales of land under deeds of trust in
force at the time the publication of said notice has begun. If the
Premises are situated in two or more counties or in two judicial districts
of the same
15
<PAGE>
county, then the Trustee shall have power, in case the Trustee is directed
to foreclose under this Deed of Trust, to select in which county, or
judicial district, the sale of all the Trust property shall be made, and
the selection shall be binding upon the Trustor and the Beneficiary and all
persons claiming through or under them, whether by contract or by law. The
Trustee shall have full power to fix the day, time and place of sale, and
may sell the Trust Property in parcels or as a whole as the Trustee may
deem best. The Trustee shall have full power to conduct any sale through an
agent appointed by the Trustee for the purpose, but said appointment of
agent need not be recorded. At any such sale: (i) the Trustee shall not be
required to have physically present, or to have constructive possession of,
the Trust Property (the Trustor hereby covenanting and agreeing to deliver
to the Trustee any portion of the Trust Property not actually or
constructively possessed by the Trustee immediately upon demand by the
Trustee) and the title to and right of possession of any such Trust
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) the
Trustee may, from time to time adjourn said sale to a later date without
readvertising, by giving notice of the time and place of such continued
sale at the time when and where the Trustee shall make such adjournment;
(iii) each and every recital contained in any instrument of conveyance made
by the Trustee shall conclusively establish the truth and accuracy of the
matters recited therein, including, without limitation, nonpayment of the
indebtedness secured by this Deed of Trust, advertisement and conduct of
such sale in the manner provided herein and otherwise by law and by
appointment of any successor Trustee hereunder; (iv) any and all
prerequisites to the validity of such sale shall be conclusively presumed
to have been performed; (v) the receipt of the Trustee or of such other
party making the sale shall be a sufficient discharge to the purchaser for
its or his purchase money and no such purchaser, or its or his assigns,
successors 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) the Trustor
shall be completely and irrevocably divested of all the Trustor's 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 the Trustor, and against any and all other
persons claiming or to claim the Trust Property sold or any part thereof;
(vii) the Beneficiary may be a purchaser at any such sale; and (viii) and
the Trustee, in the Beneficiary's own name or as the attorney of the
Trustor (the Trustee being for that purpose by this Deed of Trust duly and
irrevocably authorized and appointed as the Trustor's agent and attorney in
fact, coupled with an interest and with full power of substitution,
delegation and revocation) to make, execute, acknowledge and deliver to the
purchaser or purchasers thereof a good and sufficient deed or deeds of the
Trust Property in fee simple and to receive the proceeds of such sale or
sales.
The Trustor waives the provisions of Section 89-1-55 of the
Mississippi code of 1972, or laws amendatory thereof, if any, so far as the
same restricts the right of the Trustee to offer at sale more than one
hundred sixty (160) acres at a time, and the Trustee may offer the Land as
a whole, regardless of the manner in which the Land may
16
<PAGE>
be described.
Should the Trust Property be sold in one or more parcels as permitted
herein, the right of sale arising out of any Event of Default shall not be
exhausted by any one or more such sales, but other and successive sales may
be made until all of the Trust Property has been sold or until the
indebtedness secured by this Deed of Trust has fully satisfied.
The Trustor hereby irrevocably and unconditionally waives and
releases: (i) all benefits that might accrue to the Trustor by virtue of
any present or future law exempting the Trust Property from attachment,
levy or sale or execution or providing for any appraisement, valuation,
stay of execution, exemption from civil process, redemption or extension of
time for payment; (ii) all notices of any Event of Default or of the
Trustee's exercise of any right, remedy or recourse provided for hereunder
or under the Credit Agreement; and (iii) any right to a marshalling of
assets or a sale in inverse order of alienation.
11.3.5 STATE STATUTES. Beneficiary may exercise all rights and
--------------
remedies under the statutes in the State where the Premises are located,
subject to the following:
(a) if any provision in this Deed of Trust is inconsistent with
any applicable statute in the State where the Premises are located,
such statute shall take precedence over the provisions of this Deed of
Trust, but shall not invalidate or render unenforceable any other
provision of this Deed of Trust that can be construed in a manner
consistent with such statute; and
(b) if any provision of this Deed of Trust shall grant to
Beneficiary any rights or remedies upon default of Trustor which are
more limited than the rights that otherwise would be vested in
Beneficiary under such statute in the absence of such provision,
Beneficiary shall be vested with the rights granted in such statute to
the full extent permitted by law.
Without limiting the generality of the foregoing, all expenses incurred by
Beneficiary to the extent reimbursable under such statute, whether incurred
before or after any decrees or judgment of foreclosure or any trustee's
sale, and whether or not provided for elsewhere in this Deed of Trust,
shall be added to Trustor's Obligations or to the judgment of foreclosure,
as described more fully in Section 11.4.
11.4 ADDITIONS TO TRUSTOR'S OBLIGATIONS. Upon the occurrence of an Event
----------------------------------
of Default, there will be added to and included as part of Trustor's Obligations
(and allowed in any sale or decree for sale of the Trust Property or in any
judgment rendered upon this Deed of Trust, the Notes or the other Credit
Documents) all of the costs and expenses incurred by Beneficiary in exercising
its rights and remedies under this Deed of Trust. All of such costs and
17
<PAGE>
expenses, including attorneys' fees, shall (i) be secured by this Deed of Trust,
(ii) be payable upon demand and (iii) bear interest at 12% per annum from the
date incurred by Beneficiary until paid.
11.5 PROCEEDINGS DISCONTINUED. In case Trustee or Beneficiary shall have
------------------------
proceeded to enforce any right under this Deed of Trust by foreclosure, entry or
otherwise and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to Beneficiary, then, except as
otherwise determined in such proceeding, Trustor, Trustee and Beneficiary shall
be restored to their former positions and rights hereunder with respect to the
Trust Property, and all rights, remedies, and powers of Trustee and Beneficiary
shall continue as though no such proceedings had been commenced.
11.6 DEFICIENCY.
----------
11.6.1 SALE AND FORECLOSURE. If the Trust Property (or any part
--------------------
thereof which remains subject to this Deed of Trust) is sold pursuant to
foreclosure proceedings or a trustee's sale, and if the net proceeds of any
such sale are not sufficient to pay all of Trustor's Obligations then
outstanding and any other amounts provided for in any the decree or
judgment of foreclosure or provided for by applicable law (the amount of
such deficiency and the deficiency described in subsection 11.6.2
hereinafter collectively referred to as the "BALANCE OWED"), then the
Indebtedness evidenced by the Notes shall not be satisfied to the extent of
the Balance Owed, but such Indebtedness shall continue in existence and
shall continue to be evidenced by the Notes and shall continue to be
secured by all of the other Credit Documents which were in existence prior
to any such decree or judgment of foreclosure or trustee's sale, except
this Deed of Trust. Subject to the requirements of applicable law, if
Beneficiary shall acquire the Trust Property as a result of any such
foreclosure sale or trustee's sale (whether by bidding all or any of
Trustor's Obligations or otherwise), the proceeds of such sale shall not be
deemed to include (and Trustor shall not be entitled to any benefit or
credit on account of) proceeds of any subsequent sale of the Trust Property
by Beneficiary.
11.6.2 FORECLOSURE OF OTHER CREDIT DOCUMENTS. Notwithstanding the
-------------------------------------
provisions of subsection 11.6.1, Trustor further agrees that if any other
portion of the Collateral is foreclosed judicially and such Collateral is
sold pursuant to foreclosure proceedings, and if the proceeds of such sale
(after application of such proceeds as provided for herein and after
deducting all accrued and general and special taxes and assessments) are
not sufficient to pay Trustor's Obligations and any other amounts provided
for in the decree or judgment of foreclosure or provided for by applicable
law, then Trustor's Obligations then outstanding shall not be satisfied to
the extent of such Balance Owed, but such Indebtedness shall continue in
existence and continue to be evidenced by the Notes and shall continue to
be secured by this Deed of Trust and all of the other Credit Documents,
which were in existence immediately prior to any such decree or judgment of
foreclosure, except each such Credit Document which pertains to the portion
of the Collateral which was the subject of any such foreclosure sale.
18
<PAGE>
11.8 APPLICATION OF PROCEEDS. The proceeds of any foreclosure sale or
-----------------------
trustee's sale of the Trust Property or any other proceeds received hereunder
shall be applied in accordance with the provisions of Section 4.2 of the Credit
Agreement.
ARTICLE XII
-----------
RECONVEYANCE
------------
If required under applicable law,Trustee shall reconvey to Trustor the
Trust Property, or such portion thereof as previously shall not have been sold
pursuant to the terms of this Deed of Trust, by proper instrument upon payment
and discharge of all of Trustor's Obligations.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 NOTICES. All notices and communications under this Deed of Trust
-------
shall be in writing and shall be (i) delivered in person, or (ii) mailed,
postage prepaid, either by registered or certified mail, return receipt
requested, or by overnight express carrier, addressed in each case as follows:
To Trustor: Mikohn Gaming Corporation
1045 Palms Airport Drive
Las Vegas, Nevada 89119
Attention: Charles H. McCrea, Jr.
To Trustee: Estes and Estes, P.A.
P.O. Box 88
Gulfport, Mississippi 39502
Attention: Dan Hise
To Beneficiary: First Source Financial LLP
2850 W. Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
or to any other address, as to any such party, as such party shall designate in
a written notice to the other party hereto. All notices sent pursuant to the
terms of this Section 13.1 shall be deemed received (i) if personally delivered,
then on the date of delivery, (ii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iii) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received.
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<PAGE>
13.2 COVENANTS RUN WITH LAND. All the covenants contained in this Deed of
-----------------------
Trust shall run with the land. Time is of the essence for the performance by
Trustor of its obligations under this Deed of Trust.
13.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
DEED OF TRUST SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT
OF LAWS PROVISIONS, EXCEPT TO THE EXTENT THAT IT IS MANDATORY THAT THE LAWS OF
THE STATE WHERE THE PREMISES ARE LOCATED APPLY TO THE CREATION, PRIORITY,
PERFECTION AND MAINTENANCE OF THE DEED OF TRUST LIEN AND TO THE ENFORCEMENT OF
THE REMEDIES OF BENEFICIARY HEREUNDER AND ANY OF ITS SUCCESSORS AND ASSIGNS.
13.4 SUBMISSION TO JURISDICTION. ALL DISPUTES ARISING UNDER THIS DEED OF
--------------------------
TRUST, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT AGENT
ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST TRUSTOR OR ITS PROPERTIES IN ANY LOCATION
REASONABLY SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
TRUSTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY AGENT OR ANY LENDER. TRUSTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
13.5 SERVICE OF PROCESS. TRUSTOR HEREBY WAIVES PERSONAL SERVICE UPON IT
------------------
AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, HEREBY IRREVOCABLY DESIGNATES
AND APPOINTS CT CORPORATION SYSTEM, WITH AN OFFICE ON THE DATE HEREOF AT 208
SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604, AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO
SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS ISSUED BY
ANY COURT IN ANY LEGAL ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS DEED OF
TRUST, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO TRUSTOR AT ITS ADDRESS
20
<PAGE>
PROVIDED HEREIN EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
IF ANY AGENT APPOINTED BY TRUSTOR REFUSES TO ACCEPT SERVICE, TRUSTOR HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST TRUSTOR IN THE COURTS OF ANY OTHER JURISDICTION.
13.6 JURY TRIAL. TRUSTOR, AGENT AND THE LENDERS HEREBY WAIVE ANY RIGHT TO
----------
A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
13.6 LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY
-----------------------
LIABILITY TO TRUSTOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR
LOSSES SUFFERED BY ANY SUCH PERSON IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS DEED OF
TRUST, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS
IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON
AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
13.7 SUCCESSORS AND ASSIGNS. This Deed of Trust will be binding upon and
----------------------
inure to the benefit of the successors and assigns of each of Trustor, Trustee
and Beneficiary.
13.8 SEVERABILITY. Any provision of this Deed of Trust that is
------------
unenforceable in any state in which this Deed of Trust may be filed or recorded
or is invalid or contrary to the law of such state, shall be of no effect, and
in such case all the remaining terms and provisions of this Deed of Trust shall
continue to be fully effective in accordance with the terms and provisions of
this Deed of Trust, all as though no such invalid portion ever had been included
herein.
13.9 REMEDIES CUMULATIVE. All rights and remedies of Trustee and
-------------------
Beneficiary under this Deed of Trust and any of the other Credit Documents are
cumulative and concurrent and may be exercised singularly, successively or
concurrently and Trustee and Beneficiary shall have all rights, remedies and
recourse available at law or equity.
13.10 SUBROGATION. To the extent that any of Trustor's Obligations
-----------
represent funds utilized to satisfy any outstanding Indebtedness secured by
Liens against all or any part of the Trust Property, to the extent permitted
thereby and by applicable law, Beneficiary shall be
21
<PAGE>
subrogated to any and all Liens owned or claimed by the holder of any such
outstanding Indebtedness so satisfied, regardless of whether such Liens are
assigned to Beneficiary or released by the holder(s) thereof.
13.11 INDEMNIFICATION. Trustor will save and hold Trustee and Beneficiary
---------------
harmless of and from any and all damage, loss, cost and expense, including, but
not limited to, attorneys' fees, costs and expenses, incurred by reason of or
arising from or on account of or in connection with any suit or proceeding
threatened, filed and/or pending brought by anyone other than Trustee or
Beneficiary, in or to which Trustee or Beneficiary is or may become a party by
reason of or arising from Trustor's Obligations, this Deed of Trust or the other
Credit Documents.
13.12 CONFLICTS. In the event of any conflict or inconsistency between
---------
the terms of this Deed of Trust and the terms of the Credit Agreement, the terms
of the Credit Agreement shall prevail.
13.13 NO PARTNER, JOINT VENTURER. Trustor and Beneficiary agree that in
--------------------------
no event shall Beneficiary be deemed to be a partner or a joint venturer with
Trustor. Without limiting the foregoing, Beneficiary shall not be deemed to be
such a partner or joint venturer on account of becoming a mortgagee in
possession or exercising any rights pursuant to this Deed of Trust or pursuant
to any other instrument or document evidencing or securing any of Trustor's
Obligations.
13.14 WAIVERS. Trustor, on behalf of itself, its successors and assigns,
-------
to the extent permitted by law, hereby (i) waives any and all rights of
appraisement, valuation, stay, extension and (to the extent permitted by law)
redemption from sale under any order or decree of foreclosure of this Deed of
Trust or in connection with any trustee's sale of the Trust Property, (ii)
waives any equitable, statutory or other right available to it, pertaining to
marshalling of assets hereunder, so as to require the separate sales of
interests in the Trust Property before proceeding against any other interest in
the Trust Property, (iii) consents to and authorizes, at the option of
Beneficiary, the sale, either separately or together, of any and all interests
in the Trust Property, (iv) agrees that in no event shall Beneficiary be
required to allocate any proceeds received by Beneficiary from foreclosure sale
or otherwise, to any particular interest in the Trust Property and (v) agrees
that when a sale is consummated under any decree of foreclosure of this Deed of
Trust or in connection with any trustee's sale of the Trust Property, upon
confirmation of such sale, the master in chancery, the sheriff, Trustee or other
Person making such sale, or his successor in office, shall be and is authorized
immediately to execute and deliver to the purchaser at such sale a deed
conveying the Trust Property, showing the amount paid therefor, or if purchased
by the Person in whose favor the order or decree is entered, the amount of his
bid therefor.
13.15 REMEDIES NOT EXCLUSIVE. No right or remedy of Beneficiary hereunder
----------------------
is exclusive of any other right or remedy hereunder or now or hereafter existing
at law or in equity or under the Notes or the other Credit Documents, but is
cumulative and in addition thereto and
22
<PAGE>
Beneficiary may recover judgment thereon, issue execution therefor, and resort
to every other right or remedy available at law or in equity or under the Notes
or the other Credit Documents, without first exhausting or affecting or
impairing the security or any right or remedy afforded this Deed of Trust. No
delay in exercising, or omission to exercise, any such right or remedy will
impair any such right or remedy or will be construed to be a waiver of any
default by Trustor hereunder, or acquiescence therein, and such waiver will not
affect any subsequent default hereunder by Trustor of the same or different
nature. Every such right or remedy may be exercised independently or
concurrently, and when and so often as may be deemed expedient by Beneficiary.
No term or condition contained in this Deed of Trust may be waived, altered or
changed except as evidenced in writing signed by Trustor and Beneficiary.
13.16 NO WAIVER BY BENEFICIARY. Any failure of Beneficiary to insist upon
------------------------
the strict performance by Trustor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any such terms and
provisions, and Beneficiary, notwithstanding any such failure, shall have the
right at any time thereafter to insist upon the strict performance by Trustor of
any and all of the terms and provisions hereof.
13.17 NO RELEASE. Except as may be provided otherwise by applicable law,
----------
neither Trustor, nor any other Person now or hereafter obligated for the payment
of the whole or any part of Trustor's Obligations, shall be relieved of such
obligation by reason of (i) the sale, conveyance or other transfer of the Trust
Property, (ii) the failure of Beneficiary to comply with any request of Trustor,
or of any other Person, to take action to foreclose this Deed of Trust or
otherwise enforce any of the provisions of this Deed of Trust, the Notes or the
other Credit Documents, (iii) the release, regardless of consideration, of the
whole or any part of the Collateral, or (iv) any agreement or stipulation
between any subsequent owner of the Trust Property and Beneficiary extending the
time of payment under or modifying the terms of the Note, the other Credit
Documents or this Deed of Trust without first having obtained the consent of
Trustor or such other Person. If Beneficiary shall enter into any agreement
described in clause (iv) hereof, then, notwithstanding any such agreement,
Trustor and all such other Persons shall continue to be liable on account of
Trustor's Obligations and shall continue to make such payments according to the
terms of any such agreement of extension or modification unless expressly
released and discharged in writing by Beneficiary.
13.18 RELEASE OF SECURITY. Beneficiary, without notice, may release,
-------------------
regardless of consideration, any part of the Collateral, without impairing or
affecting the Deed of Trust Lien of or the priority of such Deed of Trust Lien
over any subordinate Lien.
13.19 SUBSTITUTION OF TRUSTEE. Beneficiary, or any successor to
-----------------------
Beneficiary, at its sole discretion, from time to time and with or without
cause, by an instrument in writing, may substitute a successor or successors to
any Trustee named herein or acting hereunder, which instrument, executed by
Beneficiary and duly acknowledged and recorded in the office of the recorder of
the county where the Premises are located, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall, without
conveyance from the predecessor Trustee, succeed to all of such predecessor
Trustee's title, estate, rights, powers and
23
<PAGE>
duties hereunder.
13.20 TRUSTEE'S POWERS. The Trustee named herein or any successor Trustee
----------------
shall be clothed with full power to act when action hereunder shall be required
and to execute any conveyance of the Trust Property. In the event that the
substitution of Trustee shall become necessary for any reason, the substitution
of one trustee in the place of the Trustee named herein shall be sufficient.
The necessity of the Trustee herein named, or any successor to such Trustee,
making oath or giving bond is expressly waived. Trustee or any one acting in
Trustee's stead shall have, in such Person's discretion, authority to employ all
proper agents and attorneys in the execution of this Deed of Trust and/or in the
conducting of any sale made pursuant to the terms hereof, and to pay for such
services rendered out of the proceeds of the sale of the Trust Property, should
any be realized; and if no sale be made then Trustor hereby undertakes and
agrees to pay the cost of such services rendered to Trustee.
[remainder of this page intentionally left blank]
24
<PAGE>
IN WITNESS WHEREOF, this Deed of Trust, Assignment of Leases and Rents, and
Security Agreement has been duly executed by Trustor by its duly authorized
representative as of the day and year first above written.
MIKOHN GAMING CORPORATION, a Nevada
corporation
By: /s/ Charles H. McCrea, Jr.
--------------------------
Name: CHARLES H. MCCREA, JR.
------------------------
Title: Secretary
-----------------------
25
<PAGE>
STATE OF NEVADA
COUNTY OF CLARK
Personally appeared before me, the undersigned authority in and for the
said County and State, on this 23rd day of October, 1997, within my
jurisdiction, the within named Charles H. McCrea, Jr., who acknowledged that
[he] [she] is Secretary of Mikohn Gaming Corp., a corporation, and that for and
on behalf of the said corporation, and as its act and deed, [he] [she] executed
the above and foregoing instrument, after first having been duly authorized by
said corporation so to do.
Wanda M. Jacobson
-----------------
NOTARY PUBLIC
My Commission Expires
_____________________
[AFFIX NOTARIAL SEAL]
[SEAL OF WANDA M. JACOBSON]
THIS DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Michael L. Owen, Esq.
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
26
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EXHIBIT A
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LEGAL DESCRIPTION
That certain parcel of land being situated and located in Harrison County, First
Judicial District, Mississippi, more particularly described as follows, to-wit:
The North 153.0 feet of Lot 8, Block 60, GULFPORT BAYOU VIEW SUBDIVISION, a
subdivision according to the official map or plat thereof on file and of record
in the office of the Chancery Clerk of the First Judicial District of Harrison
County, Mississippi.
AND ALSO: a non-exclusive easement for parking of vehicles over, through and in
the north 39.0 feet of the South 47.0 feet of said Lot 8 for the joint use
herein and of gulf Coast Mosquito Control Commission and its assigns.
<PAGE>
EXHIBIT B
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PERMITTED EXCEPTIONS
General real estate taxes not yet due and payable and any other exceptions
set forth in the title insurance policy issued to Beneficiary insuring the lien
of this instrument.
<PAGE>
EXHIBIT 10.49
Composition
MORTGAGE,
ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
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THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
("MORTGAGE") is made as of the 24th day of October, 1997, by MIKOHN GAMING
CORPORATION, a Nevada corporation, with its principal place of business at 4181
West Oquendo Road, Las Vegas, Nevada 89118 ("MORTGAGOR"), to and for the benefit
of FIRST SOURCE FINANCIAL LLP, an Illinois registered limited liability
partnership ("MORTGAGEE"), with an office at c/o First Source Financial, Inc.,
2850 West Golf Road, West Tower, 5th Floor, Rolling Meadows, Illinois 60008.
RECITALS:
A. Mortgagor is the owner of the Premises (this and all other capitalized
terms used but not elsewhere defined herein are defined in Section 1.1) and the
Improvements.
B. Pursuant to the terms of the Credit Agreement, Mortgagee has agreed to
make certain loans and other financial accommodations to Mortgagor.
C. The Loans are evidenced by the Notes.
D. One of the conditions precedent to the obligation of Mortgagee to make
the Loans is the execution and delivery by Mortgagor of this Mortgage.
ARTICLE I
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DEFINITIONS AND DETERMINATIONS
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1.1 DEFINITIONS. Capitalized terms used but not elsewhere defined in this
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Mortgage shall have the meanings ascribed thereto in the Credit Agreement. When
used in this Mortgage, the following terms shall have the following meanings:
Construction Contracts: any contracts executed by Mortgagor with any
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provider of goods or services in connection with any construction
undertaken on, or services performed in connection with, the Premises or
the Improvements.
Credit Agreement: that certain Credit Agreement dated as of October
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____, 1997 among Borrower, Lenders and Agent, as the same may be amended,
modified or supplemented after the date hereof.
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Deposits: all deposits (i) received by Mortgagor from third parties
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(including all earnest money sales deposits) or (ii) deposited by Mortgagor with
Mortgagee or third parties, including deposits pertaining to utility services,
real estate taxes, special assessments and payment of insurance premiums.
Documents: any mortgage, deed of trust, assignment of leases,
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assignment of rents, note, indemnification agreement, security agreement,
financing statement, affidavit, assignment of insurance, loss payee endorsement,
mortgage title insurance policy, opinion letter, waiver letter, estoppel letter,
consent letter, insurance certificate and any other similar documents.
Equipment: all apparatus, machinery, equipment, furniture, fixtures,
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fittings, goods, materials, supplies and chattels of any and every kind and
nature whatsoever now or hereafter used, attached to, installed or located in or
on the Premises and/or the Improvements, including any item used to supply heat,
gas, air conditioning, water, light, electricity, power, plumbing,
refrigeration, sprinkling, ventilation, mobility, communication, incineration,
recreation, laundry service or any other related services.
Event of Default: each of the Events of Default set forth in the
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Credit Agreement.
Future Advances: all advances made by Mortgagee under the Credit
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Agreement after the Closing Date to or on behalf of Mortgagor.
Imposts: any disbursements made in accordance with the terms hereof
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for the payment of taxes, levies or insurance on the Premises.
Improvements: the buildings and improvements now or hereafter located
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on the Premises, all tenements, easements, rights-of-way, hereditaments and
appurtenances now and/or at any time hereafter situated on such real estate and
all roads, alleys, streets, passages and other public ways abutting such real
estate, whether before or after vacation thereof and whether in existence as of
the date hereof or created after the date hereof.
Leases: collectively, all (i) present and future leases, subleases,
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agreements, tenancies, subtenancies, licenses, occupancy agreements, concessions
and franchises of Mortgagor's present and future right, title, and interest in
and to the Premises and/or the Improvements, (ii) deposits of money as advance
rent or for security under any of the Leases and (iii) guaranties of performance
under the items described in clauses (i) and (ii) preceding.
Lenders: the financial institutions from time to time party to the
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Credit Agreement.
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Mortgaged Property: collectively, all of Mortgagor's present and
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future estate, right, title, and interest in and to the following:
(a) the Premises;
(b) the Improvements;
(c) the Rents;
(d) the Leases;
(e) all Plans;
(f) all Deposits;
(g) all Permits;
(h) all Equipment;
(i) all Construction Contracts;
(j) all present and future judgments, awards of damages and
settlements made as a result or in lieu of any taking of all or any part of the
Premises, Improvements, Equipment and/or Leases under the power of eminent
domain, or for any damage thereto as a result of any such taking;
(k) all insurance policies in force or effect insuring the Premises,
the Improvements, the Rents, the Leases or the Equipment;
(l) rights arising out of Mortgagor's interest in the Premises and the
Improvements to (i) the payment of money, (ii) accounts receivable, (iii)
reserves, (iv) deferred payments, (v) refunds and (vi) cost savings;
(m) all development and use rights with respect to the
Premises, the Improvements and/or the Leases;
(n) all chattel paper, instruments, documents, notes, drafts and
letters of credit, other than letters of credit in favor of Mortgagee, which
arise from or relate to (i) construction on the Premises or (ii) the Premises
and Improvements generally;
(o) all causes of action and proceeds thereof for any damage or injury
to the Premises or the Improvements or any other portion of the Mortgaged
Property described above, in addition to those described in clause (j) above, or
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breach of warranty in connection with the construction of all or any portion of
the Improvements; and
(p) all proceeds (including condemnation and insurance proceeds) of,
additions to, substitutions for, and changes in each and every one of the
foregoing.
Mortgage Lien: the Lien in favor of Mortgagee represented by this
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Mortgage.
Mortgagor's Obligations: (i) any and all Indebtedness due or to
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become due, now existing or howsoever arising of Mortgagor to Mortgagee pursuant
to the terms of the Credit Agreement, including, without limitation, all (A)
advances made in accordance with the terms hereof to protect and preserve the
value of the Mortgaged Property and the priority of the Mortgage Lien and (B)
Future Advances and (ii) the performance of the covenants of Mortgagor contained
in the Credit Agreement and the Related Documents.
Permits: all permits, certificates, approvals, licenses, applications
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and authorizations used in the operation of the Premises, Improvements and/or
the Leases.
Plans: all plans and specifications, designs, surveys, drawings, soil
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reports and other matters prepared for any construction on the Premises.
Premises: the real property legally described in EXHIBIT A.
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Rents: all present and future rents, royalties, issues, avails,
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profits and proceeds of or from the Premises, the Improvements, the Leases
and/or the Equipment.
1.2 CERTAIN TERMS. Wherever used in this Mortgage:
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1.2.1 AND/OR. The term "and/or" means one or the other or both.
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1.2.2 REFERENCES. All references to "Article", "Section",
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"subsection", "Subparagraph", "Clause" or "Exhibit", unless otherwise stated,
shall be deemed to refer to an Article, Section, subsection, subparagraph,
clause or Exhibit, as applicable, of this Mortgage.
1.2.3 EXHIBITS. Each reference to an "Exhibit" to this Mortgage
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is to an Exhibit which is attached to this Mortgage, each of which Exhibits is
deemed to be a part hereof.
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ARTICLE II
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CONVEYANCE
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2.1 MORTGAGED PROPERTY. To secure the payment and performance of
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Mortgagor's Obligations or the Liabilities, subject to the terms, covenants and
provisions contained herein, Mortgagor hereby MORTGAGES AND CONVEYS to
Mortgagee, its successors and/or assigns all of Mortgagor's right, title and
interest in and to the Mortgaged Property. Mortgagee, its successors and
assigns, subject to the terms of this Mortgage, are to have and to hold all such
Mortgaged Property forever for the benefit of Mortgagee for the purposes and
uses set forth in this Mortgage.
2.2 SECURITY AGREEMENT AND FIXTURE FILING. This Mortgage constitutes
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a security agreement with respect to the portion of the Mortgaged Property which
consists of personal property and a financing statement filed as a fixture
filing under the Uniform Commercial Code of the State in which the Premises are
located, covering any property which now is or later may become a fixture
attached to the Premises or the Improvements.
2.3 ABSOLUTE ASSIGNMENT. This Mortgage is a present and absolute
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assignment with respect to the Leases and the Rents.
ARTICLE III
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FUTURE ADVANCES; LIMITATION ON AMOUNT SECURED
---------------------------------------------
3.1 FUTURE ADVANCES. This Mortgage is given to secure not only
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Mortgagor's Obligations which exist as of the Closing Date, but also the payment
of any and all Future Advances, whether such Future Advances are obligatory or
are to be made at the option of Mortgagee.
3.2 LIMITATION ON AMOUNT SECURED. The total amount of Indebtedness
----------------------------
secured by this Mortgage may decrease or increase from time to time, but the
total unpaid balance so secured at one time shall not exceed the sum of (i)
$60,000,000, plus (ii) interest thereon, plus (iii) any Imposts, plus (iv) any
amounts paid by Mortgagee pursuant to Section 10.2 hereof, plus (v) all costs
and expenses incurred by Mortgagee in enforcing its rights and remedies under
this Mortgage, plus (vi) interest on the disbursements described in clauses
(iii), (iv) and (v) preceding, which interest shall be calculated at 12% per
annum.
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
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Mortgagor represents and warrants to Mortgagee as follows:
4.1 TITLE. Mortgagor (i) has full legal power and authority to
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mortgage and convey the Premises and (ii) is the holder of fee simple title to
the Premises, free and clear of all Liens except Permitted Liens.
4.2 LOCATION, USE OF PREMISES, IMPROVEMENTS AND EQUIPMENT. The
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location and use of the Premises, the Improvements and the Equipment are in
compliance with all applicable laws, rules, ordinances and regulations,
including, but not limited to, building and zoning laws, and all covenants and
restrictions of record, the failure to comply with which would have a Material
Adverse Effect. No notice of violation of such laws, rules and/or ordinances
has been issued and received by Mortgagor which remains uncorrected.
4.3 CREDIT AGREEMENT. All representations and warranties of
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Mortgagor set forth in the Credit Agreement are true and correct and are deemed
to be remade herein, including, without limitation, those with respect to (i)
Liens, (ii) Hazardous Materials, Environmental Laws and other environmental
matters affecting the Mortgaged Property and (iii) taxes, assessments, levies,
impositions and charges that have been or hereafter may be imposed or assessed
against all or any portion of the Mortgaged Property.
4.4 COPY OF MORTGAGE. Mortgagor has been furnished with a true,
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correct and complete copy of this Mortgage.
4.5 LEGAL COUNSEL. Throughout the transaction contemplated by this
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Mortgage, Mortgagor has retained and has been represented by legal counsel of
its own choosing.
4.6 BUSINESS LOAN. The (i) Loans constitute a business loan
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transaction and (ii) proceeds of such Loans are to be utilized solely for the
purpose of carrying on the business of Mortgagor.
4.7 NO AGRICULTURAL PURPOSES. No part of the Mortgaged Property is
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used principally or primarily for agricultural or farm purposes.
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ARTICLE V
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AFFIRMATIVE COVENANTS
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Until Mortgagor's Obligations are paid and performed in full,
Mortgagor agrees it shall:
5.1 PAYMENT AND PERFORMANCE OF MORTGAGOR'S OBLIGATIONS. Promptly pay
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or perform, or cause to be paid or performed, when due all of Mortgagor's
Obligations.
5.2 MAINTENANCE OF RIGHTS. Maintain the standing, right, power and
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lawful authority to do the following: (i) own good title to the Mortgaged
Property, (ii) carry on the business of and operate the Mortgaged Property,
(iii) enter into, execute and deliver this Mortgage, (iv) convey and assign the
interests of Mortgagor in the Mortgaged Property to Mortgagee, (v) encumber the
Mortgaged Property to Mortgagee as provided herein and (vi) consummate all of
the transactions described in or contemplated by this Mortgage to be consummated
by Mortgagor.
5.3 MAINTENANCE OF PERMITS. Obtain and maintain all Permits where
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the failure to obtain and/or maintain any such Permit would have a Material
Adverse Effect.
5.4 PEACEFUL POSSESSION. Remain in peaceful possession of the
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Mortgaged Property and take all actions necessary to maintain and preserve the
Mortgage Lien.
5.5 PAYMENT OF LIENS. Promptly pay or cause to be paid, as and when
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due and payable or when declared due and payable, any Indebtedness which may
become or be secured by any Lien on any Mortgaged Property and, immediately upon
request by Mortgagee, deliver to Mortgagee evidence satisfactory to Mortgagee of
the payment and discharge thereof.
5.6 REPAIRS. Make all necessary repairs, replacements and renewals
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(including the replacement of any items of Equipment) to the Mortgaged Property
so that the value thereof shall not be impaired, including, without limitation,
repairing, restoring or rebuilding any building or improvement now or hereafter
on the Premises which may become damaged or destroyed, and if any portion of the
Mortgaged Property becomes damaged or destroyed, Mortgagor permit Mortgagee, and
its agents, upon prior notice and demand, access to the Mortgaged Property for
the purpose of inspection thereof.
5.7 BUILDINGS AND IMPROVEMENTS. Pay for and complete, within a
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reasonable time, any building or improvement at any time in the process of being
erected upon the Premises.
5.8 EXECUTION OF DOCUMENTS. Immediately upon request by Mortgagee,
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at Mortgagor's sole expense, make, execute and deliver and/or cause to be made,
executed and delivered to Mortgagee, in form and substance acceptable to
Mortgagee, all Documents that Mortgagee deems necessary to evidence, document
and/or conclude the transactions described in
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<PAGE>
and/or contemplated by this Mortgage, or reasonably required to perfect or
continue perfected the Mortgage Lien.
5.9 COMPLIANCE WITH LAWS. Comply with all applicable laws, rules,
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ordinances and regulations, including, without limitation, building and zoning
laws, and all covenants and restrictions of record, the failure to comply with
which would have a Material Adverse Effect.
5.10 CREDIT AGREEMENT. Comply with all covenants, agreements and
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indemnifications contained in the Credit Agreement, including those with respect
to (i) taxes, assessments, levies, impositions and charges as they relate to
Mortgagor or the Mortgaged Property, (ii) delivery of financial statements,
reports and other information, (iii) insurance policies to be maintained for the
Mortgaged Property and the settlement, receipt and application of insurance
proceeds arising under such insurance policies and (iv) Hazardous Materials,
Environmental Laws and other environmental matters as they relate to Mortgagor
or the Mortgaged Property.
5.11 STAMP TAX; EFFECT OF CHANGE IN LAWS REGARDING TAXATION.
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5.11.1 PAYMENT OF STAMP TAX. If, by the laws of the United States of
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America or of any state or subdivision thereof having jurisdiction over
Mortgagor, any tax is due or becomes due in respect of the issuance of the Notes
or the recording of this Mortgage or the Credit Agreement and the Related
Documents and unless such laws prohibit Mortgagor from paying such tax, (i) pay
such tax in the manner required by any such law and (ii) reimburse Mortgagee for
any sums which Mortgagee may expend by reason of the imposition of any tax on
the issuance of the Notes.
5.11.2 PAYMENT OF TAXES IMPOSED ON MORTGAGEE. In the event of the
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enactment, after this date, of any law, statute, rule or regulation of the
United States of America or of the State in which the Premises are located or
any other state or subdivision thereof imposing upon Mortgagee the payment of
the whole or any part of the taxes, assessments or Liens herein required to be
paid by Mortgagor, or changing in any way the laws relating to the taxation of
mortgages or debts secured by mortgages or Mortgagee's interest in the Premises
or any other portion of the Mortgaged Property, or the manner of collection of
taxes, so as to affect this Mortgage or Mortgagor's Obligations or the holder
thereof, then, and in any such event, upon demand by Mortgagee, pay such taxes
or assessments or reimburse Mortgagee therefor; provided, however, that if the
opinion of counsel for Mortgagee, (i) it might be unlawful to require Mortgagor
to make such payment, or (ii) the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by law, then and in
any such event, Mortgagee may elect, by notice in writing given to Mortgagor, to
declare all of Mortgagor's Obligations to be and become due and payable thirty
(30) days from the date of giving of such notice.
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ARTICLE VI
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NEGATIVE COVENANTS
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Until Mortgagor's Obligations are paid and performed in full,
Mortgagor agrees it will not:
6.1 ADDITIONAL LIMITATIONS. Execute, file or record any notice
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limiting the maximum principal amount that may be secured by this Mortgage.
6.2 SALE OR TRANSFER. Sell, transfer, exchange, convey, remove or
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otherwise dispose of all or any portion of the Mortgaged Property or legal or
equitable interest therein, except to the extent permitted by the Credit
Agreement.
6.3 LIENS. Permit any Liens to exist on the Mortgaged Property
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except (i) Permitted Liens, and (ii) Leases, if any.
6.4 USE OF MORTGAGED PROPERTY. Substantially or materially change
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the use or character of any portion of the Mortgaged Property, permit any
excavation, construction, site work or other lienable work to be performed on
any portion of the Mortgaged Property, initiate or acquiesce in any zoning
variation or reclassification of any portion of the Mortgaged Property or commit
or suffer any waste to exist on any portion of the Mortgaged Property.
6.5 INSURANCE. Purchase any separate insurance concurrent in form or
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contributing in the event of loss with that required to be maintained under the
Credit Agreement and the Related Documents unless (i) Mortgagee receives prompt
notice thereof and is included thereon under a standard non-contributory
mortgagee clause acceptable to Mortgagee, (ii) such separate insurance otherwise
complies with all of the requirements of the Credit Agreement and the Related
Documents and (iii) Mortgagor delivers to Mortgagee promptly the original policy
or policies of such insurance.
ARTICLE VII
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INSURANCE
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7.1 ADJUSTMENT OF LOSSES; COLLECTION OF PROCEEDS. In case of loss or
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damage by fire or other insured casualty to all or any portion of the Mortgaged
Property, Mortgagee is authorized and empowered to (i) make or file proofs of
loss, and settle and adjust any claim under insurance policies which insure
against such risks, or (ii) direct Mortgagor to agree with each insurance
company on the amount to be paid as a result of such loss. If the insurance
proceeds paid for such loss are equal to or less than $10,000, Mortgagor may
collect such proceeds so long as (x) Mortgagor uses such proceeds to repair,
restore or rebuild the Mortgaged Property, in such manner and under such
conditions as Mortgagee may require and (y) no Event of Default or
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Unmatured Event of Default exists. If the insurance proceeds paid for such loss
are greater than $10,000, or if an Unmatured Event of Default or Event of
Default then exists, then Mortgagee is authorized to collect such proceeds.
7.2 APPLICATION OF PROCEEDS. Mortgagee may elect (i) to apply
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insurance proceeds received by Mortgagee to the payment of Mortgagor's
Obligations, whether or not then due, or (ii) after the payment of all expenses
incurred by Mortgagee in connection with the collection of such insurance
proceeds, including, without limitation, attorneys' fees, to make such insurance
proceeds available to Mortgagor for repair, restoration or rebuilding of the
Mortgaged Property, in such manner and under such conditions as Mortgagee may
require. In the event that Mortgagee has permitted the insurance proceeds to be
used to restore the Mortgaged Property, Mortgagor shall (x) pay the amount of
any deficiency in such insurance proceeds in order to restore the Mortgaged
Property fully to its condition immediately prior to the loss or damage to which
such insurance proceeds relate and (y) deliver to Mortgagee any surplus which
may remain out of such proceeds after payment of the cost of restoration to be
applied to the payment of Mortgagor's Obligations.
7.3 FAILURE TO COLLECT PROCEEDS. Mortgagee shall not be held
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responsible for (i) any failure to collect any insurance proceeds due under the
terms of any policy, regardless of the cause of such failure, (ii) the amount of
any such proceeds ultimately paid, regardless of any negotiation by Mortgagee of
such amount, or (iii) any use by Mortgagor of such proceeds as Mortgagee may pay
over to Mortgagor.
ARTICLE VIII
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CONDEMNATION
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8.1 NOTICE; ASSIGNMENT OF PROCEEDS. Mortgagor shall notify Mortgagee
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immediately of the institution or threat of institution of any proceeding
pertaining to the condemnation of any portion of the Mortgaged Property.
Mortgagee is authorized to settle all claims for damages to any portion of the
Mortgaged Property which relate to, and collect any proceeds of any award which
may be the result of, any eminent domain or condemnation proceeding.
8.2 APPLICATION OF PROCEEDS. Mortgagee may elect (i) to apply the
-----------------------
proceeds of the award or claim received by Mortgagee described in Section 8.1 to
the payment of Mortgagor's Obligations in accordance with the provisions of the
Credit Agreement, whether due or not, or (ii) after the payment of all expenses
incurred by Mortgagee in connection with the collection of such proceeds,
including, without limitation, attorneys' fees, to make such proceeds available
to Mortgagor for replacement of the condemned portion of the Mortgaged Property,
in such manner and under such conditions as Mortgagee may require. In the event
that Mortgagee has permitted the proceeds of the award or claim to be used to
replace the condemned portion of the Mortgaged Property, Mortgagor shall (x) pay
the amount of any deficiency in such proceeds in order to complete such
replacement and (y) deliver to Mortgagee any surplus which may remain out of
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such proceeds after payment of the cost of replacement to be applied to the
payment of Mortgagor's Obligations.
8.3 FAILURE TO COLLECT PROCEEDS. Mortgagee shall not be held
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responsible for (i) any failure to collect any condemnation proceeds, regardless
of the cause of such failure, (ii) the amount of any such proceeds ultimately
paid, regardless of any negotiation by Mortgagee of such amount, or (iii) any
use by Mortgagor of such proceeds as Mortgagee may pay over to Mortgagor.
ARTICLE IX
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LEASES AND RENTS
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9.1 LICENSE TO COLLECT. Subject to Mortgagee's rights under Article
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XI, Mortgagee hereby confers upon Mortgagor a non-exclusive license to collect
and retain the Rents as they become due and payable.
9.2 RENT ROLL, COPIES OF LEASES. Upon Mortgagee's request, Mortgagor
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shall deliver to Mortgagee (i) a rent roll pertaining to all Leases, (ii) copies
of all Leases and (iii) such other matters and information relating to any Lease
as Mortgagee may request.
ARTICLE X
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CERTAIN RIGHTS OF MORTGAGEE
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10.1 DOCUMENTS. In case Mortgagor fails to execute or obtain any
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Documents required by Mortgagee for the perfection or continuation of the
Mortgage Lien, Mortgagor hereby appoints Mortgagee as its true and lawful
attorney-in-fact to execute or obtain any such Documents on its behalf.
10.2 MAINTENANCE OF MORTGAGED PROPERTY. If Mortgagor, within thirty
---------------------------------
(30) days after receipt of written demand from Mortgagee (except in cases of
emergency, when no demand shall be required), shall neglect or refuse to (i)
keep the Mortgaged Property in good operating condition and repair, (ii) replace
or maintain the same as herein agreed, (iii) pay the premiums for the insurance
which is required to be maintained hereunder, (iv) pay and discharge all Liens
as herein agreed or (v) otherwise perform Mortgagor's Obligations within the
time periods specified therefor (including any applicable cure periods),
Mortgagee, at its option and sole election, may cause such repairs or
replacements to be made, obtain such insurance, pay such Liens or perform such
Mortgagor's Obligations. Any amounts paid by Mortgagee in taking such action,
together with interest thereon at the Default Rate until repaid by Mortgagor to
Mortgagee, shall be due and payable by Mortgagor to Mortgagee upon demand, and,
until paid, shall constitute a part of Mortgagor's Obligations secured by this
Mortgage. Mortgagee shall not be
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liable to Mortgagor for failure or refusal to exercise any such right. In making
any payments pursuant to the exercise of any such right, Mortgagee may rely upon
any bills delivered to it by Mortgagor or any such payee.
ARTICLE XI
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DEFAULT AND REMEDIES
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The occurrence of an Event of Default under the Credit Agreement shall
constitute an Event of Default under this Mortgage. Upon the occurrence of an
Event of Default, Mortgagee, in its sole discretion and at its sole election,
without notice of such election, and without further demand, may exercise any
one or more of the following rights and remedies:
11.1 ACCELERATION. Mortgagee may declare all of Mortgagor's
------------
Obligations immediately due and payable, whereupon Mortgagor's Obligations
immediately shall mature and become due and payable.
11.2 OTHER REMEDIES. To the extent permitted by applicable law,
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Mortgagee may exercise any one or more of the following remedies, whether or not
Mortgagor's Obligations have been accelerated:
11.2.1 TAKING OF POSSESSION. Mortgagee, by itself or by such officers
--------------------
or agents as it may appoint, may enter and take exclusive possession of all or
any part of the Mortgaged Property, including all books, papers and accounts of
Mortgagor relating to the business of Mortgagor conducted at such Mortgaged
Property, and may expel, remove and exclude Mortgagor, its agents and employees
and any persons, goods and chattels occupying the Mortgaged Property. If
Mortgagor for any reason fails to surrender or deliver the Mortgaged Property or
any part thereof after such demand by Mortgagee, Mortgagee may obtain a judgment
or decree conferring on Mortgagee the right to immediate possession or requiring
the delivery to Mortgagee of the Mortgaged Property, and Mortgagor specifically
consents to the entry of such judgment or decree. Upon every such taking of
possession, Mortgagee may (i) hold, store, use, operate, manage and control the
Mortgaged Property and conduct the business of Mortgagor thereon, (ii) perform
all necessary and proper maintenance and make all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty and
other Property, (iii) keep the Mortgaged Property insured, (iv) manage and
operate the Mortgaged Property and exercise all of the rights and powers of
Mortgagor to the same extent as Mortgagor could in its own name, (v) enter into
any agreements with respect to the exercise by others of any of the powers
granted to Mortgagee herein, in such manner as Mortgagee shall elect, (vi)
collect and receive all of the Rents, including those past due as well as those
accruing after the occurrence of any such Event of Default and (vii) after
deducting (A) all expenses of taking, holding, holding, managing and operating
the Mortgaged Property
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(including compensation for the services of all Persons employed for such
purposes), (B) the cost of all such maintenance, repairs, renewals,
replacements, additions, betterments, improvements and purchases and
acquisitions, (C) the cost of such insurance, (D) such taxes, assessments and
other similar charges as Mortgagee may determine to pay, (E) other proper
charges upon the Mortgaged Property or any part thereof and (F) the
compensation, expenses and disbursements of the attorneys and agents of
Mortgagee, apply the remainder of the monies and proceeds so received by
Mortgagee as described in Section 11.8hereof.
11.2.2 DEPOSITS FOR TAXES AND INSURANCE. Mortgagee may require
--------------------------------
Mortgagor to deposit with Mortgagee, commencing 10 days following such request
and on the first day of each month thereafter, a sum equal to the amount of all
insurance premiums next due in respect of the insurance policies required to be
maintained under the Credit Agreement and the Related Documents and all general
and special real estate taxes and assessments next due upon or for the Mortgaged
Property (the amount of such insurance premiums, taxes and assessments next due
to be based upon Mortgagee's reasonable estimate, but shall include all taxes or
assessments not levied, charged, assessed or imposed separately upon the
Mortgaged Property), reduced by the amount, if any, then on deposit with
Mortgagee for such purpose, divided by the number of months to elapse before one
month prior to the date when such insurance premiums, taxes and assessments will
become due and payable. If such Deposits are insufficient to pay any such
insurance premiums, taxes or assessments when the same become due and payable,
Mortgagor, within 10 days after receipt of demand therefor from Mortgagee, shall
deposit such additional funds as may be necessary to pay such insurance premiums
in full. If such Deposits exceed the amount required to pay such insurance
premiums, taxes or assessments for any year, the excess shall be credited
against the next succeeding deposit or deposits to be made by Mortgagor. Such
Deposits need not be kept separate and apart from any other funds of Mortgagee,
shall be held without any allowance of interest to Mortgagor and shall be used
for the payment of insurance premiums, taxes and assessments on the Mortgaged
Property next due and payable when they become due; provided that Mortgagee
shall not be liable for any failure to apply such Deposits to the payment of
such insurance premiums, taxes and assessments unless Mortgagee shall have
received from Mortgagor a request for payment accompanied by the bills for such
insurance premiums, taxes and assessments not less than thirty daysprior to the
date due.
11.2.3 LEASES AND RENTS. Mortgagee may, with or without taking
----------------
possession of the Mortgaged Property, as attorney and agent-in-fact for
Mortgagor constituted and appointed by Mortgagor with full power of substitution
(which power is coupled with an interest and is irrevocable), in the name of
Mortgagor, Mortgagee, or both:
(a) demand, collect, settle, adjust, compromise, and enforce, by legal
proceedings or otherwise, payment of the Rents, endorse the name of Mortgagor
upon any payments or proceeds of the Rents and deposit the same for the account
13
<PAGE>
of Mortgagee and do all other acts and things necessary, in Mortgagee's sole
discretion, to obtain control and use of the Rents;
(b) terminate the license granted to Mortgagor hereunder to collect
the Rents and thereafter Mortgagee shall have all right, title and interest in
and to the Leases and the Rents by virtue of the present assignment thereof
granted to Mortgagee hereunder;
(c) require Mortgagor to deliver to Mortgagee the originals of the
Leases, with appropriate endorsement and/or other specific evidence of
assignment thereto to Mortgagee, which endorsement and/or assignment shall be in
form and substance acceptable to Mortgagee;
(d) notify any of the obligors under the Leases that the Leases have
been assigned to Mortgagee and direct such obligors thereafter to make all
payments due from them under the Leases directly to Mortgagee; and
(e) require Mortgagor to direct all obligors of the Leases to make all
payments due them under the Leases directly to Mortgagee.
Notwithstanding anything in this subsection 11.2.3 to the contrary,
under no circumstances shall Mortgagee have any duty to produce Rents from the
Mortgaged Property. Regardless of whether or not Mortgagee, in person or by
agent, takes actual possession of the Premises and Improvements, Mortgagee is
not and shall not be deemed to be (i) a "mortgagee in possession" for any
purpose; (ii) responsible for performing any of the obligations of the lessor
under any Lease; (iii) responsible for any waste committed by lessees or any
other parties, any dangerous or defective condition of the Mortgaged Property,
or any negligence in the management, upkeep, repair or control of the Mortgaged
Property; or (iv) liable in any manner for the Mortgaged Property or the use,
occupancy, enjoyment or operation of all or any part thereof.
11.2.4 APPOINTMENT OF RECEIVER. Upon application to a court of
-----------------------
competent jurisdiction, Mortgagee may appoint a receiver to take possession of
and to operate the Mortgaged Property and to collect and apply the Rents,
without notice and without regard to the occupancy or value of any security for
Mortgagor's Obligations or the solvency of Mortgagor. The receiver shall have
all rights and powers necessary or usual for the protection, possession,
control, management and operation of the Mortgaged Property during the period of
receivership, to the fullest extent permitted by law.
11.2.5 OTHER REMEDIES. Mortgagee may exercise any other rights and
--------------
remedies then available to Mortgagee under this Mortgage, the Notes, the Credit
Agreement and the other Related Documents and any applicable laws.
14
<PAGE>
11.3 REMEDIES UPON ACCELERATION. If Mortgagor's Obligations have
--------------------------
been accelerated pursuant to Section 11.1, in addition to Mortgagee's rights
under Section 11.2, Mortgagee may exercise any one or more of the following
remedies:
11.3.1 COMMENCE FORECLOSURE PROCEEDINGS. Mortgagee may commence a
--------------------------------
civil action to foreclose the Mortgage Lien for payment of Mortgagor's
Obligations, or any part thereof, and obtain an order or judgment of foreclosure
and sale of the Mortgaged Property. In any civil action to foreclose the
Mortgage Lien or otherwise enforce Mortgagee's rights, there shall be allowed
and included as part of Mortgagor's Obligations in the order or judgment for
foreclosure and sale (or other order), all expenditures and expenses which may
be paid or incurred by or on behalf of Mortgagee for attorneys' fees, costs and
expenses, appraiser's fees, engineer's fees, out-lays for documentary and expert
evidence, receiver's fees, stenographers' charges, publication costs, and costs
(which may be estimates as to items to be expended after entry of such order or
judgment) of procuring all such abstracts of title, title searches and
examinations, title insurance policies and similar data and assurances with
respect to the title of the Mortgaged Property as Mortgagee may deem necessary
either to prosecute such civil action or to evidence to bidders at any sale
which may be had pursuant to such order or judgment the true condition of the
title to, or the value of, the Mortgaged Property.
11.3.2 BID AT FORECLOSURE SALE. Mortgagee may bid for and purchase
-----------------------
the Mortgaged Property at any foreclosure sale and apply all or any part of
Mortgagor's Obligations as a credit to the purchase price in lieu of paying cash
therefor.
11.3.3 RIGHTS UNDER UNIFORM COMMERCIAL CODE. Mortgagee may exercise
------------------------------------
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State in which the Premises are located with respect to the
Collateral. Pursuant to Section 9-501(4) of such Uniform Commercial Code,
Mortgagee shall have an option to proceed with respect to both the real property
portion of the Mortgaged Property and the Collateral, in accordance with its
rights, powers and remedies with respect to the real property, in which
event the remedy and enforcement provisions of this Mortgage in lieu of the
remedy and enforcement provisions of such Uniform Commercial Code shall apply.
Such Section 9-501(4) also permits Mortgagee to proceed separately against the
Collateral in accordance with the remedy and enforcement provisions of such
Uniform Commercial Code. If Mortgagee shall elect to proceed against the
Collateral separately from any proceeding with respect to the real property,
Mortgagor agrees that 10 days notice of the sale of the Collateral shall be
reasonable notice.
11.3.4 STATE STATUTES. Mortgagee may exercise all rights and remedies
--------------
under the statutes in the State where the Premises are located, subject to the
following:
(a) if any provision in this Mortgage is inconsistent with any
applicable statute in the State where the Premises are located, such statute
shall take precedence over the provisions of this Mortgage, but shall not
invalidate or render
15
<PAGE>
unenforceable any other provision of this Mortgage that can be construed in a
manner consistent with such statute; and
(b) if any provision of this Mortgage shall grant to Mortgagee any
rights or remedies upon default of Mortgagor which are more limited than the
rights that otherwise would be vested in Mortgagee under such statute in the
absence of such provision, Mortgagee shall be vested with the rights granted in
such statute to the full extent permitted by law.
Without limiting the generality of the foregoing, all expenses
incurred by Mortgagee to the extent reimbursable under such statute, whether
incurred before or after any decrees or judgment of foreclosure, and whether or
not provided for elsewhere in this Mortgage, shall be added to Mortgagor's
Obligations or to the judgment of foreclosure, as described more fully in
Section 11.4.
11.4 ADDITIONS TO MORTGAGOR'S OBLIGATIONS. Upon the occurrence of an
------------------------------------
Event of Default, there will be added to and included as part of Mortgagor's
Obligations (and allowed in any sale or decree for sale of the Mortgaged
Property or in any judgment rendered upon this Mortgage, the Notes, the Credit
Agreement or the other Related Documents) all of the costs and expenses incurred
by Mortgagee in exercising its rights and remedies under this Mortgage. All of
such costs and expenses, including attorneys' fees, shall (i) be secured by this
Mortgage, (ii) be payable upon demand and (iii) bear interest at the Default
Rate from the date incurred by Mortgagee until paid.
11.5 PROCEEDINGS DISCONTINUED. In case Mortgagee shall have proceeded
------------------------
to enforce any right under this Mortgage by foreclosure, entry or otherwise and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to Mortgagee, then, except as otherwise
determined in such proceeding, Mortgagor and Mortgagee shall be restored to
their former positions and rights hereunder with respect to the Mortgaged
Property, and all rights, remedies, and powers of Mortgagee shall continue as
though no such proceedings had been commenced.
11.6 DEFICIENCY.
----------
11.6.1 SALE AND FORECLOSURE. If the Mortgaged Property (or any part
--------------------
thereof which remains subject to this Mortgage) is sold pursuant to foreclosure
proceedings, and if the net proceeds of any such sale are not sufficient to pay
all of Mortgagor's Obligations then outstanding and any other amounts provided
for in any the decree or judgment of foreclosure or provided for by applicable
law (the amount of such deficiency and the deficiency described in subsection
11.6.2 hereinafter collectively referred to as the "BALANCE OWED"), then the
Indebtedness evidenced by the Notes shall not be satisfied to the extent of the
Balance Owed, but such Indebtedness shall continue in existence and shall
continue to be evidenced by the Notes and shall continue to be secured by the
Credit Agreement and the Related Documents which were in existence prior to any
such decree or
16
<PAGE>
judgment of foreclosure, except this Mortgage. Subject to the requirements of
applicable law, if Mortgagee shall acquire the Mortgaged Property as a result of
any such foreclosure sale (whether by bidding all or any of Mortgagor's
Obligations or otherwise), the proceeds of such sale shall not be deemed to
include (and Mortgagor shall not be entitled to any benefit or credit on account
of) proceeds of any subsequent sale of the Mortgaged Property by Mortgagee.
11.6.2 FORECLOSURE OF OTHER CREDIT AGREEMENT AND THE RELATED
-----------------------------------------------------
DOCUMENTS. Notwithstanding the provisions of subsection 11.6.1, Mortgagor
further agrees that if any other portion of the Collateral is foreclosed
judicially and such Collateral is sold pursuant to foreclosure proceedings, and
if the proceeds of such sale (after application of such proceeds as provided for
herein and after deducting all accrued and general and special taxes and
assessments) are not sufficient to pay Mortgagor's Obligations and any other
amounts provided for in the decree or judgment of foreclosure or provided for by
applicable law, then Mortgagor's Obligations then outstanding shall not be
satisfied to the extent of such Balance Owed, but such Indebtedness shall
continue in existence and continue to be evidenced by the Notes and shall
continue to be secured by this Mortgage, the Credit Agreement and the other
Related Documents, which were in existence immediately prior to any such decree
or judgment of foreclosure, except each such Loan Instrument which pertains to
the portion of the Collateral which was the subject of any such foreclosure
sale.
11.8 APPLICATION OF PROCEEDS. The proceeds of any foreclosure sale
-----------------------
of the Mortgaged Property or any other proceeds received hereunder shall be
applied in accordance with the provisions of SECTION 9.7 OF THE CREDIT
AGREEMENT.
ARTICLE XII
-----------
RECONVEYANCE
------------
Mortgagee shall release the Mortgaged Property, or such portion
thereof as previously shall not have been sold pursuant to the terms of this
Mortgage, by proper instrument upon payment and discharge of all of Mortgagor's
Obligations.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 NOTICES. All notices and communications under this Mortgage
-------
shall be in writing and, if (a) forwarded by mail shall be deemed to have been
given three days after the date sent if sent by registered or certified mail,
postage prepaid, and:
17
<PAGE>
(i) if to Mortgagor, addressed to Mortgagor at its address first set
forth above; or
(ii) if to Mortgagee, addressed to Mortgagee at its address first set
forth above; or
in the case of any party, at such other address as such party may, by written
notice received by the other parties to this Mortgage, have designated as its
address for notices; and (b) notices given by telegram, telex or facsimile
transmission shall be deemed to have been given when sent if addressed to the
party to whom sent, at its address as aforesaid, or to any other address, as to
any such party, as such party shall designate in a written notice to the other
party hereto. All notices sent pursuant to the terms of this Section 13.1 shall
be deemed received (i) if personally delivered, then on the date of delivery,
(ii) if sent by overnight, express carrier, on the next Business Day immediately
following the day sent, or (iii) if sent by registered or certified mail, on the
earlier of the fifth Business Day following the day sent or when actually
received.
13.2 COVENANTS RUN WITH LAND. All the covenants contained in this
-----------------------
Mortgage shall run with the land. Time is of the essence for the performance by
Mortgagor of its obligations under this Mortgage.
13.3 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH AND GOVERNED AS TO VALIDITY, INTERPRETATION, CONSTRUCTION, EFFECT AND IN
ALL OTHER RESPECTS BY THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS, EXCEPT
THAT THE LAWS OF THE STATE WHERE THE PREMISES ARE LOCATED SHALL APPLY TO THE
CREATION, PRIORITY, PERFECTION AND MAINTENANCE OF THE MORTGAGE LIEN AND TO THE
ENFORCEMENT OF THE REMEDIES OF MORTGAGEE HEREUNDER AND ANY OF ITS SUCCESSORS AND
ASSIGNS.
13.4 JURISDICTION AND VENUE. SUBJECT TO THE PROVISIONS OF ANY
----------------------
APPLICABLE STATUTE IN THE STATE WHERE THE PREMISES ARE LOCATED, MORTGAGOR AGREES
THAT MORTGAGEE MAY ENFORCE ANY CLAIM ARISING OUT OF THIS MORTGAGE IN ANY STATE
OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO,
ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT
TO ANY SUCH CLAIM, MORTGAGOR HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 208 SOUTH LASALLE STREET, CHICAGO,
ILLINOIS 60604, TO RECEIVE FOR AND ON BEHALF OF MORTGAGOR SERVICE OF PROCESS IN
ILLINOIS. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF SUCH COURTS BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO MORTGAGOR AND
AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (i) SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT,
ACTION OR PROCEEDING AND (ii) SHALL BE TAKEN AND HELD TO BE PERSONAL SERVICE
UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE
RIGHT
18
<PAGE>
OF AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
PRECLUDE AGENT OR ANY LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT OF
THIS MORTGAGE IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH
ACTION. MORTGAGOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED
IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES
--------------------
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY,
OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
13.6 SUCCESSORS AND ASSIGNS. This Mortgage will be binding upon and
----------------------
inure to the benefit of the successors and assigns of each of Mortgagor and
Mortgagee.
13.7 SEVERABILITY. Any provision of this Mortgage that is
------------
unenforceable in any state in which this Mortgage may be filed or recorded or is
invalid or contrary to the law of such state, shall be of no effect, and in such
case all the remaining terms and provisions of this Mortgage shall continue to
be fully effective in accordance with the terms and provisions of this Mortgage,
all as though no such invalid portion ever had been included herein.
13.8 REMEDIES CUMULATIVE. All rights and remedies of Mortgagee
-------------------
under this Mortgage, the other Credit Agreement and any of the other Related
Documents are cumulative and concurrent and may be exercised singularly,
successively or concurrently and Mortgagee shall have all rights, remedies and
recourse available at law or equity.
13.9 SUBROGATION. To the extent that any of Mortgagor's Obligations
-----------
represent funds utilized to satisfy any outstanding Indebtedness secured by
Liens against all or any part of the Mortgaged Property, to the extent permitted
thereby and by applicable law, Mortgagee shall be subrogated to any and all
Liens owned or claimed by the holder of any such outstanding Indebtedness so
satisfied, regardless of whether such Liens are assigned to Mortgagee or
released by the holder(s) thereof.
19
<PAGE>
13.10 INDEMNIFICATION. Mortgagor will save and hold Mortgagee
---------------
harmless of and from any and all damage, loss, cost and expense, including, but
not limited to, attorneys' fees, costs and expenses, incurred by reason of or
arising from or on account of or in connection with any suit or proceeding
threatened, filed and/or pending brought by anyone other than Mortgagee, in or
to which Mortgagee is or may become a party by reason of or arising from
Mortgagor's Obligations, this Mortgage, the Credit Agreement and any of the
other Related Documents.
13.11 CONFLICTS. In the event of any conflict or inconsistency
---------
between the terms of this Mortgage and the terms of the Credit Agreement, the
terms of the Credit Agreement shall prevail.
13.12 NO PARTNER, JOINT VENTURER. Mortgagor and Mortgagee agree that
--------------------------
in no event shall Mortgagee be deemed to be a partner or a joint venturer with
Mortgagor. Without limiting the foregoing, Mortgagee shall not be deemed to be
such a partner or joint venturer on account of becoming a mortgagee in
possession or exercising any rights pursuant to this Mortgage or pursuant to any
other instrument or document evidencing or securing any of Mortgagor's
Obligations.
13.13 WAIVERS. Mortgagor, on behalf of itself, its successors and
-------
assigns, to the extent permitted by law, hereby (i) waives any and all rights of
appraisement, valuation, stay, extension and (to the extent permitted by law)
redemption from sale under any order or decree of foreclosure of this Mortgage,
(ii) waives any equitable, statutory or other right available to it, pertaining
to marshalling of assets hereunder, so as to require the separate sales of
interests in the Mortgaged Property before proceeding against any other interest
in the Mortgaged Property, (iii) consents to and authorizes, at the option of
Mortgagee, the sale, either separately or together, of any and all interests in
the Mortgaged Property, (iv) agrees that in no event shall Mortgagee be required
to allocate any proceeds received by Mortgagee from foreclosure sale or
otherwise, to any particular interest in the Mortgaged Property and (v) agrees
that when a sale is consummated under any decree of foreclosure of this
Mortgage, upon confirmation of such sale, the master in chancery, the sheriff or
other Person making such sale, or his successor in office, shall be and is
authorized immediately to execute and deliver to the purchaser at such sale a
deed conveying the Mortgaged Property, showing the amount paid therefor, or if
purchased by the Person in whose favor the order or decree is entered, the
amount of his bid therefor.
13.14 REMEDIES NOT EXCLUSIVE. No right or remedy of Mortgagee
----------------------
hereunder is exclusive of any other right or remedy hereunder or now or
hereafter existing at law or in equity or under the Notes, the Credit Agreement
or any of the other Related Documents, but is cumulative and in addition thereto
and Mortgagee may recover judgment thereon, issue execution therefor, and resort
to every other right or remedy available at law or in equity or under the Notes,
the Credit Agreement or any of the other Related Documents, without first
exhausting or affecting or impairing the security or any right or remedy
afforded this Mortgage. No delay in exercising, or omission to exercise, any
such right or remedy will impair any such right or remedy or will be construed
to be a waiver of any default by Mortgagor hereunder, or acquiescence therein,
and such waiver will not affect any subsequent default hereunder by Mortgagor of
the same or different nature. Every such right or remedy may be exercised
independently or concurrently,
20
<PAGE>
and when and so often as may be deemed expedient by Mortgagee. No term or
condition contained in this Mortgage may be waived, altered or changed except as
evidenced in writing signed by Mortgagor and Mortgagee.
13.15 NO WAIVER BY MORTGAGEE. Any failure of 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 such terms and
provisions, and Mortgagee, notwithstanding any such failure, shall have the
right at any time thereafter to insist upon the strict performance by Mortgagor
of any and all of the terms and provisions hereof.
13.16 NO RELEASE. Except as may be provided otherwise by applicable
----------
law, neither Mortgagor, nor any other Person now or hereafter obligated for the
payment of the whole or any part of Mortgagor's Obligations, shall be relieved
of such obligation by reason of (i) the sale, conveyance or other transfer of
the Mortgaged Property, (ii) the failure of Mortgagee to comply with any request
of Mortgagor, or of any other Person, to take action to foreclose this Mortgage
or otherwise enforce any of the provisions of this Mortgage, the Notes, the
Credit Agreement or any of the other Related Documents, (iii) the release,
regardless of consideration, of the whole or any part of the Collateral, or (iv)
any agreement or stipulation between any subsequent owner of the Mortgaged
Property and Mortgagee extending the time of payment under or modifying the
terms of the Notes, the Credit Agreement, any of the other Related Documents or
this Mortgage without first having obtained the consent of Mortgagor or such
other Person. If Mortgagee shall enter into any agreement described in clause
(iv) hereof, then, notwithstanding any such agreement, Mortgagor and all such
other Persons shall continue to be liable on account of Mortgagor's Obligations
and shall continue to make such payments according to the terms of any such
agreement of extension or modification unless expressly released and discharged
in writing by Mortgagee.
13.17 RELEASE OF SECURITY. Mortgagee, without notice, may release,
-------------------
regardless of consideration, any part of the Collateral, without impairing or
affecting the Mortgage Lien of or the priority of such Mortgage Lien over any
subordinate Lien.
[remainder of this page intentially left blank]
21
<PAGE>
IN WITNESS WHEREOF, this Mortgage, Assignment of Leases and Rents, and
Security Agreement has been duly executed by Mortgagor by its duly authorized
representative as of the day and year first above written.
MIKOHN GAMING CORP., a Nevada
corporation
By: /s/ Don W. Stevens
-------------------------
Name: Don W. Stevens
------------------------
Title : EVP
---------------------
22
<PAGE>
STATE OF NEVADA)
) SS:
COUNTY OF CLARK)
On this 23rd day of October, 1997, before me, a Notary Public in and
for the State of Illinois, in the County aforesaid, personally appeared Don lW.
Stevens, to me known to be the E. Vice Pres. of Mikohn Gaming Corp., a Nevada
corporation, the corporation that executed the foregoing instrument, and upon
oath did depose that he is the E. Viec Pres. of such corporation, that the
signature to said instrument was made by the Ev. Vice Pres. of said corporation
as indicated after said signature, and that the corporation executed the said
instrument freely and voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
Wanda M. Jacobson
----------------------------------------
NOTARY PUBLIC in and for said State and
County
My commission expires: _________________
THIS DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Michael L. Owen
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
23
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
DESCRIPTION NO. 1
Lots C, D, E, and F and that portion of Lots 15 through 18 and Lots through 40
lying north of the Chicago and North Western Railroad right-of-way in Block 6 of
Riverside Addition to the City of Rapid City, Pennington County, South Dakota;
INCLUDING the east 5 feet of the north 10 feet of Lot 37 and the north 10 feet
of Lots 38, 39 and 40 in said Block 6; BUT EXCEPTING the north 10 feet of Lots
33, 34, 35 and 36 and the west 20 feet of the north 10 feet of Lot 37 in said
Block 6.
DESCRIPTION NO. 2
That portion of Lots 23, 24, 25 and 26 in Block 6 of Riverside Addition to the
City of Rapid City, Pennington County, South Dakota, lying south ofthe Chicago
and North Western Railroad right-of-way.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,237,714
<SECURITIES> 0
<RECEIVABLES> 22,548,481
<ALLOWANCES> 378,081
<INVENTORY> 22,105,944
<CURRENT-ASSETS> 54,553,192
<PP&E> 23,676,934
<DEPRECIATION> 7,734,820
<TOTAL-ASSETS> 89,552,982
<CURRENT-LIABILITIES> 34,599,619
<BONDS> 3,609,399
0
0
<COMMON> 993,200
<OTHER-SE> 50,350,764
<TOTAL-LIABILITY-AND-EQUITY> 51,343,964
<SALES> 73,573,424
<TOTAL-REVENUES> 73,573,424
<CGS> 46,060,896
<TOTAL-COSTS> 22,968,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 43,129
<INTEREST-EXPENSE> 1,735,262
<INCOME-PRETAX> 2,765,211
<INCOME-TAX> 1,050,000
<INCOME-CONTINUING> 1,715,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,715,211
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
