Exhibit 10.42

 

Johan P. Finley

 

 

February 24, 2004

 

 

PDS Gaming Corporation
6171 McLeod Drive
Las Vegas, Nevada 89120

 

Re:          Guaranty dated February 24, 2004 (“Guaranty) of Promissory Note
dated February 24, 2004 in the amount of $7,691,796 (“Note”) and Collateral
Documents; PDS Gaming Corporation, PDS Gaming Corporation-Nevada, PDS Gaming
Corporation-Mississippi, and PDS Gaming Corporation-Colorado (jointly and
severally “Borrower”); First State Bank of Thermopolis (“Lender”); Johan P.
Finley (“Guarantor”)

 

Gentlemen:

 

This letter sets forth the agreement between Borrower and Guarantor with respect
to the above-referenced Note.  If the following terms and conditions meet with
your approval, please sign this letter where indicated below and return the
original to me.  Capitalized terms used herein have the meanings ascribed to
them in the Guaranty.

 

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Guarantor agree as follows:

 

1.                                       Indemnification.

 

Borrower agrees to indemnify and hold harmless Guarantor from and against any
and all losses, claims, damages, liabilities and expenses (including without
limitation and as incurred reasonable costs of investigating, preparing or
defending any such claim or action, including attorneys’ fees and legal costs
and accountants’ fees and costs) arising out of, or in connection with, the
Guaranty.  Borrower will not, however, be responsible for any claims,
liabilities, losses, damages or expenses that have resulted solely from
Guarantor’s willful misconduct or gross negligence.  In case any action is
brought against Guarantor with respect to which indemnity may be sought against
Borrower, Guarantor will promptly notify Borrower in writing and Borrower will,
if requested by Guarantor, assume the defense thereof, including the employment
of counsel reasonably satisfactory to Guarantor and payment of all reasonable
fees and expenses, including without limitation and as incurred legal fees and
costs and accountants’ fees and costs.  The failure to so notify Borrower shall
not affect any obligations Borrower may have to

 

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Guarantor pursuant to this letter agreement or otherwise, except to the extent
that Borrower is materially adversely affected and irreparably prejudiced by
such failure.

 

The indemnification, contribution and expense reimbursement obligations set
forth herein shall be in addition to any liability Borrower may have to
Guarantor at common law or otherwise and shall survive the conclusion of the
Guaranty in connection with the Note.

 

2.                                       Disposition of Assets

 

In case of any Event of Default on the part of Borrower, which remains uncured
after applicable notice and the expiration of time to cure as provided in the
Note and Collateral Documents, Guarantor has the right to dispose of the assets
of Borrower as required to satisfy the Note and all sums due thereunder
including without limitation the costs of collection, fees, charges, and accrued
and unpaid interest whether at the Note rate or any accelerated rate due at
default or maturity, notwithstanding anything to the contrary set forth in the
Note or Collateral Documents.

 

3.                                       Fees for Guaranty

 

For and in exchange for the Guaranty made by Guarantor, Borrower agrees to pay
to Guarantor each year that lump sum equal to two percent (2.00%) of the
Principal outstanding as of March 1.   The first such payment will be made on or
about March 1, 2004, and each annual lump sum payment thereafter will be due and
payable on March 1 of each following year until the Note is cancelled.  The Fees
will be prorated for any partial year.

 

4.                                       Legal Fees and Costs

 

Borrower agrees that it will pay the legal fees and costs incurred by Borrower
and Guarantor in connection with the provision of the Guaranty.  Borrower and
Guarantor acknowledge and agree that the legal fees and costs contemplated by
this paragraph 4 are additional to those fees and costs contemplated in the
Indemnification set forth in paragraph 1, above.

 

5.                                       Miscellaneous

 

(a)                                  Non-waiver.  No delay or failure of
Guarantor in exercising any right, remedy, power or privilege hereunder shall
affect such right, remedy, power or privilege, nor shall any single or partial
exercise thereof preclude the exercise of any other right, remedy, power or
privilege.

 

(b)                                 Delay.  No delay or failure of Guarantor at
any time to demand strict adherence to the terms hereof shall be deemed to
constitute a course of conduct inconsistent with Guarantor’s right at any time,
before or after any Event of Default, to demand strict adherence to the terms
hereof.

 

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(c)                                  Governing Law.  This letter of agreement
shall be interpreted and the rights of the parties hereunder shall be determined
under the laws of the State of Nevada.

 

(d)                                 Invalidity.  Should any part, term or
provision of this letter of agreement be decided, by a court of competent
jurisdiction, to be illegal or in conflict with any law, the validity of the
remaining portions or provisions of this letter of agreement shall not be
affected thereby.

 

(e)                                  Notices.   Any notices required to be given
hereunder by one party to the other shall be deemed effectively given if
delivered to the other party at that party’s last known address by overnight
courier with proof of delivery, by certified mail return receipt requested,
confirmed facsimile transmission, or if delivered by hand.

 

If the foregoing terms and conditions meet with your approval, please sign this
letter where indicated below and return the original to me.

 

Sincerely,

 

/s/ Johan P. Finley

 

Johan P. Finley

 

 

ACCEPTED AND AGREED TO this 24th day of March, 2004.

 

 

 

PDS Gaming Corporation, PDS Gaming

 

Corporation-Nevada, PDS Gaming

 

Corporation-Mississippi, PDS Gaming

 

Corporation-Colorado

 

 

 

By

/s/ Peter D. Cleary

 

 

 

Peter D. Cleary, President

 

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