EXHIBIT 10.3
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (the "Agreement") is made, executed
and entered into this 15th day of April, 1998, between and among North American
Gaming and Entertainment Corporation ("Secured Party") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("Pledgor").
W I T N E S S E T H:
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
SECURITY INTEREST
Pledgor hereby creates and grants to the Secured Party a security interest
in the property described in Article II hereof to secure the payment and
performance of the obligations of Pledgor to the Secured Party set forth in
Article III hereof.
ARTICLE II
COLLATERAL
The property in which the security interest is created is all of Pledgor's
right, title and interest in and to an aggregate fifty-one percent (51%)
Membership Interests and Sharing Ratios (collectively, the "Interests") in OM
Operating, LLC (the "Company") represented by Member Certificate No. 2, together
with all distributions of Cash Flow (as hereafter defined) from time to time
paid, payable, distributed or distributable by the Company to Pledgor in respect
of or related to the Interests, together with all proceeds (hereinafter referred
to as the "Collateral").
Pledgor hereby assigns to Secured Party all distributions of "Cash Flow"
(hereafter defined) made or to be made by the Company to Pledgor in respect of
or related to the Interests and authorizes Secured Party to apply any such
amounts received by Secured Party to repayment of the Note (hereafter defined),
first in payment of accrued interest and then as payment of principal. Pledgor
further hereby authorizes and directs the Company to make payment or
distributions directly to Secured Party of such Cash Flow from time to time
paid, payable, distributed or distributable to Pledgor in respect of or related
to the Interests; and Pledgor hereby appoints Secured Party as its attorney-in-
fact, which appointment shall be deemed irrevocable and coupled with an
interest, to make demand upon and receive payment from the Company on behalf of
Pledgor for any such Cash
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Flow. Secured Party is required to apply such distributions of Cash Flow to the
Note upon receipt. Notwithstanding the foregoing, or any other provision of this
Agreement or the Note to the contrary, Secured Party agrees to release and
deliver to Pledgor, out of any Cash Flow distributed to Pledgor by the Company
hereunder or under the Note, an amount equal to the quarterly federal and/or
state income tax liability of Pledgor attributable to Pledgor's prorata share of
the net taxable income of the Company for the preceding calendar quarter
attributable to the "Existing Casinos" (as hereinafter defined), net of the
amount of interest accrued or paid on the Note for the corresponding period for
which Pledgor received a tax deduction and depreciation expense attributable to
the Existing Casinos for the corresponding period for which Pledgor received a
tax deduction, if Pledgor is required to make estimated quarterly payments to
the Internal Revenue Service; and, if not, Secured Party agrees to release and
deliver to Pledgor prior to filing of Pledgor's federal income tax return an
amount of Cash Flow equal to the federal and/or state income tax liability of
Pledgor attributable to Pledgor's prorata share of the net taxable income of the
Company for the preceding taxable year attributable to the Existing Casinos, net
of the amount of interest accrued or paid on the Note for the corresponding
period for which Pledgor received a tax deduction and depreciation expense
attributable to the Existing Casinos for the corresponding period for which
Pledgor received a tax deduction. If quarterly distributions are made, Pledgor
shall deliver a reconciliation to Secured Party at the time of filing of his
federal and/or state income tax return and if the quarterly distributions
exceeded the amount of his income tax liability, Pledgor shall immediately pay
to Pledgor the amount of such excess for payment on the Note. Pledgor shall, as
a condition precedent to any such release and delivery by Secured Party, furnish
to Secured Party such information and documentation reasonably requested by
Secured Party establishing the existence of this federal and/or state income tax
liability attributable to the net taxable income of the Company from the
operations of the Existing Casinos. For purposes of this Agreement, the
"Existing Casinos" shall mean the five existing video poker casinos operated by
the Company as of the date of this Agreement, The Gold Rush, King's Lucky Lady,
Pelican Palace, Lucky Longhorn and The Diamond Jubilee, or whichever of those
Existing Casinos shall be in operation by the Company for the applicable taxable
year to which the federal income tax liability relates. For purposes of this
Agreement, "Cash Flow" shall have the same meaning as in the Note.
ARTICLE III
OBLIGATION SECURED
This Agreement shall secure the payment and performance of the Obligation
of Pledgor to Secured Party. The term "Obligation", as used herein, means:
(i) all principal and interest accruing under that certain Note (herein
so called) executed of even date herewith payable to Secured Party by Pledgor,
including interest, collection and attorneys' fees as therein provided;
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(ii) all loans and advances which Secured Party may hereafter make to
Pledgor but insofar and only insofar as same relate to this Agreement or the
Note payable to Secured Party;
(iii) all indebtedness and liabilities of Pledgor to Secured Party at
any time arising under the terms thereof and all renewals and extensions
thereof, or any part thereof;
(iv) performance and discharge of each and every obligation, covenant and
agreement of Pledgor herein contained; and
(v) any and all renewals or extensions of any of the foregoing debts,
obligations and liabilities or any part thereof.
ARTICLE IV
WARRANTY AND REPRESENTATION OF PLEDGOR
Pledgor represents and warrants that:
(i) Pledgor has full authority and capacity to execute and deliver this
Agreement;
(ii) no financing statement covering the Collateral, or any part thereof,
has been filed with any filing officer;
(iii) no other security agreement covering the Collateral, or any part
thereof, has been made and no security interest, other than the one herein
created, has attached or been perfected in the Collateral or in any part
thereof;
(iv) no dispute, right of setoff, counter-claim or defense exists with
respect to all or any part of the Collateral;
(v) except for matters arising by reason of state or federal securities
laws, there are no restrictions upon the transfer of any of the Collateral;
(vi) Pledgor has the right to transfer the Collateral free of any liens,
claims or encumbrances and without obtaining the consent of any other party
which has not already been obtained, and the transfer of the Collateral will not
result in a default under any agreement to which Pledgor or the Company is a
party; and
(vii) Pledgor is the owner of the Collateral.
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ARTICLE V
COVENANTS AND OBLIGATIONS OF PLEDGOR
Pledgor covenants and agrees to:
(i) deliver to the Secured Party the original member certificate which
represents the Collateral, together with a power of attorney endorsing the
Collateral to Secured Party in the form attached hereto as Exhibit "A";
(ii) from time to time promptly execute and deliver to Secured Party all
such other assignments, certificates, supplemental writings, financing
statements and continuation statements, and do all other acts or things, as
Secured Party may reasonably request in order to more fully evidence and perfect
the security interest herein created;
(iii) promptly furnish Secured Party with any information which Secured
Party may reasonably request concerning the Collateral;
(iv) allow Secured Party to inspect all records of Pledgor relating to the
Collateral, and to make and take away copies of such records;
(v) promptly notify Secured Party of any change in any fact or
circumstance warranted or represented by the Pledgor in this Agreement or in any
other writing furnished by Pledgor to Secured Party in connection with the
Collateral;
(vi) promptly notify Secured Party of any claim, action or proceeding
affecting title to the Collateral, or any part thereof, or the security interest
therein, and at the request of Secured Party, appear in and defend, at Pledgor's
expense, any such action or proceeding; and
(vii) promptly notify Secured Party of any change of address of
Pledgor.
Pledgor further covenants and agrees that, without the prior written
consent of Secured Party, Pledgor will not: (a) sell, assign or transfer any of
Pledgor's rights in the Collateral; or (b) create any other security interest
in, or otherwise encumber, the Collateral, or any part thereof, or permit the
same to be or become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance or security agreement of
any kind or character.
Should the Collateral, or any part thereof, ever be in any manner converted
by the Company into another type of property or any money or other proceeds ever
be paid or delivered to Pledgor as a result of Pledgor's rights in the
Collateral, then, in any such event, all such property, money and other proceeds
shall become part of the Collateral, shall be held by Pledgor in trust for the
benefit of Secured Party, and Pledgor covenants to forthwith pay or deliver to
Secured Party all of the same
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and, at the same time, if Secured Party deems it necessary and so requests,
Pledgor will properly endorse or assign the same. With respect to any of such
property of a kind requiring an additional security agreement, financing
statement or other writing to perfect a security interest therein in favor of
Secured Party, Pledgor will forthwith execute and deliver to Secured Party
whatever the Secured Party shall reasonably deem necessary or proper for such
purpose. Should any covenant or agreement of Pledgor fail to be performed in
accordance with its terms, Secured Party may, but never shall be obligated to,
perform or attempt to perform such covenant or agreement on behalf of Pledgor
and Pledgor agrees to pay to Secured Party any such amount reasonably expended
by Secured Party in such performance or attempted performance, together with
interest thereon at the rate specified in the Note.
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS OF SECURED PARTY UPON DEFAULT
The term "default", as used herein, means the occurrence of any of the
following events:
(i) the failure of Pledgor to pay (a) any installment of principal or
interest under the Note, which failure continues for thirty (30) calendar days
after notice thereof from Secured Party to Pledgor or (b) any other portion of
the Obligation, which failure continues for thirty (30) calendar days after
notice thereof from Secured Party to Pledgor; provided, however, it shall not be
a default by Pledgor if the Company fails to or is prohibited from timely
distributing to Secured Party the Cash Flow to be made to Pledgor, as provided
herein and in the Note, unless such failure or prohibition is as a result of any
act by Pledgor to prevent or restrict the Company from making timely
distributions to Secured Party, in which case Pledgor shall be deemed to be
immediately in default; or
(ii) the failure of Pledgor to punctually and properly perform any
material covenant or agreement contained herein or in the Note, which failure
continues for thirty (30) calendar days after notice thereof from Secured Party
to Pledgor.
Upon the occurrence of a default, in addition to any and all other rights
and remedies which Secured Party may then have hereunder, or under the Texas
Uniform Commercial Code (the "Code"), or otherwise, Secured Party, at its
option, may:
(i) declare the entire unpaid balance of principal of and all accrued
interest on the Obligation immediately due and payable, without notice, demand,
protest or presentment;
(ii) reduce any claim against Pledgor to judgment and otherwise enforce
collection of the same;
(iii) foreclose or otherwise enforce its security interest in all or
any part of the Collateral
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by any available judicial procedure;
(iv) after notification, if any, as provided for herein, sell or
otherwise dispose of, at such location chosen by Secured Party, all or any part
of the Collateral, and any such sale or other disposition may be as a unit or in
parcels, by public or private proceedings, and for cash or upon credit or
otherwise as Secured Party may reasonably determine, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral, shall
not exhaust Secured Party's power of sale, but sales may be made from time to
time until all of the Collateral has been sold or until the Obligation has been
paid in full), and at any such sale it shall not be necessary to exhibit the
Collateral;
(v) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Pledgor hereby consents to
any such appointment;
(vi) buy the Collateral at any public sale;
(vii) buy the Collateral at any private sale if the Collateral is of a
type customarily sold in a recognized market or is a type which is the subject
of widely distributed standard price quotations; and
(viii) without notice to Pledgor, either have the Collateral registered
in Secured Party's name, or in the name of a nominee, and, with or without such
registration, (a) exercise as to such Collateral all the rights, powers and
remedies of an owner, including the right and power to vote, (b) enter into any
extension, reorganization, merger or consolidation agreement, or any other
agreement in any way relating to or affecting the Collateral, and in connection
therewith may deposit or surrender control of the Collateral and accept other
property in exchange therefor, and (c) demand of the Company to receive any and
all dividends and other distributions payable in respect thereof, regardless of
the medium in which paid and whether they be ordinary or extraordinary, and the
Company, in making payment to Secured Party hereunder, shall be fully protected
in relying on the written statement of Secured Party that he then holds a
security interest which entitles him to receive such payment, and the receipt of
Secured Party for such payment shall be full acquittance therefor to the Company
and the Company shall not be required to see the application of such payment;
provided, however, Secured Party shall have no duty to exercise any of the
foregoing rights, privileges or options and shall not be responsible for any
delay or failure to do so.
Secured Party shall have no duty to fix or preserve the rights against any
other party having an interest in the Collateral, and shall never be liable for
its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Pledgor for what Secured
Party may actually collect or receive thereon. Pledgor agrees that the Secured
Party shall have no responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters relating to any of
the Collateral, nor for informing Pledgor with respect to any
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thereof.
Secured Party shall be entitled to apply the proceeds of any sale or other
disposition of the Collateral in the following order: first, to the payment of
all of Secured Party's reasonable expenses, including, without limitation,
attorneys' fees and other legal expenses, incurred in holding and preparing the
Collateral, or any part thereof, for sale or other disposition, in arranging for
such sale or other disposition, and in actually selling the same; and next,
toward payment of the balance of the Obligation in such order and manner as
Secured Party, in its discretion, may deem advisable. Secured Party shall
account to Pledgor for any surplus after making the foregoing application and,
if any Collateral remains unsold, shall return such Collateral to Pledgor. If
the proceeds are not sufficient to pay the Obligation in full, Pledgor shall not
be liable for any deficiency, it being understood that the Note and Obligation
are limited recourse obligations of Pledgor and, notwithstanding any provision
herein to the contrary, Secured Party shall have recourse against Pledgor only
to the extent of the Collateral.
ARTICLE VII
RIGHTS OF PLEDGOR
Unless and until occurrence of an event of "default" as herein defined,
Pledgor shall have all ownership rights in and to the Collateral, including the
right to vote the Interests and the right to receive distributions of cash and
property relative to the Interests, other than distributions of Cash Flow which
are to be applied as payment on the Note as provided herein and in the Note.
Secured Party agrees not to record the transfer of the Interests into its name
pursuant to the Power of Attorney until a default has occurred, at which time
such transfer may be made. If requested by Pledgor, Secured Party shall execute
and deliver to Pledgor such proxies and authorizations as are reasonably
required to confirm the voting rights of Pledgor.
ARTICLE VIII
SECURITIES LAW
The Secured Party is authorized, at any sale, if it deems it desirable so
to do, to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing for their own account, for
investment, and not with a view to distribution or sale of any of the
Collateral.
If any default shall have occurred and if Secured Party determines to
exercise its rights to sell all or any of the Collateral, upon request the
Pledgor shall from time to time furnish to Secured Party all such information as
Secured Party may request in order to determine the number of shares included in
the Collateral which may be sold by Pledgor in exempt transactions under Section
4(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities
and Exchange Commission thereunder (or any statutory provisions or rules in
effect in lieu thereof), as the same are from time
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to time in effect.
Pledgor recognizes and acknowledges that Secured Party may be unable to
effect a public sale of all or a part of the Collateral (time being of the
essence) and may elect to resort to one or more private sales to purchasers who
will be obligated to agree, among other things, to acquire the Collateral for
their own account, for investment, and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Secured Party than those of public sales,
provided such private sales shall be made in a commercially reasonable manner.
ARTICLE IX
NOTIFICATION OF SALE
Reasonable notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale
or other intended disposition of the Collateral is to be made, shall be sent to
Pledgor at the address set forth on the signature page hereof, or at such other
address which Pledgor may give to Secured Party from time to time, and to any
other person entitled under the Code to notice.
ARTICLE X
FINANCING STATEMENT
Secured Party shall have the right at any time to file this Agreement, or a
photographic or other reproduction hereof, as a financing statement, and to
attach to the same a description of all Collateral at the time subject to this
Agreement, but the failure of Secured Party to do so shall not impair the
validity or enforceability of this Agreement.
ARTICLE XI
REMEDIES CUMULATIVE
All rights and remedies of Secured Party hereunder are cumulative of each
other and of every other right or remedy which Secured Party may otherwise have
at law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the Obligation,
and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise by Secured Party of other rights or
remedies.
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ARTICLE XII
TRANSFER AND ASSIGNMENT BY SECURED PARTY
The rights, powers and interests held by Secured Party hereunder, together
with the Collateral, may be transferred and assigned by Secured Party, in whole
or in part, at such time and upon such terms as Secured Party may deem advisable
to any person who shall acquire any part of the Obligation, and upon any such
transfer or assignment, the transferee or assignee shall succeed to all the
rights and powers of, and be subject to the duties and obligations of, Secured
Party hereunder to the extent of any such transfer and assignment.
ARTICLE XIII
NO WAIVER OF RIGHTS OR REMEDIES
Should any part of the Obligation be payable in installments, the
acceptance by Secured Party at any time and from time to time of part payment of
the aggregate amount of all installments then matured shall not be deemed to be
a waiver of the default, if any, then existing. No waiver by Secured Party of
any default shall be deemed to be a wavier of any other subsequent default, nor
shall any such waiver by Secured Party be deemed to be a continuing waiver. No
modification or waiver of any provision of this agreement or of any promissory
note or other security agreement, mortgage, deed of trust, assignment or
contract of any kind evidencing or securing payment of the Obligation, or any
part thereof, shall be effective unless the same shall be in writing and signed
by Secured Party. No delay or omission by Secured Party in exercising any right
or power hereunder, or under any other writings executed by Pledgor as security
for or in connection with the Obligation, shall impair any such right or power
or be construed as a waiver thereof or any acquiescence therein, nor shall any
single or partial exercise of any such right or power preclude other or further
exercise thereof, or the exercise of any other right or power of Secured Party
hereunder or under such other writings.
ARTICLE XIV
BINDING EFFECT
This Agreement shall be binding on Pledgor and Pledgor's successors and
assigns and shall inure to the benefit of Secured Party and its successors and
assigns.
ARTICLE XV
LAW GOVERNING; JURISDICTION
All obligations of each Pledgor under this Agreement are performable in
Dallas County, Texas. This Agreement shall be deemed made in Dallas County,
Texas and shall be governed by, and construed in accordance with, the laws of
the State of Texas. Any legal action or proceeding
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with respect to this agreement or the Note and any actions for enforcement of
any judgment in respect thereof may be brought in the courts of the State of
Texas located in Dallas County, Texas or of the United States of America for the
Northern District of Texas, and, by execution and delivery of this Agreement,
Pledgor hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Pledgor irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Pledgor at the address set forth opposite its signature
below. ▇▇▇▇▇▇▇ hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or the Note
brought in the courts referred to above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of Secured Party or any holder of the Note
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Pledgor in any other jurisdiction.
ARTICLE XVI
HEADINGS
All headings set forth in this Agreement are intended for convenience only
and shall not control or affect the meaning, construction or effect of this
Agreement or any of the provisions hereof.
ARTICLE XVII
SEVERABILITY
All agreements and covenants contained herein are severable and in the
event that any of them shall be held to be invalid by any court of competent
jurisdiction, this Agreement shall be interpreted as if such invalid agreements
or covenants were not contained herein.
ARTICLE XVIII
TERMINATION OF SECURITY AGREEMENT
Upon the payment by Pledgor of all principal and accrued interest due
pursuant to the terms of the Note and payment by Pledgor of the remainder of the
Obligation, if any, this Agreement shall terminate. Upon such termination,
Secured Party shall promptly return to Pledgor the member certificate
representing the Collateral, together with the power of attorney executed by
Pledgor in favor of Secured Party.
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ARTICLE XIX
NOTICES
Any notice shall be conclusively deemed to have been received by a party
hereto and to be effective on the day on which delivered to such party at the
address set forth below beside each party's signature hereto (or at such other
address as such party shall specify to the other parties in writing), or if sent
by registered mail, on the third business day after the day on which mailed,
addressed to such party at the same address.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the subject matter hereof
and contains all of the covenants and agreements between the parties with
respect to the subject matter hereof.
ARTICLE XXI
WAIVERS AND AMENDMENTS
No term or condition of this Agreement shall be deemed to have been waived
nor shall there be any estoppel to enforce any provision of this Agreement
except by written instrument of the party charged with such waiver or estoppel.
No amendment or modification of this Agreement shall be deemed effective unless
and until executed in writing by the parties hereto.
ARTICLE XXII
MULTIPLE COUNTERPARTS
This Agreement may be executed in two (2) or more counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart.
EXECUTED by Pledgor and Secured Party effective the date and year first
above written.
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ADDRESS AND TELECOPY NUMBER PLEDGOR:
FOR NOTICES TO PLEDGOR:
▇▇▇ ▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ --------------------------------------
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
ADDRESS AND TELECOPY NUMBER SECURED PARTY:
FOR NOTICES TO SECURED PARTY: NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇. ▇. ▇▇▇▇▇, ▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ -----------------------------------
Its: President
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EXHIBIT "A"
TO
ASSIGNMENT AND SECURITY AGREEMENT
POWER OF ATTORNEY
FOR VALUE RECEIVED, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ hereby sells, assigns and transfers
unto North American Gaming and Entertainment Corporation the undersigned's
Membership Interest in OM Operating LLC (the "Company") representing 51% of the
aggregate Membership Interests and Sharing Ratios in the Company in the name of
the undersigned on the books of the Company represented by Member Certificate
No.__________ and hereby irrevocably constitutes and appoints North American
Gaming and Entertainment Corporation, attorney to transfer the said Membership
Interests and Sharing Ratios on the books of the Company with full power of
substitution in the premises.
DATED: April __, 1998.
_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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