MODIFICATION/CHANGE IN TERMS AGREEMENT
This Modification/Change in Terms Agreement ("MODIFICATION
AGREEMENT") is entered into the 23 day of October, 1998, by and
between Paul-Son Gaming Supplies, a Nevada corporation
("BORROWER") and Norwest Bank Nevada, N.A. ("BANK").
RECITALS
On or about November 14, 1997, Bank extended to
Borrower two loans. One loan was in the original principal amount
of One Million Eight Hundred Thousand And No/100 Dollars
($1,800,000.00) ("Credit Facility 1"), and a second loan was in
the original principal amount of One Million And No/100 Dollars
($1,000,000.00) ("Credit Facility 2").
Credit Facility 1 was evidenced by a Promissory Note
dated November 14, 1997 in the original principal amount of One
Million Eight Hundred Thousand And No/100 Dollars ($1,800,000.00)
("Note 1"). Credit Facility 2 was evidenced by a Promissory Note
dated November 14, 1997 in the original principal amount of One
Million And No/100 Dollars ($1,000,000.00) ("Note 2").
Notes 1 and 2 are secured, in part, by a Deed of Trust
dated November 14, 1997, and recorded on November 20, 1997 as
Instrument No. 00156 in Book 971120 of the official records of
the County Recorder of Clark County, Nevada (the "Deed of
Trust"). Notes 1 and 2 are also secured, in part, by that certain
Continuing Security Agreement dated November 14, 1997, executed
by Borrower in favor of Bank ("Security Agreement").
The terms of the loans evidenced by Notes 1 and 2 are
further governed by various documents, including, but not limited
to, that certain Letter Loan Agreement dated November 14, 1997
(the "Loan Agreement"). The Notes, the Deed of Trust, the Loan
Agreement, and the Continuing Security Agreement, and the other
documents executed in connection therewith are collectively
referred to hereinafter as the "Loan Documents."
Credit Facility 2 matures on October 31, 1998 ("Maturity
Date 2"), and the Borrower has asked that the Bank extend
Maturity Date 2, and to extend additional credit in the nature of
a third credit facility in favor of Borrower. The Bank is willing
to extend Maturity Date 2, and to provide additional financing in
the nature of a third credit facility for Borrower's use, subject
to the terms of this Modification Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Note 2 is amended to reflect the Maturity Date of Note
2 is extended to November 1, 1999.
2. The Loan Agreement is amended to reflect the following:
(a) A new section is inserted on page one which shall
read as follows:
CREDIT FACILITY 3: Borrower agrees to borrow from
Bank, and subject to the terms and conditions of
this Agreement and the other Loan Documents, Bank
agrees to loan, to or for the benefit of Borrower,
a sum not to exceed Five Hundred Thousand and
No/100 Dollars ($500,000.00) in the form of a
non-revolving term loan. Indebtedness arising
under Credit Facility 3 shall be evidenced by and
bear interest as provided in Bank's form of
promissory note, date October 23, 1998 ("Note 3"),
which shall be duly signed and delivered to Bank
by Borrower, and all notes taken in renewal or
modification of, additional to or in substitution
for it.
(b) A sentence is added to the "LOAN PURPOSES" section
on page one as follows:
The purpose of Credit Facility 3 is to provide
funds to purchase capital assets to be used in the
Borrower's manufacturing facility located in
Mexico.
(c) The "MATURITY DATES" section on page one is
amended to reflect that Maturity Date 2 is extended to
November 1, 1999. Further, a new sentence is added as
follows:
The Maturity Date of Credit Facility 3 is August
23, 2001 ("Maturity Date 3").
(d) The "INTEREST RATES" section on page one is
amended to reflect that the interest on Credit Facility
2 is now the Base Rate PLUS one-percent (1.00 %).
Further, a new sentence is added as follows:
Interest on Credit Facility 3 shall be calculated
at an annual rate equal to the Base Rate PLUS one
and three-quarters percent (1.75%), which rate is
variable and may change as often as daily.
(e) The "REPAYMENT" section on page two is amended to
add the following:
Credit Facility 3 shall be repaid in monthly
installments of $13,888.89 PLUS all interest
accrued and unpaid at the time of each monthly
installment, beginning on November 23, 1998, and
continuing on the twenty-third (23rd) day of each
month until Maturity Date 3. On Maturity Date 3,
all unpaid
2
principal, all accrued interest and all other fees
and charges shall be fully due and payable.
(f) The "COLLATERAL" section on page two is amended to
reflect that Credit Facility 3 shall be secured by the personal
property described in the Loan Agreement and the Continuing
Security Agreement, and by a second deed of trust on the real
property described in the Loan Agreement and the Deed of Trust.
(g) The "SIGNIFICANT COVENANTS" section is amended/
modified as follows:
- SUBSECTION (V) is amended and fully restated as
follows:
" within thirty (30) days of the end of each
month, provide an accounts receivables and
payables aging report (in a form acceptable
to Bank), and a schedule of contracts in
progress (containing such information
required by Bank), and a borrowing base
certificate (containing such information
requited by Bank and in a form acceptable to
Bank), all signed by an authorized financial
officer of Borrower."
- SUBSECTION (VIII) is deleted in its entirety.
- A NEW SUBSECTION "(xviii)" is added which shall
read as follows:
"during any calendar year in which this
Agreement is in effect (beginning on the date
of this Modification Agreement and continuing
through Maturity Date 2), Borrower shall pay
in full all outstanding principal and accrued
interest on Credit Facility 2 and shall
maintain a zero ($0.00) balance with respect
to Credit Facility 2 for a period of thirty
(30) consecutive days."
- A NEW SUBSECTION (ixx) is added which shall
read as follows:
"maintain at all times during the term of
this Agreement, a Minimum Cash Flow of 1.25x,
measured on a quarterly basis. Minimum Cash
Flow shall be calculated by determining the
following: (Net Profit plus depreciation)
divided by (prior period CPLTD, unfinanced
CAPEX plus dividends).
3
- A NEW SUBSECTION (xx) is added which shall read
as follows:
on an annual basis, on or before June 30 of
each year, provide information and access to
Bank to allow Bank to conduct an audit
regarding the value and sufficiency of the
collateral for the Credit Facilities, which
audit shall be at the expense of Borrower.
(h) A NEW SECTION is added to the Loan Agreement which
shall read as follows:
CROSS-DEFAULT/CROSS-COLLATERALIZATION: The Bank
and Borrower agree that a default in the
performance relating to any Credit Facility shall
be deemed a default of all Credit Facilities.
Additionally, Bank and Borrower agree that all the
collateral securing the obligations of one Credit
Facility shall secure the obligations of all
Credit Facilities, and Borrower grants to Bank a
security interest in all such collateral for such
purposes.
3. At the time of the execution of this Modification
Agreement by Borrower (except otherwise provided below), and as a
condition of extending the term of the Note 2 and the granting of
Credit Facility 3, Borrower shall pay to Bank a fee of $5000.00,
plus all fees and costs incurred by Bank in relation to this
Modification Agreement, including, without limitation, all legal
fees, recording fees, and title fees (including, without
limitation, the costs of any endorsements to any policies of
title insurance required by Bank, in its discretion), and all
other fees required under the Loan Documents.
4. Nothing contained in this Agreement shall be construed
to allow any third party to assume the rights or duties of
Borrower under the terms of the Loan Documents, as modified and
amended.
5. All terms not defined herein (or redefined herein)
shall have the meanings ascribed to those terms in the original
Loan Documents (as they may have previously been modified and
amended).
6. In the event that there is any conflict between the
terms of this Agreement and the terms of the Loan Documents (as
may have previously been modified or amended), the terms of this
Agreement shall prevail and be controlling. Except as
specifically provided herein, the terms of the Loan Documents
remain in full force and effect.
7. Borrower and Bank hereby confirm and agree that the
Deed of Trust shall continue to secure all obligations and
indebtedness of the Borrower created in relation to Credit
Facilities 1 and 2. No present or future rights, remedies,
benefits or powers belonging to the Bank, as beneficiary under
the Deed of Trust, or the trustee thereunder, whether arising
from Notes 1 and 2,
4
Deed of Trust or any other Loan Document, shall be affected,
prejudiced or restricted by this Agreement.
8. The Borrower and Bank both agree that all disputes,
claims and controversies between them, whether individual, joint,
or class in nature, arising from this Agreement, the Loan, the
Note or otherwise, including without limitation contract and tort
disputes, shall be arbitrated pursuant to the Rules of the
American Arbitration Association, upon request of either party.
No act to take or dispose of any collateral securing the Note (as
amended) shall constitute a waiver of this arbitration agreement,
or shall be prohibited by this arbitration agreement. This
includes, without limitation: obtaining injunctive relieve or a
temporary restraining order; invoking a power of sale under any
mortgage or deed of trust; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to
personal property, including taking or disposing of such
property, with or without judicial process, pursuant to Article 9
of the Nevada Uniform Commercial Code. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of any
act, or exercise of any right, concerning any collateral securing
the Note, shall also be arbitrated; provided, however, that no
arbitrator shall have the right or the power to enjoin or
restrain any act of any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitation,
estoppel, waiver, laches and other similar doctrines, which would
otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of
an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall
apply to the construction, interpretation, and enforcement of
this arbitration provision.
9. The provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
IN WITNESS WBEREOF, the parties have signed this Agreement
as of the date first above written.
BORROWER: BANK:
Paul-Son Gaming Supplies, Norwest Bank Nevada, N.A.
a Nevada corporation
By: /s/ Eric P. Endy By: /s/ Andrew B. George
--------------------------- ----------------------------
Eric P. Endy, C.O.O. Andrew B. George
Its: President Its: Managing Officer
5
ACKNOWLEDGMENT, CONSENT AND RATIFICATION OF GUARANTORS
The undersigned Guarantor hereby consent to the terms of
this Modification Agreement and acknowledge that its obligations
arising under the Guarantee dated November 14, 1997, remain
unaffected by the terms hereof. The undersigned Guarantor hereby
ratifies and reaffirms all of the terms of the Guarantee dated
November 14, 1997 and the Continuing Security Agreement signed by
Guarantor in connection therewith on November 14, 1997.
Paul-Son Gaming Corporation,
a Nevada corporation
By: /s/ Eric P. Endy
--------------------------
Eric P. Endy, C.O.O.
Its: President
Dated and effective as of the date first above written.
6
DISBURSEMENT REQUEST AND AUTHORIZATION
=============================================================================
Borrower: Paul-Son Gaming Supplies, Inc. Lender: Norwest Bank Nevada,
(TIN: 88-0126025) National Association
1700 Industrial Road Las Vegas Business
Las Vegas, NV 89102-2620 Banking, Market 1
3300 West Sahara Avenue
Div. 100
Las Vegas, NV 89102
=============================================================================
LOAN TYPE. This is a Variable Rate (1.750% over NORWEST BANK
MINNESOTA BASE, making an initial rate of 9.750%), Principal Plus
Interest Loan to a Corporation for $500,000.00 due on August 23,
2001.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
SPECIFIC PURPOSE. The specific purpose of this loan is: To
finance equipment to be used in Mexico.
FLOOD INSURANCE. As reflected on Flood Map No. 32003C 2170 D
dated 08-16-1995, for the community of Las Vegas, City Of, the
property that will secure the loan is not located in an area that
has been identified by the Director of the Federal Emergency
Management Agency as an area having special flood hazards.
Therefore, although flood insurance may be available for the
property, no special flood hazard insurance is required by law
for this loan.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan
proceeds will be disbursed until all of Lender's conditions for
making the loan have been satisfied. Please disburse the loan
proceeds of $500,000.00 as follows:
AMOUNT PAID TO BORROWER DIRECTLY: $500,000.00
$500,000.00 Deposited to Account # .
--------------
NOTE PRINCIPAL: $500,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as
agreed the following charges:
PREPAID FINANCE CHARGES PAID IN CASH: $0.00
OTHER CHARGES PAID IN CASH: $5,794.50
$5,000.00 Application Fee
$32.00 Flood Certification Fee
$150.00 UCC Search Fee (est.)
$70.00 Tax Services Contract
$542.50 Attorney Fee
--------------
TOTAL CHARGES PAID IN CASH: $5,794.50
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED
ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL
ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN
BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED OCTOBER 23, 1998.
BORROWER:
PAUL-SON GAMING SUPPLIES, INC.
BY: /s/ Eric P. Endy
-----------------------------
ERIC P. ENDY, EXECUTIVE VICE
PRESIDENT/COO/SECRETARY/DIRECTOR
=============================================================================
[NEVADA TITLE COMPANY LETTERHEAD]
ESCROW DISCLAIMER
=================
TO: NEVADA TITLE COMPANY
RE: 98-10-1654 SBD
DATE: NOVEMBER 2, 1998
The undersigned parties acknowledge that the Escrow Agent's
function is to be a disinterested third party, taking mutual
instructions from the parties to a transaction for preparation of
documentation to complete the principals' prior agreements.
The Escrow Agent is NOT AN ATTORNEY and CANNOT ADVISE the parties
as to any legal business, regulations, disclosure requirements,
or tax consequences of any provisions or instrument set forth or
prepared in connection with this transaction. The undersigned
have read and understand each document to which we have affixed
our signature and have authorized and instructed Escrow Agent in
the manner in which any blanks remaining in said forms are to be
completed.
With regard to any questions we may have had pertaining to the
Escrow Instructions, the Escrow Agent's role or participation in
this escrow, or to the role of the Real Estate Broker, if any, we
have received sufficient explanation. We understand that the
subject escrow shall close in accordance with the matters set
forth on the documents we have executed.
With regard to any questions we may have had pertaining to the
new loan being obtained, if any, we have been made aware that the
loan documents were not generated by Nevada Title Company, and
that we have received sufficient explanation from the lender
providing said loan.
DO NOT AFFIX YOUR SIGNATURES BELOW UNTIL YOU HAVE READ AND AGREED
WITH THE MATTERS SET FORTH ABOVE. SHOULD YOU STILL HAVE QUESTIONS
WITH REGARD TO THE ABOVE, YOU ARE ADVISED TO SEEK THE ADVICE OF
AN INDEPENDENT LEGAL COUNSEL.
SELLERS BUYERS
PAUL-SON GAMING SUPPLIES, INC.
/s/ Eric P. Endy, C.O.O.
------------------------------
/s/ John M. Garner, C.F.O.
------------------------------
[NEVADA TITLE COMPANY LETTERHEAD]
TO: NEVADA TITLE COMPANY
RE: 98-10-1654 SBD
DATE: NOVEMBER 2, 1998
COMPLIANCE AGREEMENT
In the event a post-closing or post-disbursement adjustment is
necessary by an entity involved with this escrow transaction, the
undersigned authorizes Nevada Title Company to, if immediate
action be necessary, advance funds on their behalf to effect an
accurate closing settlement. The undersigned, upon notification,
and the opportunity to investigate such advances, agrees to fully
cooperate and pay to Nevada Title Company any and all funds so
advanced on their behalf.
DEMAND STATEMENTS, FEES, RECONVEYANCE FEES
Escrow Agent is directed to file the necessary Trust Deeds and
other instruments and pay any encumbrance which a title search
reveals against the subject property, except as set forth herein.
Nevada Title Company is authorized and directed to pay said
encumbrances as directed by the lienholder thereof, acting solely
upon the written direction of such lienholder, and it is
expressly understood and agreed that Nevada Title Company assumes
no liability for the accuracy of any such statement or direction.
NOTWITHSTANDING ANY PROVISION IN THE TRUST DEEDS BEING PAID OFF
THROUGH THIS TRANSACTION, NEVADA TITLE COMPANY SHALL CHARGE A
TRUSTEE FEE AS MAY BE REQUIRED TO RECONVEY THE TRUST DEED OF
RECORD. Escrow Agent is expressly authorized to charge to the
account of the party obligated to pay same, any charge or expense
incurred in connection with this transaction or the terms
thereof. Escrow Agent is further directed and authorized to
reimburse itself for any charges which it may incur during this
escrow by charging such amount to the party obligated to pay
same.
BORROWERS
PAUL-SON GAMING SUPPLIES, INC.
/s/ Eric P. Endy, C.O.O.
------------------------------
/s/ John M. Garner, C.F.O.
------------------------------
PROMISSORY NOTE
==================================================================
Borrower: Paul-Son Gaming Supplies, Inc. Lender: Norwest Bank of Nevada, National Association
(TIN: 88-0126025) Las Vegas Business Banking, Market 1
1700 Industrial Road 3300 West Sahara Avenue
Las Vegas, NV 89102-2620 Div. 100
Las Vegas, NV 89102
==================================================================
Principal Amount: $1,000,000.00 Initial Rate: 9.750% Date of Agreement: October 23, 1998
PROMISE TO PAY. Paul-Son Gaming Supplies, Inc. ("Borrower")
promises to pay to Norwest Bank Nevada, National Association
("Lender"), or order, in lawful money of the United States of
America, the principal amount of Five Hundred Thousand & 00/100
Dollars ($500,000.00), together with interest on the unpaid
principal balance from October 23, 1998, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes
in the Index, Borrower will pay this loan in 33 principal
payments of $13,888.89 each and one final principal and interest
payment of $42,016.46. Borrower's first principal payment is due
November 23, 1998, and all subsequent principal payments are due
on the same day of each month after that. In addition, Borrower
will pay regular monthly payments of all accrued unpaid interest
due as of each payment date. Borrower's first interest payment
is due November 23, 1998, and all subsequent interest payments
are due on the same day of each month after that period.
Borrower's final payment due August 23, 2001, will be for all
principal and accrued interest not yet paid. The annual interest
rate for this Note is computed on a 365/360 basis; that is, by
applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing.
Unless otherwise agreed or required by applicable law, payments
will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Note is
subject to change from time to time based on changes in an index
which is the NORWEST BANK MINNESOTA BASE (the "Index"). The
Index is not necessarily the lowest rate charged by Lender on its
loans and is set by Lender in its sole discretion. If the Index
becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender
will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based
on other rates as well. The interest rate change will not occur
more often than each DAY. The Index currently is 8.000% per
annum. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate of 1.75 percentage points
over the Index, resulting in an initial rate of 9.750% per annum.
NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower or
Borrower's obligation to continue to make payments under the
payment schedule. Rather, they will reduce the principal balance
due and may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 15 days or more late, Borrower will
be charged 5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this Note
or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Any representation or
statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect
either now or at the time made or furnished. (d) Borrower become
insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (e)
Any creditors tries to take any of Borrower's property on or in
which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (f) Any
guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this
Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment
or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted
under applicable law, do one or both of the following: (a)
Increase the variable interest rate on this Note to 18.000% per
annum, and (b) add any unpaid accrued interest to principal and
such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). The
interest rate will not exceed the maximum rate permitted by
applicable law. This Note has been delivered to Lender and
accepted by Lender in the State of Nevada. If there is a lawsuit
Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Clark County, the State of Nevada
(Initial Here EPE). Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the
other. This Note shall be governed by and construed in
accordance with the laws of the State of Nevada.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else
and all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for
which a grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any
and all such accounts.
ARBITRATION. Except for "Core Proceedings" under the United
States Bankruptcy Code, the Bank and the Borrower agree to submit
to binding arbitration all claims, disputes and controversies
between or among them, whether in tort, contract or otherwise
(and their respective employees, officers, directors, attorneys,
and other agents) arising out of or relating to in any way (i)
the loan and related loan and security documents which are the
subject of this Agreement and its negotiation, execution,
collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code); and (iii) be
conducted in accordance with the Commercial Arbitration rules of
the American Arbitration Association ("AAA").
The arbitration requirement does not limit the right of either
party to (i) foreclosure against real or personal property
collateral; (ii) exercise self-help remedies relating to
collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provision ancillary remedies such
as replevin, injunctive relief, attachment or the appointment of
a receiver, before during or after the pendency or any
arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of either party to submit any
dispute to arbitration, including those arising from the exercise
of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
Any arbitration proceeding will be before a single arbitrator
selected according to the Commercial Arbitration Rules of the
AAA. The arbitrator will be a neutral attorney who has practiced
in the area of commercial law for a minimum of ten years. The
arbitrator will determine whether or not an issue is arbitratable
and will give effect to the statutes of limitations in
determining any claim. Judgment upon the award rendered by the
arbitrator may be
10-23-1998 PROMISSORY NOTE Page 2
Loan No. 227529-9002 (Continued)
=================================================================
entered in any court having jurisdiction.
MOTION PRACTICE. In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are
similar to motions to dismiss for failure to state a claim or
motions for summary adjudication.
DISCOVERY. In any arbitration proceeding discovery will be
permitted and will be governed by the Nevada Rules of Civil
Procedure. All discovery must be completed no later than 20 days
before the hearing date and within 180 days of the commencement
of arbitration proceedings. Any requests for any extension of
the discovery periods, or any discovery disputes, will be subject
to final determination by the arbitrator upon a showing that the
request for discovery is essential for the party's presentation
and that no alternative means for obtaining information is
available.
PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall
award costs and expenses of the arbitration proceeding in
accordance with provisions of the loan agreement, promissory note
and/or other loan documents.
GENERAL PROVISIONS. Lender may delay or forego enforcing any of
its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive presentment,
demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser shall be
released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent
of or notice to any other than the party with whom the
modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISION. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Paul-Son Gaming Supplies, Inc.
By: /s/ Eric P. Endy
Eric P. Endy, Executive Vice President
/COO/Secretary & Director
=================================================================
CHANGE IN TERMS AGREEMENT
=================================================================
Borrower: Paul-Son Gaming Supplies, Inc. Lender: Norwest Bank of Nevada, National Association
(TIN: 88-0126025) Las Vegas Business Banking, Market 1
1700 Industrial Road 3300 West Sahara Avenue
Las Vegas, NV 89102-2620 Div. 100
Las Vegas, NV 89102
==================================================================
Principal Amount: $1,000,000.00 Date of Agreement: October 23, 1998
DESCRIPTION OF EXISTING INDEBTEDNESS. THE UNDERSIGNED IS
INDEBTED TO NORWEST BANK NEVADA, NATIONAL ASSOCIATION,
("LENDER"), AS EVIDENCED BY A PROMISSORY NOTE DATED NOVEMBER 14,
1997, IN THE FACE AMOUNT OF $1,000,000.00, HAVING AN UNPAID
PRINCIPAL BALANCE OF $850,000.00, WITH INTEREST ACCRUED TO
OCTOBER 22, 1998, IN THE AMOUNT OF $6,876.72.
DESCRIPTION OF CHANGE IN TERMS. LENDER HEREBY EXTENDS THE
MATURITY DATE TO NOVEMBER 1, 1999.
ALL TERMS AND CONDITIONS OF THE LETTER/LOAN AGREEMENT DATED
NOVEMBER 14, 1997 SHALL REMAIN IN FULL FORCE AND EFFECT EXXCEPT
AS MODIFIED WITHIN THIS PARAGRAPH OF THIS CHANGE IN TERMS
AGREEMENT.
EFFECTIVE THIS DATE, LENDER AMENDS THE INTEREST RATE TO BASE RATE
+ 1% PER ANNUM AS FURTHER DESCRIBED BELOW.
PROMISE TO PAY. Paul-Son Gaming Supplies, Inc. ("Borrower")
promises to pay to Norwest Bank Nevada, National Association
("Lender"), or order, in lawful money of the United States of
America, the principal amount of One Million and 00/100 Dollars
($1,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on
November 1, 1999. In addition, Borrower will pay regular monthly
payments of accrued unpaid interest beginning November 23, 1998,
and all subsequent interest payments are due on the same day of
each month after that. The annual interest rate for this
Agreement is computed on a 365/360 basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be
applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Agreement is
subject to change from time to time based on changes in an index
which is the NORWEST BANK MINNESOTA BASE (the "Index"). The
Index is not necessarily the lowest rate charged by Lender on its
loans and is set by Lender in its sole discretion. If the Index
becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender
will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based
on other rates as well. The interest rate change will not occur
more often than each DAY. The index currently is 8.000% per
annum. The interest rate to be applied to the unpaid principal
balance of this Agreement will be at a rate of 1.000 percentage
point over the Index, resulting in an initial rate of 9.000% per
annum. NOTICE: Under no circumstances will the interest rate on
this Agreement be more than the maximum rate allowed by
applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance
due.
LATE CHARGE. If a payment is 15 days or more late, Borrower will
be charged 5.000% of the regularly schedule payment.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any
other agreement or loan Borrower has with Lender. (c) Any
representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished.
(d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by
Borrower or against Borrower under any bankruptcy or insolvency
laws. (e) Any creditor tries to take any of Borrower's property
on or in which Lender has a lien or security interest. This
includes a garnishment of any of Borrower's accounts with Lender.
(f) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this
Agreement. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment
or performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Agreement and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted
under applicable law, do one or both of the following: (a)
increase the variable interest rate on this Agreement to 18.000%
per annum, and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate
provided in this Agreement (including any increased rate). The
interest rate will not exceed the maximum rate permitted by
applicable. This Agreement has been delivered to Lender and
accepted by Lender in the State of Nevada. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Clark County, the State of Nevada
(Initial Here EPE). Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This
agreement shall be governed by and construed in accordance with
the laws of the State of Nevada.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else
and all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for
which the grant of a security interest would be prohibited by
law. Borrower authorizes Lender, to the extend permitted by
applicable law, to charge or setoff all sums owing on this
Agreement against any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of
credit. Advances under this Agreement may be requested either
orally or in writing by Borrower or by an authorized person.
Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed
to Lender's office shown above. The following party or parties
are authorized to request advances under the line of credit until
Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: Eric P. Endy.
Borrower agrees to be liable for all sums either: (a) advanced
in accordance with the instructions of an authorized person or
(b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Agreement at any time may
be evidenced by endorsements on this Agreement or by Lender's
internal records, including daily computer print-outs. Lender
will have no obligation to advance funds under this Agreement if:
(a) Borrower or any guarantor is in default under the terms of
this Agreement or any agreement that
10-23-1998 CHANGE IN TERMS AGREEMENT Page 2
Loan No. 227529/9003 (Continued)
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Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Agreement;
(b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts
to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Agreement for purposes
other than those authorized by Lender.
CONTINUING VALIDITY. Except as expressly changed by this
Agreement, the terms of the original obligation or obligations,
including all agreements evidenced or securing the obligation(s),
remain unchanged and in full force and effect. Consent by Lender
to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender
to make any future change in terms. Nothing in this Agreement
will constitute a satisfaction of the obligation(s). It is the
intention of Lender to retain as liable parties all makers and
endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in
writing. Any maker or endorser, including accommodation makers,
will not be released by virtue of this Agreement. If any person
who signed the original obligation does not sign this Agreement
below, then all persons signing below acknowledge that this
Agreement is given conditionally, based on the representation to
Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by
it. The waiver applies not only to any initial extension,
modification or release, but also to all such subsequent actions.
ARBITRATION. Except for "Core Proceedings" under the United
States Bankruptcy Code, the Bank and the Borrower agree to submit
to binding arbitration all claims, disputes and controversies
between or among them, whether in tort, contract or otherwise
(and their respective employees, officers, directors, attorneys,
and other agents) arising out of or relating to in any way (i)
the loan and related loan and security documents which are the
subject of this Agreement and its negotiation, execution,
collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code); and (iii) be
conducted in accordance with the Commercial Arbitration rules of
the American Arbitration Association ("AAA").
The arbitration requirement does not limit the right of either
party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to
collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional ancillary remedies such
as replevin, injunctive relief, attachment or the appointment of
a receiver, before, during or after the pendency or any
arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of either party to submit any
dispute to arbitration, including those arising from the exercise
of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
Any arbitration proceeding will be before a single arbitrator
selected according to the Commercial Arbitration Rules of the
AAA. The arbitrator will be a neutral attorney who has practiced
in the area of commercial law for a minimum of ten years. The
arbitrator will determine whether or not an issue is arbitratable
and will give effect to the statutes of limitation in determining
any claim. Judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction.
MOTION PRACTICE. In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are
similar to motions to dismiss for failure to state a claim or
motions for summary adjudication.
DISCOVERY. In any arbitration proceeding discovery will be
permitted and will be governed by the Nevada Rules of Civil
Procedure. All discovery must be completed no later than 20 days
before the hearing date and within 180 days of the commencement
of arbitration proceedings. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to
final determination by the arbitrator upon a showing that the
request for discovery is essential for the party's presentation
and that no alternative means for obtaining information is
available.
PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall
award costs and expenses of the arbitration proceeding in
accordance with the provisions of the loan agreement, promissory
note and/or other loan documents.
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing
any of its rights or remedies under this Agreement without losing
them. Borrower and any other person who signs, guarantees or
endorses this Agreement, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless
otherwise expressly stated in writing, no party who signs this
Agreement, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties
agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST
RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT
AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
Paul-Son Gaming Supplies, Inc.
By: /s/
Eric P. Endy, Executive Vice President/
COO/Secretary and Director
LENDER:
Norwest Bank Nevada, National Association
By: /s/
Authorized Officer
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