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EXHIBIT 10.20
Loan and Security Agreement
COAST
LOAN AND SECURITY AGREEMENT
BORROWER: MULTIMEDIA GAMES, INC.,
A Texas Corporation
MEGABINGO, INC.,
A Delaware Corporation
MULTIMEDIA CREATIVE SERVICES, INC.,
A Delaware Corporation
ADDRESS: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DATE: July __, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date
between COAST BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a
California corporation, with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the borrower(s) named above (jointly and
severally, the "Borrower"), whose chief executive office is located at the above
address ("Borrower's Address"). The Schedule to this Agreement (the "Schedule")
shall for all purposes be deemed to be a part of this Agreement, and the same is
an integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 1 below.)
1. DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings:
"Account Debtor" means the obligor on a Receivable or General
Intangible.
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"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Affiliated Bingo Halls" means bingo halls which have contracted to
have Borrower provide close circuit bingo under the name MegaBingo or networked
interactive high speed bingo games under names, including but not limited to,
MegaMania, Flashcash, Bigcash and Evergreen, or Class III Gaming.
"Audit" means to inspect, audit and copy Borrower's books and records
and the Collateral.
"Average Net Monthly Gaming Revenues" means a three month rolling
average of Borrower's Net Gaming Revenues.
"Borrower" has the meaning set forth in the introduction to this
Agreement.
"Borrower's Address" has the meaning set forth in the introduction to
this Agreement.
"Business Day" means a day on which Coast is open for business.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty percent
(20%) of the total voting power of all classes of stock or other ownership
interests then outstanding of any Borrower normally entitled to vote in the
election of directors or analogous governing body.
"Class III Gaming" means Class III Gaming as defined in the Indian
Gaming Regulatory Act of 1988.
"Closing Date" date of the initial funding under this Agreement.
"Coast" has the meaning set forth in the introduction to this
Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 4 hereof.
"Collections" means Net Gaming Revenues.
"Concentration Accounts" means (i) that certain account number
0188024277 at Norwest Bank Texas, N.A., held in the name of Borrower and subject
to a blocked account agreement in favor of Coast, into which the Local Accounts
are swept on the first Business Day of each week with
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respect to gaming revenues derived from MegaBingo, (ii) that certain account
number 0188024285 at Norwest Bank Texas, N.A., held in the name of Borrower and
subject to a blocked account agreement in favor of Coast, into which the Local
Accounts are swept twice each week with respect to gaming revenues derived from
the high speed interactive bingo games and (iii) that certain account number
0188024293 at Norwest Bank Texas, N.A., held in the name of Borrower and subject
to a blocked account agreement in favor of Coast, into which the Local Accounts
are swept on the first and fifteenth of each month (or on the next Business day
if the first or fifteenth does not fall on a Business Day) with respect to
gaming revenues derived from Class III Gaming.
"Creative Services" means Multimedia Creative Services, Inc., a
Delaware corporation.
"Credit Limit" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Dollars or $" means United States dollars.
"Early Termination Fee" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"EBITDA" means, in any fiscal period, Borrower's consolidated net
income or net loss (other than extraordinary or non-recurring gains of Borrower
for such period), plus (i) the amount of all interest expense, income tax
expense, depreciation expense and amortization expense of Borrower for such
period, on a consolidated basis, and plus or minus (as the case may be) (ii) any
other non-cash charges which have been added or subtracted, as the case may be,
in calculating Borrower's consolidated net income for such period.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"Gaming Contracts" means those contracts between any Borrower and an
Affiliated Bingo Hall, whereby Borrower is to provide close circuit bingo under
the name MegaBingo; or networked
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interactive highspeed bingo games under the names MegaMania, Flashcash, Bigcash
or Evergreen; or Class III Gaming.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
hereof without limitation, all choses in action, causes of action, corporate or
other business records, Deposit Accounts, investment property, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks and the
goodwill of the business symbolized thereby, names, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists,
security and other deposits, rights in all litigation presently or hereafter
pending for any cause or claim (whether in contract, tort or otherwise), and all
judgments now or hereafter arising there from, all claims of Borrower against
Coast, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, proprietary
information, purchase orders, and all insurance policies and claims (including
without limitation life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower, all rights
to indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit, and including without limitation all farm products), and all materials
and supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Investment Property" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.
"Loan Documents" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.
"Loans" has the meaning set forth in Section 2.1
"Local Accounts" mean those certain accounts listed on Exhibit A,
attached hereto, into which the Affiliated Bingo Halls deposit revenues from
gaming.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower, taken as a whole, or any subsidiary of Borrower or any guarantor of
any of the Obligations, (ii) the ability of Borrower or any guarantor of any of
the Obligations to perform its obligations under this Agreement (including,
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without limitation, repayment of the Obligations as they come due) or (iii) the
validity or enforceability of this Agreement or any other agreement or document
entered into by any party in connection herewith, or the rights or remedies of
Coast hereunder or thereunder.
"Maturity Date" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"Maximum Dollar Amount" has the meaning set forth in Section 2 of the
Schedule.
"MegaBingo" means MegaBingo, Inc., a Delaware
"Minimum Monthly Interest" has the meaning set forth in Section 3 of
the Schedule.
"Multimedia" means Multimedia Games, Inc., a Texas corporation.
"Net Gaming Revenues" means Borrower's revenues from gaming activities,
less disbursements to Affiliated Bingo Halls for prizes and allotments and other
amounts not belonging to Borrower pursuant to Gaming Contracts.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"Permitted Liens" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in
writing by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially
concurrently with this Agreement;
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(f) liens of materialmen, mechanics, warehousemen, carriers,
or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by liens of the type
described above in clauses (a) or (b) above, provided that any
extension, renewal or replacement lien is limited to the property
encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase;
or
(h) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of
goods.
Coast will have the right to require, as a condition to its consent
under clause (d) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Coast's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
Coast, and agree not to take any action to enforce its subordinate security
interest so long as any Obligations remain outstanding, and that Borrower agree
that any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, general
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, government, or any agency or political division
thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not that rate is the lowest
interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal on the first business day of the applicable month, as
the base rate on corporate loans at large U.S. money center commercial banks.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Date" shall mean the Maturity Date if this Agreement is
renewed pursuant to Section 9.1 hereof, and each anniversary thereafter that
this Agreement is renewed pursuant to Section 9.1 hereof.
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"Renewal Fee" means the fee that Borrower must pay Coast upon renewal
of this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Tangible Net Worth" means consolidated Owner's equity, plus
subordinated debt otherwise permitted hereunder, less, goodwill, patents,
trademarks, copyrights, franchises, formulas, leasehold interests, leasehold
improvements, non-compete agreements, engineering plans, deferred tax benefits,
organization costs, prepaid items, and any other assets of Borrower that would
be treated as intangible assets on Borrower's balance sheet prepared in
accordance with GAAP.
"Year 2000 Problem" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"Other Terms" All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. CREDIT FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts
and in percentages to be determined by Coast in its good faith discretion, up to
the Credit Limit, provided no Default or Event of Default has occurred and is
continuing. In addition, Coast may create reserves against or reduce its advance
rates without declaring a Default or an Event of Default if it determines that
there has occurred a Material Adverse Effect.
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3. INTEREST AND FEES.
3.1 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be outstanding
from time to time, Borrower shall pay Coast Minimum Monthly Interest during the
term of this Agreement with respect to the Loans in the amount set forth on the
Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
deemed fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts
(to the extent permitted by applicable law), and all money, and all property now
or at any time in the future in Coast's possession (including claims and credit
balances), and all proceeds of any of the foregoing (including proceeds of any
insurance policies, proceeds of proceeds, and claims against third parties), all
products of any of the foregoing, and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Coast may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the first advance
of funds hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due and
unpaid ninety (90) days past its invoice date except for such accounts payable
being contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed landlord
waivers and access agreements in form and substance satisfactory to Coast, in
Coast's sole and absolute discretion, and, when deemed appropriate by Coast, in
form for recording in the appropriate
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recording office, with respect to all leased locations where Borrower maintains
any inventory or equipment.
5.4 EXECUTED AGREEMENT. Coast shall have received this Agreement duly
executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.5 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion
of Borrower's counsel, in form and substance satisfactory to Coast in its sole
and absolute discretion.
5.6 PRIORITY OF COAST'S LIENS. Coast shall have received the results of
"of record" searches satisfactory to Coast in its sole and absolute discretion,
reflecting its Uniform Commercial Code filings against Borrower indicating that
Coast has a perfected, first priority lien in and upon all of the Collateral,
subject only to Permitted Liens.
5.7 INSURANCE. Coast shall have received copies of the insurance
binders or certificates evidencing Borrower's compliance with Section 8.2
hereof, including lender's loss payee endorsements.
5.8 BORROWER'S EXISTENCE. Coast shall have received copies of
Borrower's articles or certificate of incorporation and all amendments thereto,
and a Certificate of Good Standing, each certified by the Secretary of State of
the state of Borrower's organization, and dated a recent date prior to the
Closing Date, and Coast shall have received Certificates of Foreign
Qualification for Borrower from the Secretary of State of each state wherein the
failure to be so qualified could have a Material Adverse Effect.
5.9 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing the
execution and delivery of this Agreement and the other documents contemplated
hereby, and authorizing the transactions contemplated hereunder and thereunder,
and authorizing specific officers of Borrower to execute the same on behalf of
Borrower, in each case certified by the Secretary or other acceptable officer of
Borrower as of the Closing Date.
5.10 TAXES. Coast shall have received evidence from Borrower that
Borrower has complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.11 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have
received a certificate from the relevant officer of Borrower to the effect that,
as the result of a comprehensive assessment undertaken by Borrower of Borrower's
computer systems, software and applications and after due inquiry made to
Borrower's material suppliers, vendors and customers, Borrower knows of no facts
that would cause Borrower to reasonably believe that the Year 2000 Problem will
cause a Material Adverse Effect.
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5.12 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower, which shall include, but not be limited to searches for tax
liens, judgments, and other adverse material information relating to Borrower;
background searches on Borrower's officers and directors; receipt by Coast of an
appraisal of Borrower's assets; and evidence that Borrower is current with
respect to all tax payments.
5.13 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such
other agreements, instruments and documents as Coast may require in connection
with the transactions contemplated hereby, all in form and substance
satisfactory to Coast in Coast's sole and absolute discretion, and in form for
filing in the appropriate filing office, including, but not limited to, those
documents listed in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make
Loans, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (c) do not violate Borrower's
articles or certificate of incorporation or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (d) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast thirty (30) days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and will
in the future comply, with all laws relating to the conduct of business under a
fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule.
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Borrower will give Coast at least thirty (30) days' prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower and Inventory which has been
sold by Borrower on conditional sales contracts to Affiliated Bingo Halls in the
ordinary course of Borrower's business. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens and the rights of Affiliated
Bingo Halls under conditional sales contracts with Borrower. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Coast, use its best efforts to cause such
third party to execute and deliver to Coast, in form acceptable to Coast, such
waivers and subordinations as Coast shall specify, so as to ensure that Coast's
rights in the Collateral are, and will continue to be, superior to the rights of
any such third party. Borrower will keep in full force and effect, and will
comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Coast have been, and will be,
prepared in conformity with GAAP (except, in the case of unaudited financial
statements, for the absence of footnotes and subject to normal year-end
adjustments) and now and in the future will fairly reflect the financial
condition of Borrower, at the times and for the periods therein stated. Between
the last date covered by any such statement provided to Coast and the date
hereof, there has been no Material Adverse Effect. Borrower is now and will
continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments,
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deposits and contributions now or in the future owed by Borrower. Borrower may,
however, defer payment of any contested taxes, provided that Borrower (i) in
good faith contests Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Coast in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. As of the date
hereof, Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency. Borrower shall, at all times, utilize the services of
an outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, the Fair Labor Standards Act, and those relating to Borrower's ownership of
real or personal property, the conduct and licensing of Borrower's business, and
environmental matters.
6.10 LITIGATION. Except as disclosed in Schedule 6.10 attached hereto,
there is no claim, suit, litigation, proceeding or investigation pending or (to
best of Borrower's knowledge) threatened by or against or affecting Borrower in
any court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in a Material
Adverse Effect. Borrower will promptly inform Coast in writing of any claim,
proceeding, litigation or investigation in the future threatened or instituted
by or against Borrower involving an amount set forth on the Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. As the result of a comprehensive review and
assessment undertaken by Borrower of Borrower's computer systems, software and
applications and after due inquiry made of Borrower's material suppliers,
vendors and customers Borrower represents and warrants that the Year 2000
problem will not result in a Material Adverse Effect.
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7. COLLECTIONS AND RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: All Collections with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent the undisputed bona fide existing unconditional payments to Borrower
of the Net Gaming Revenues of Borrower resulting from the sale, delivery and
acceptance of goods or the rendition of services in the ordinary course of
Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Coast as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Collections and Receivables are and shall be true and correct and
all such invoices, instruments and other documents and all of Borrower's books
and records are and shall be genuine and in all respects what they purport to
be. All sales and other transactions underlying or giving rise to the
Collections and each Receivable shall fully comply with all applicable laws and
governmental rules and regulations. All signatures and endorsements on all
documents, instruments, and agreements relating to all Receivables are and shall
be genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Collections and Receivables, all on Coast's standard
forms; provided. however. that Borrower's failure to execute and deliver the
same shall not affect or limit Coast's security interest and other rights in all
of Borrower's Receivables, nor shall Coast's failure to advance or lend against
a specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 A.M. Los Angeles, California time,
will not be considered by Coast until the next Business Day. Together with each
such schedule, or later if requested by Coast, Borrower shall furnish Coast with
copies (or, at Coast's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Collections and Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Coast an aged accounts receivable trial balance in such form and at
such intervals as Coast shall request. In addition, Borrower shall deliver to
Coast the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, upon receipt thereof and in the same form as received, with all
necessary endorsements, all of which shall be with recourse. Borrower shall also
provide Coast with copies of all credit memos as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. Each day, every Affiliated Bingo Hall
shall deposit that day's gaming revenues into the appropriate Local Account for
such Affiliated Bingo Hall. Each Local Account will be swept (i) on the first
Business Day of each week with respect to gaming revenues derived from
MegaBingo, (ii) no less often than twice a week with respect to gaming
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revenues derived from high speed interactive bingo games and (iii) on the first
and fifteenth of each month (or in the event that the first or fifteenth if not
a Business Day, on the next Business Day) with respect to gaming revenues
derived from Class III Gaming into the applicable Concentration Account, which
shall in turn be swept daily with the Net Gaming Revenues being transferred into
a Coast account at Southern Pacific Bank referencing Multimedia. All funds other
than the Net Gaming Revenues shall be transferred from each Concentration
Account to the appropriate Affiliated Gaming Hall for the payment of gaming
costs and expenses related to gaming activities (including but not limited to
the payment of prizes) into an account designated by the Affiliated Gaming Hall.
To the extent that Borrower receives any Collections contrary to the terms of
this Agreement, Borrower shall hold all payments on, and proceeds of such
Collections in trust for Coast, and Borrower shall deliver all such payments and
proceeds to Coast within one (1) Business Day after receipt by Borrower, in
their original form, duly endorsed to Coast, to be applied to the Obligations in
such order as Coast shall determine. Coast or its designee may, at any time,
notify Account Debtors that Coast has been granted a security interest in the
Receivables.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition
of any Collateral shall be delivered to Coast within one (1) Business Day after
receipt by Borrower, in their original form, duly endorsed to Coast, to be
applied to the Obligations in such order as Coast shall determine. Borrower
agrees that it will not commingle proceeds of Collateral with any of Borrower's
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Coast. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or
claims relating to the Collections and Receivables which could result in a
Material Adverse Effect.- Borrower shall not forgive (completely or partially),
compromise or settle any Receivable for less than payment in full, or agree to
do any of the foregoing, except that Borrower may do so, provided that: (a)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Coast on the regular reports provided to Coast; (b) no Default or
Event of Default has occurred and is continuing; and (c) taking into account all
such discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Coast may, at any time after the occurrence of an Event
of Default, settle or adjust disputes or claims directly with Account Debtors
for amounts and upon terms which Coast considers advisable in its reasonable
credit judgment and, in all cases, Coast shall credit Borrower's Loan account
with only the net amounts received by Coast in payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the
occurrence of any Event of Default, Borrower shall (a) hold the returned
Inventory in trust for Coast, (b) segregate all returned Inventory from all of
Borrower's other property, (c) conspicuously label the returned Inventory as
subject to Coast's security interest, and (d) immediately notify Coast of the
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return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Coast's request deliver such
returned Inventory to Coast.
7.8 VERIFICATION. Coast may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for its
own gross negligence or willful misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lender's loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than the amount set forth in Section 8 of the
Schedule, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Coast may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Coast may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.
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8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but
not less frequently than quarterly and on one (1) Business Day's notice, Coast,
or its agents, shall have the right to perform Audits. Coast shall take
reasonable steps to keep confidential all confidential information obtained in
any Audit, but Coast shall have the right to disclose any such information to
its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena
or other legal process. The Audits shall be at Borrower's expense and the charge
for the Audits shall be Seven Hundred Fifty Dollars ($750) per person per day
(or such higher amount as shall represent Coast's then current standard charge
for the same), plus reasonable out-of-pocket expenses. Borrower will not enter
into any agreement with any accounting firm, service bureau or third party to
store Borrower's books or records at any location other than Borrower's Address,
without first notifying Coast of the same and obtaining the written agreement
from such accounting firm, service bureau or other third party to give Coast the
same rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement. Borrower shall also take all necessary
steps to assure that its material accounting and software, systems and
applications, and those of its accounting firm, service bureau or any other
third party vendor or supplier, will, on a timely basis, adequately and
completely address the Year 2000 Problem in all material respects.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior
written consent, do any of the following:
(a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty
percent (50%) of the ownership interest in the surviving entity
immediately after such merger or consolidation, and (ii) the Borrower
is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of
business, or (ii) in a transaction or a series of transactions not
involving the payment of an aggregate amount in excess of the amount
set forth in Section 8 of the Schedule;
(c) enter into any other transaction outside the ordinary
course of business;
(d) sell or transfer any Collateral, except for the sale of
finished Inventory in the ordinary course of Borrower's business
including the sale, in connection with a Gaming contract of machines on
conditional sales contracts to an Affiliated Bingo Hall, and except for
the sale of obsolete or unneeded Equipment in the ordinary course of
business;
(e) store any Inventory (other than Inventory by transit in
the hands of carriers) or other Collateral with any warehouseman or
other third party;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i)
advances to customers or suppliers in the ordinary course of business,
(ii) travel advances, employee
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relocation loans and other employee loans and advances in the ordinary
course of business, (iii) loans to employees, officers and directors
for the purpose of purchasing equity securities of the Borrower, and
(iv) loans, in the ordinary course of Borrower's business as presently
conducted not to exceed $250,000 in any calendar year, to Affiliated
Bingo Halls to expand floor space;
(h) incur any debts, outside the ordinary course of business,
which would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity, except for the attorneys fees
of Affiliated Bingo Halls incurred in the ordinary course of Borrower's
business as presently conducted, in connection with litigation with
various attorneys general in an amount not to exceed, in the aggregate,
$120,000 in any twelve (12) month period;
(j) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for dividends or distributions
on Borrower's series A preferred stock in the amount of One Hundred
Four Thousand Dollars ($104,000) per year or dividends or distributions
payable solely in stock form of ownership interests in Borrower);
(k) make any change in Borrower's capital structure which
would have a Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default is
continuing or would occur as a result of such transaction:
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be extended,
and this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one
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party gives written notice to the other, not less than sixty (60) days prior to
the Maturity Date or the next Renewal Date, that such party elects to terminate
this Agreement effective on the Maturity Date or such next Renewal Date. If this
Agreement is renewed under this Section 9.1, Borrower shall pay to Coast a
Renewal Fee in the amount shown in Section 3 of the Schedule. The Renewal Fee
shall be due and payable on the Renewal Date and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under this
Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the amount
shown in Section 3 of the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
lot all or any part of such Obligations are otherwise then due and payable.
Notwithstanding any termination of this Agreement, all of Coast's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that, without limiting the fact that
Loans are subject to the discretion of Coast, Coast may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Coast, nor shall any such
termination relieve Borrower of any Obligation to Coast, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Coast shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Coast's security
interests.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or
certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading and results in a Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation; or
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(c) the total Loans and other Obligations outstanding at any
time shall exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral
to Coast as provided in Section 7.5 above, or shall fail to give Coast
access to its books and records or Collateral as provided in Section
8.4 above, or shall breach any negative covenant set forth in Section
8.5 above; or
(e) Borrower shall fail to comply with the financial covenants
(if any) set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within five (5) Business Days
after the date due; or
(g) Any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of
the Collateral which is not cured within ten (10) days after the
occurrence of the same; or
(h) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the
Permitted Lien; or
(i) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a Material Adverse
Effect; or
(j) Dissolution, termination of existence, insolvency or
business failure of Borrower or any guarantor of any of the
Obligations; or appointment of a receiver, trustee or custodian, for
all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower or any
guarantor of any of the Obligations under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, now or in the future
in effect; or
(k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, now or in the future
in effect, which is (i) not timely controverted, or (ii) not cured by
the dismissal thereof within thirty (30) days after the date commenced;
or
(l) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor
of any of the Obligations under any bankruptcy or insolvency law; or
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(m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or
other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the
foregoing, or commencement of proceedings by or against any such third
party under any bankruptcy or insolvency law; or
(n) Borrower or any guarantor of any of the Obligations makes
any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the
applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or
(o) Except as permitted under Section 8.5(a), Borrower shall
suffer or experience any Change of Control without Coast's prior
written consent, which consent shall be in the discretion of Coast in
the exercise of its reasonable business judgment; or
(p) Borrower shall generally not pay its debts as they become
due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or
make or suffer any transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law;
or
(q) there shall be any Material Adverse Effect; or
(r) Borrower's Net Gaming Revenues in any month decrease by
more than twenty percent (20%) from the immediately preceding month.
Coast may cease making any Loans or extending any credit
hereunder during any of the above cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following:
(a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing
or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Coast
without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store or
remove any of the Collateral, and remain on the premises or cause a
custodian to remain on
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the premises in exclusive control thereof, without charge for so long
as Coast deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement;
provided, however. that should Coast seek to take possession of any of
the Collateral by Court process, Borrower hereby irrevocably waives:
(i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an
incident to such possession;
(ii) any demand for possession prior to the
commencement of any suit or action to recover possession
thereof; and
(iii) any requirement that Coast retain possession
of, and not dispose of, any such Collateral until after trial
or final judgment;
(d) Require Borrower to assemble any or all of the Collateral
and make it available to Coast at places designated by Coast which are
reasonably convenient to Coast and Borrower, and to remove the
Collateral to such locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for
the purpose of removal, Coast shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes, equipment and all other
property without charge. Coast is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights
under all licenses and all franchise agreements shall inure to Coast's
benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Coast obtains possession of it or after
further manufacturing, processing or repair, at one or more public
and/or private sales, in lots or in bulk, for cash, exchange or other
property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for
sale. Coast shall have the right to conduct such disposition on
Borrower's premises without charge, for such time or times as Coast
deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may
directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability
Borrower may have if any Collateral is defective as to title or
physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith,
Borrower irrevocably authorizes Coast to endorse or sign Borrower's
name on all collections, receipts, instruments and other
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documents, to take possession of and open mail addressed to Borrower
and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in Coast's sole discretion, to
grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and
obligations incurred by Coast (including attorneys' fees and expenses
incurred in connection with bankruptcy) with respect to the foregoing
shall be due from the Borrower to Coast on demand. Coast may charge the
same to Borrower's loan account, and the same shall thereafter bear
interest at the same rate as is applicable to the Receivable Loans.
Without limiting any of Coast's rights and remedies, from and after the
occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional three percent per
annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least seven (7)
days prior to the sale, and, in the case of a public sale, notice of
the sale is published at least seven (7) days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with
or without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00
p.m Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's
check or wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast
may (but is not obligated to) direct any prospective purchaser to
ascertain directly from Borrower any and all information concerning the
same.
Coast shall be free to employ other methods of noticing and
selling the Collateral, in its discretion, if they are commercially
reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power
of attorney coupled with an interest, authorizing and permitting Coast (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to
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Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Coast agrees to exercise the following powers
in a commercially reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast
may, in its sole discretion, deem advisable in order to perfect and
maintain Coast's security interest in the Collateral, or in order to
exercise a right of Borrower or Coast, or in order to fully consummate
all the transactions contemplated under this Agreement, and all other
present and future agreements;
(b) After the occurrence and during the continuation of an
Event of Default, execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or
otherwise dispose of or to lease (as lessor or lessee) any real or
personal property which is part of Coast's Collateral or in which
Coast-has an interest;
(c) After the occurrence and during the continuation of an
Event of Default, execute on behalf of Borrower, any invoices relating
to any Receivable, any draft against any Account Debtor and any notice
to any Account Debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic's, materialman's or other lien, or assignment
or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items
of payment or proceeds of Collateral; endorse the name of Borrower upon
any instruments, or documents, evidence of payment or Collateral that
may come into Coast's possession;
(e) Endorse all checks and other forms of remittances received
by Coast;
(f) After the occurrence and during the continuation of an
Event of Default, pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or
any judgment based thereon, or otherwise take any action to terminate
or discharge the same;
(g) After the occurrence and during the continuation of an
Event of Default, grant extensions of time to pay, compromise claims
and settle Receivables and General Intangibles for less than face value
and execute all releases and other documents in connection therewith;
(h) After the occurrence and during the continuation of an
Event of Default, pay any sums required on account of Borrower's taxes
or to secure the release of any liens therefor, or both;
(i) After the occurrence and during the continuation of an
Event of Default, settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain
payment therefor;
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(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast
the same rights of access and other rights with respect thereto as
Coast has under this Agreement; and
(k) After the occurrence and during the continuation of an
Event of Default, take any action or pay any sum required of Borrower
pursuant to this Agreement and any other present or future agreements.
Any and all sums paid and any and all costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast
(including attorneys' fees and expenses incurred pursuant to
bankruptcy) with respect to the foregoing shall be added to and become
part of the Obligations, and shall be payable on demand. Coast may
charge the foregoing to Borrower's loan account and the foregoing shall
thereafter bear interest at the same rate applicable to the Receivable
Loans. In no event shall Coast's rights under the foregoing power of
attorney or any of Coast's other rights under this Agreement be deemed
to indicate that Coast is in control of the business, management or
properties of Borrower. Borrower shall pay, indemnify, defend, and hold
Coast and each of its officers, directors, employees, counsel, agents,
and attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and
all attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in
connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated
herein, and with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the
use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall
have no obligation to any Indemnified Person hereunder with respect to
any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall
survive the termination of this Agreement and the repayment of the
Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral shall be applied by Coast first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole
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discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Coast of the cash therefor.
10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party in equity, under the Code, and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Coast of one or more of its rights or remedies shall not be deemed an election,
nor bar Coast from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Coast to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been
indefeasibly paid and performed.
11. GENERAL PROVISIONS.
11.1 INTEREST COMPUTATION. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by Coast
(including proceeds of Receivables and payment of the Obligations in full) shall
be deemed applied by Coast on account of the Obligations three (3) Business Days
after receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM Los Angeles, California time,
on any day shall be deemed received on the next Business Day. Coast shall be
entitled to charge Borrower's account for such three (3) Business Days of
"clearance" or "float" at the rate(s) set forth in Section 3 of the Schedule on
all checks, wire transfers and other items received by Coast, regardless of
whether such three (3) Business Days of "clearance" or "float" actually occur,
and shall be deemed to be the equivalent of charging three (3) Business Days of
interest on such collections. This across-the-board three (3) Business Day
clearance or float charge on all collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Coast's financing of Borrower.
Coast shall not, however, be required to credit Borrower's account for the
amount of any item of payment which is unsatisfactory to Coast in its sole
discretion, and Coast may charge Borrower's loan account for the amount of any
item of payment which is returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all
payments with respect to the Obligations may be applied, and in Coast's sole
discretion reversed and re-applied, to the Obligations, in such order and manner
as Coast shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest from the date due to the
date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
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notifies Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.
11.6 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
11.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
11.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any Default shall not waive or affect any other
Default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Coast, or any
of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or
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representing Coast, but nothing herein shall relieve Coast from liability for
its own gross negligence or willful misconduct.
11.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 Attorneys Fees, Costs and Charges. Borrower shall reimburse Coast
for all attorneys' fees (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and all filing, recording, search, title insurance,
appraisal, audit, and other costs incurred by Coast, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any attorneys' fees and costs (including
attorneys' fees and expenses incurred pursuant to bankruptcy) Coast incurs in
order to do the following: prepare and negotiate this Agreement and the
documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Coast's
security interest in, the Collateral; and otherwise represent Coast in any
litigation relating to Borrower. If either Coast or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its costs and attorneys' fees
(including attorneys' fees and expenses incurred pursuant to bankruptcy),
including (but not limited to) attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. Borrower shall also pay Coast's standard charges for returned checks
and for wire transfers, in effect from time to time. All attorneys' fees, costs
and charges (including attorneys' fees and expenses incurred pursuant to
bankruptcy) and other fees, costs and charges to which Coast may be entitled
pursuant to this Agreement may be charged by Coast to Borrower's loan account
and shall thereafter bear interest at the same rate as the Loans.
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights and
delegate its duties hereunder, to a recognized financial institution acceptable
to the National Indian Gaming Commission, without the consent of Borrower. Coast
reserves the right to syndicate all or a portion of the transaction created
herein or sell, assign, transfer, negotiate, or grant participations in all or
any part of, or any interest in Coast's rights and benefits hereunder. In
connection with any such syndication, assignment or participation, Coast may
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disclose all documents and information which Coast now or hereafter may have
relating to Borrower or Borrower's business. To the extent that Coast assigns
its rights and obligations hereunder to a third Person which is a financial
institution, Coast thereafter shall be released from such assigned obligations
to Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof; provided,
however, Coast agrees to provide Borrower with copies of such press releases and
tombstone advertisements.
11.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and Coast acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any rule
of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the internal laws of the State of California, without
regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (b) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (c) waives any and all rights Borrower may have to object
to the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR
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ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER: COAST:
MULTIMEDIA GAMES, INC. COAST BUSINESS CREDIT,
A Texas Corporation A division of Southern Pacific Bank
By By
------------------------------------ ------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman of the Board Directors Title
------------------------------
MEGABINGO, INC.,
A Delaware Corporation
By
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman of the Board Directors
MULTIMEDIA CREATIVE SERVICES, INC.,
A Delaware Corporation
By
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman of the Board Directors
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COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: MULTIMEDIA GAMES, INC.,
A Texas Corporation
MEGABINGO, INC.,
A Delaware Corporation
MULTIMEDIA CREATIVE SERVICES, INC.,
A Delaware Corporation
ADDRESS: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DATE: July _____________, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in total amount at any time
outstanding not to exceed the lesser of a
total of Ten Million Dollars ($10,000) at
any on time outstanding (the "Maximum Dollar
Amount"), or advances up to seven (7) times
Borrower's Average Net Monthly Gaming
Revenues, which shall be reduced each fiscal
quarter (beginning September 30, 1999) by
three tenths (0.3) until the advance rate is
up to three and one half (3.5) time
Borrower's Average Net monthly Gaming
Revenues; provided, however, in no event
shall the amount of Loans exceed (i) 1.6
times EBITDA measured on a rolling twelve
(12) month basis; or (ii) eighty percent
(80%) of the orderly liquidation value (as
reasonably determined
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by Coast) of Borrower's Gaming Contracts or
(iii) seventy-five percent (75%) of
Borrower's market capitalization, measured
on a three (3) month rolling average basis
and based upon the quoted stock price of the
capital stock of Multimedia (or if not
publicly traded or quoted, as reasonably
determined by Coast).
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE A rate equal to the Prime Rate plus 1.75%
per annum, calculated on the basis of a
360-day year of the actual number of days
elapsed. The interest rate applicable to all
Loans shall be adjusted monthly as of the
first day of each month, and the interest to
be charged for each month shall be based on
the highest Prim Rate in effect during the
prior month, but in no event shall the rate
of interest charged on any Loans in any
month be less than 9% per annum.
SECTION 3.1 - MINIMUM MONTHLY
INTEREST: Calculated at the applicable rate of
interest on forty percent (40%) of the
Maximum Dollar Amount
SECTION 3.2 - LOAN FEE: One Hundred Thousand Dollars ($100,000),
such amount being fully earned and payable
on the Closing Date, and Fifty Thousand
Dollars ($50,000) fully earned on the
Closing Date and due on the first
anniversary of the Closing Date and Fifty
Thousand ($50,000) fully earned on the
Closing Date and due on the second
anniversary and on each anniversary
thereafter.
SECTION 3.2 - FACILITY FEE: $4,000, per quarter, payable on the Closing
Date (prorated for any partial quarter at
the beginning of the term of this
Agreement).
SECTION 9.1 - RENEWAL FEE: 1/2% of the Maximum Dollar Amount per year.
SECTION 9.2 - EARLY
TERMINATION An amount equal to five percent (5%) of the
FEE: Maximum Dollar Amount (as defined in the
Schedule), if termination occurs on or
before January 31, 2000; four percent (4%)
of the Maximum Dollar Amount, if termination
occurs after January 31, 2000, and on or
before July 31, 2000; two percent (2%) of
the Maximum Dollar Amount, if termination
occurs after January 31, 2001 and on or
before July 31, 2001; and one percent (1%)
of the Maximum Dollar Amount, If
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termination occurs after July 31, 2001;
provided, however, prior to the Maturity
Date and absent an Event of Default, if
Borrower is able to obtain a credit facility
from another lender with a credit limit in
excess of the Maximum Dollar Amount, then
the Early Termination Fee referenced above
shall be reduced by one half.
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM
AVAILABILITY $3,000,000
SECTION 5.13 - OTHER DOCUMENTS
AND AGREEMENTS 1. Joint and Several Borrower Rider;
2. Deficiency guaranty of ▇▇▇▇▇▇ ▇▇▇▇▇▇;
3. UCC-1 financing statements, fixture
filings and termination statements
4. Intellectual Property Security Agreements
(including those covering copyrights,
patents and trademarks);
5. Security Agreement - Stock Pledge;
6. Blocked account agreements for the
Concentration Accounts;
7. Coast's completion of due diligence
regarding contracts between Borrower's and
Sovereign Native American Nations; and
8. Registration of Borrower's copyrights and
other intellectual property as applicable
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF ▇▇▇▇▇▇ International, Inc.
BORROWER: TV Bingo Network, Inc.
First American Enterprises, Inc.
SECTION 6.2 - PRIOR TRADE ▇▇▇▇▇▇ International, Inc.
NAMES OF TV Bingo Network, Inc.
BORROWER: First American Enterprises, Inc.
SECTION 6.2 - EXISTING TRADE None.
NAMES OF
BORROWER:
SECTION 6.3 - OTHER LOCATIONS ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
AND ADDRESSES: ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 6.10 - MATERIAL See Schedule 6.10.
ADVERSE
LITIGATION:
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SECTION 6.10 - FUTURE CLAIMS Borrower will promptly inform Coast in
AND LITIGATION: writing of any claim, proceeding, litigation
or investigation in the future threatened or
instituted by or against Borrower involving
any single claim of Fifty Thousand Dollars
($50,000) or more, or involving One Hundred
Thousand Dollars ($100,000) or more in the
aggregate.
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS 1. Tangible net Worth Covenant: Borrowers
shall have, measured as of the Closing
Date and monthly thereafter, a Tangible
Net Worth of no less than Ten Million
Five Hundred Thousand Dollars
($10,500,000). Thereafter, Borrowers
shall maintain a Tangible net Worth
adjusted quarterly, of not less than the
sum of (i) the prior period's minimum
Tangible Net Worth, and (ii) eighty
percent (80%) of Borrowers after tax net
profits.
2. Restriction on parties to contracts:
All Gaming contracts to be entered into
between any Borrower and a new or
existing customer shall only be entered
into by MegaBingo or Creative Services.
Multimedia shall not enter into any such
contract or agreement.
SECTION 8.2 - INSURANCE: Subject to the limitations set forth in
Section 8.2 of the Agreement, Coast shall
release to Borrower insurance proceeds with
respect to Equipment totaling less than
Fifty Thousand ($50,000)
SECTION 8.3 - REPORTING: Borrower shall provide coast with the
following:
1. Monthly Receivable agings, aged by
invoice date, within fifteen (15) days
after the end of each month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
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registers within fifteen (15) days after
the end of each month.
3. Monthly internally prepared financial
statements, as soon as available, and in
any even within forty-five (45) days
after the end of each fiscal quarter of
Borrower.
4. Quarterly internally prepared financial
statements, as soon as available, and in
any event within forty-five (45) days
after the end of each fiscal quarter of
Borrower.
5. Quarterly customer lists, including
customer name, address, and phone number
6. Annual financial statements, as soon as
available, and in any event within
ninety (90) days following the end of
Borrower's fiscal year, containing the
unqualified opinion, of, and certified
by, an independent certified public
accountant acceptable to Coast.
7. A report detailing monthly gaming
revenues, bingo prizes, and payments to
Affiliated Bingo Halls, within ten (10)
days after the end of the month.
8. A report of monthly collections
detailing how received (i.e. gaming
collections, sale of Equipment, or lease
payments), within fifteen (15) days
after the end of the month.
9. A schedule listing Borrower's
twenty-five (25) largest customers
listed by order of expiration of the
Gaming Contract between Borrower and
such customer, within ten (10) days
after the end of each month.
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10. A report showing that all federal and
state taxes, as applicable, have been
paid and are current, within ten (10)
days after the end of each month.
11. Immediate notification when any of the
Affiliated Bingo Halls terminates its
contract with Borrower or when any new
customer enters into a Gaming Contract
with Borrower.
12. A certificate from two officers,
consisting of the President, Chief
Financial Officer, or Chairman of the
Board of Directors, of Borrower stating
that Borrower has not directed any of
the Affiliated Bingo Halls to deposit
revenues in any account other than the
Borrower's local account for such
Affiliated Bingo Hall, within ten (10)
days after the end of each month.
SECTION 8.5 - NEGATIVE Fifty Thousand Dollars ($50,000)
COVENANTS
(ACQUIRED
ASSETS):
SECTION 9 - TERM
SECTION 9.1. - MATURITY DATE: July 31,2002, subject to automatic renewal
as provided in Section 9.1 of the Agreement,
and early termination as provided in Section
9.2 of the Agreement.
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