Exhibit 10.40


 


PROMISSORY NOTE


 


	
  $7,691,796.00
  (U.S.)

  	
   

  	
  Las Vegas,. Nevada

  
	
   

  	
   

  	
  Dated: February 24, 2004

  



 


FOR VALUE
RECEIVED, PDS GAMING CORPORATION, a Minnesota corporation (“PDS”), PDS GAMING CORPORATION-NEVADA, a Nevada
corporation (“PDS-NV”), PDS GAMING CORPORATION-MISSISSIPPI, a
Mississippi corporation (“PDS-MS”), and PDS GAMING CORPORATION-COLORADO, a
Colorado corporation (“PDS-CO”)  jointly and severally (PDS, PDS-NV,
PDS-MS and PDS-CO are collectively referred to herein as the “Undersigned”),  agree
and promise to pay to the order of FIRST STATE BANK OF THERMOPOLIS, a state
chartered bank (the “Lender”),  its endorsees, successors, participants
and assigns (collectively, the “Holder”),  at its principal office at 435 Arapahoe,
Thermopolis, Wyoming 82443-1232, or at such other place as the Holder may from
time to time designate, the principal sum of Seven Million Six Hundred Ninety One
Thousand Seven Hundred Ninety Six and 00/100 Dollars ($7,691,796.00)
or so much as may from time to time be disbursed hereon in accordance with the
terms of the Loan Agreement, together with interest on the Principal Balance at
the rate of interest hereinafter set forth, in coin or currency, which, at the
time or times of payment, is legal tender for the payment of public and private
debts in the United States of America. The terms of this Note shall be read to
the extent possible in a manner consistent with the terms of the Loan Agreement
(defined below), but in the case of a conflict between the terms of this Note
and the Loan Agreement, the terms of this Note shall control. This Note shall
be payable in the following manner and on all the following terms and at the
following times:


 


1.                                      DEFINITIONS.  For purposes of this Note the
following terms shall have the following meanings:


 


a.                                      “Default” shall have the meaning given to such term in Section 10
below.


 


b.                                      “Default Rate”  shall have the meaning given to such term
in Section 3(b) below.


 


c.                                       “Installment Payment Date”  shall have the meaning given to such term in
Section 7 below.


 


d.                                      “Loan”  shall mean the Loan defined in the Loan Agreement,
evidenced by the Note.


 


e.                                       “Loan Agreement”  shall mean the Loan Agreement of even date entered into
between the Undersigned, as Borrower, and Lender, wherein Lender has agreed to
loan to the Undersigned the Principal of this Note subject to compliance with
the terms and conditions of such agreement.


 


f.                                         “Maturity Date”  shall mean March 1, 2007.


 

















 


g.                                      “Note” shall mean this Note and any other promissory note
evidencing the Loan.


 


h.                                      “Principal Balance”  shall mean the Principal from time to time outstanding
and unpaid on this Note.


 


i.                                         “Participation Agreement”  shall mean the Loan Participation and
Servicing Agreement of even date herewith between Lender and all Buyers, as
such term is defined in the Participation Agreement, as the same may be amended
or supplemented from time to time in accordance with its terms.


 


j.                                         “Required Payment Amount”  shall have the meaning given to such term in
the Loan Agreement.


 


Terms
not defined herein or elsewhere in this Note shall have the same meaning as
defined in the Loan Agreement.


 


2.                                      DISBURSEMENTS.  Disbursements under this Note are to be made
pursuant to the terms and conditions of the Loan Agreement.


 


3.                                      INTEREST RATE. The Principal Balance of this Note outstanding
at the close of each day shall bear interest at the following per annum rates
of interest:


 


a.                                      Loan Rate. From
and after the date of the initial advance, this Note shall bear interest at a
definite and certain per annum rate of interest equal to eight and one quarter percent (8.25%).


 


b.                                      Default Rate. If a Default (as later defined) occurs under this Note then, at the
option of the Holder hereof, during the entire period during which such Default
shall occur and be continuing interest shall be payable on the Principal
Balance at a per annum rate of interest equal to the lesser of (i) the maximum
lawful rate of interest permitted to be paid on this Note or (ii) Four Percent
(4.00%) plus the Loan Rate (“Default Rate”) whether or not the Holder has exercised
its option to accelerate the maturity of this Note and declare the entire
Principal Balance due and payable.


 


4.                                      BASIS OF COMPUTATION. Interest shall be computed and charged on the
basis the actual number of days elapsed and a 365/360 day year. Interest shall
commence as to the Principal Balance as such Principal Balance is advanced.


 


5.                                      LATE CHARGE. In the event that any payment required
hereunder is not paid when due, the Undersigned agrees to pay a late charge of
$.04 per $1.00 of unpaid payment to defray the costs of the Holder incident to
collecting such late payment. This late charge shall apply individually to all
payments past due and there will be no daily pro rata adjustment. This
provision shall not be deemed to excuse a late payment or be deemed a waiver of
any other rights the Holder may have including the right to declare the entire
Principal Balance and interest immediately due and payable.


 


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6.                                      TERMS OF PAYMENT.  This Note shall be payable as follows:


 


a.                                      Beginning on April 1, 2004, and on
the 1st day of each calendar month thereafter, (each an “Installment Payment Date”)  thirty six (36)
monthly installments of principal and interest in the amount of Two Hundred
Forty Two Thousand Seven Hundred Sixteen and 57/100ths Dollars ($242,716.57),
then in the thirty sixth (36th) month, in addition to the final
payment of principal and interest all accrued and unpaid interest and other
charges, if any, shall be due and payable.


 


b.                                      The Principal Balance shall be payable on the
earlier to occur of the


 


following:


 


i.                                         The Maturity Date; or


 


ii.                                     Such earlier date as to which payment shall
have been accelerated by virtue of the occurrence of an Event of Default
hereunder;


 


at
which time the entire Principal Balance and all accrued and unpaid interest
thereon, and all other charges payable pursuant to the terms hereof shall in
any event be fully due and payable.


 


7.                                      APPLICATION OF PAYMENTS. So long as a Default does not exist, all
payments shall be applied first to any costs of collection, then to late
charges, then to interest and then to the Principal Balance, and all accrued
unpaid interest thereon, except that if any advance made by Lender on behalf of
the Holder under the terms of any instruments securing this Note is not repaid,
any monies received, at the option of Lender, may first be applied to repay
such advances, plus interest hereon, and the balance, if any, shall be applied
as above. If a Default exists, Lender may apply any payments received on this
Note to the Principal Balance, interest, late charges or other amounts due from
the Undersigned in such order as Lender, in its sole discretion shall
determine.


 


8.                                      PREPAYMENT. At the option of the Borrower, the Principal
Balance may be prepaid, in full or in minimum amounts of $250,000 or more, such
voluntary prepayments may be made on any payment date provided that there has
been a fifteen (15) days prior express written notice and plus the following
prepayment premium (“Premium”) amounts, paid in addition to the amount prepaid:
Loan Year One – Prepayment plus a 2% Premium on the then outstanding Principal
Balance of this Note; Loan Year Two – Prepayment plus a 1% Premium on the then
outstanding Principal Balance of this Note; and Loan Year Three – None (pay at
par, after notice). Amounts paid or prepaid under this Note may not be
reborrowed. Prepayments will be applied in the inverse order of maturity.  Prepayment that are directly from proceeds
of collateral contract payoffs, or are required under the credit facility to
meet minimum collateral coverage or minimum debt coverage covenants, will not
be subject to a Premium.


 


9.                                      SECURITY. The payment and performance of this Note is
secured by the Security Agreement and other security instruments each of even
date herewith given by the Undersigned to the Lender, each encumbering certain
assets of the Undersigned.


 


10.                               DEFAULT. If (i) a default be made in any payment when
due in accordance with the terms and conditions of this Note and continues for
a period of five (5) days after such payment becomes due, (ii) an Event of
Default (as defined herein and therein) occurs under this


 


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Note, or (iii) an Event
of Default (as defined therein) occurs -under the Loan Agreement (any of the
events described in clauses (i), (ii), and (iii) above are herein singularly
and collectively referred to as a “Default”), the entire Principal Balance together with
accrued interest thereon and late charges, if any, shall become immediately due
and payable at the option of Lender, exercised as provided for in the
Participation Agreement.


 


11.                               TIME OF ESSENCE.  Time is of the essence. No delay or omission
on the part of the Holder or Lender in exercising any right hereunder shall operate
as a waiver of such right of any other remedy under the Loan Agreement or this
Note. A waiver on any one occasion shall not be construed as a bar to or waiver
of any such right or remedy on a future occasion.


 


12.                               COSTS OF COLLECTION.  In the event of any Default hereunder the
Undersigned agrees to pay the costs of collection including court costs,
arbitration proceedings, and reasonable attorney’s fees (prior to trial, at
trial, and on appeal) incurred by Lender in collecting the indebtedness secured
hereby, or in exercising or defending, or obtaining the right to exercise, the
rights of Lender or any Participant hereunder or under any of the Loan
Documents (as defined in the Loan Agreement).


 


13.                               WAIVER OF PRESENTMENT, ETC.  Presentment
for payment, protest and notice of non-payment are waived. Consent is given to
any extension or alteration of the time or terms of payment hereof, any
renewal, any release of all or any part of the security given for the payment
hereof, any acceptance of additional security of any kind, and any release of,
or resort to, any party liable for payment hereof.


 


14.                               SAVINGS CLAUSE.  Notwithstanding anything to the contrary set
forth in this instrument, if at any time until payment in full of all of the
indebtedness due hereunder, the interest rate on such indebtedness exceeds the
highest rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto (the “Maximum Lawful  Rate”),
then in such event and so long as the Maximum Lawful Rate would be so exceeded,
the interest rate shall be equal to the Maximum Lawful Rate; provided,  however,
that if at any time thereafter the interest rate is less than the Maximum
Lawful Rate, the Undersigned shall continue to pay interest hereunder at the
Maximum Lawful Rate until such time as the total interest received by the
Holder from the making of advances hereunder is equal to the total interest
which the Holder would have received had the interest rate been (but for the operation
of this paragraph) the interest rate payable since the initial funding of the
Loan. Thereafter, the interest rate payable hereunder shall be the interest
rate provided for in this instrument unless and until the interest rate so
provided for again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by
the Holder pursuant to the terms hereof exceed the amount which such Holder
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this paragraph, shall
make a final determination that the Holder has received interest in excess of
the Maximum Lawful Rate, the Holder shall, to the extent permitted by
applicable law, promptly apply such excess first to any interest due and not
yet paid under this instrument, then to the outstanding Principal Balance due
under this instrument, then to other unpaid indebtedness and thereafter shall
refund any excess to Undersigned or as a court of competent jurisdiction may
otherwise order.


 


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15.                               USE OF PROCEEDS.  The Undersigned warrants and represents that
all funds advanced under this Note shall be applied and are intended solely for
the purposes set forth in the Loan Agreement and not for any personal, family
or household purposes.


 


16.                               GOVERNING LAW; JURISDICTION.  The
obligation evidenced by this Note was negotiated, delivered and accepted in the
State of Nevada, the laws of which state shall in all respects be controlling
in the interpretation and validity of this Note and all obligations evidenced
hereby. The Undersigned hereby submits itself to the jurisdiction of the State
of Nevada, and the federal courts of the United States located in such state in
respect of all actions arising out of or in connection with the interpretation
or enforcement of this Note and the documents related hereto.


 


17.                               PARTICIPATION AGREEMENT.  This Note evidences the debt of each of the
Undersigned with respect to the Loan, and is secured by the Security Agreement.
Any payment of principal or interest, or premiums or penalty on this Note shall
be paid to Lender. Notwithstanding any other provision herein or in the Loan
Agreement, this Note and all rights hereunder shall be subject always to the
terms of the Participation Agreement, regardless of any transfer, assignment or
endorsement of this Note.


 


18.                               JOINT AND SEVERAL LIABILITY.  Each of
the Undersigned agrees that it is liable, jointly and severally with each other
Undersigned, for the payment of this Note and all other obligations of the
Undersigned under the Loan Agreement, and that the Holder can enforce such
obligations against any Undersigned, in the Holder’s sole and unlimited
discretion. Without in any way limiting the generality of the foregoing, each
of the Undersigned acknowledges and agrees to the provisions of the Loan
Agreement and by this reference hereby incorporates such provisions herein as
though expressly set forth herein.


 


19.                               WAIVER OF JURY TRIAL.  The Undersigned hereby irrevocably waives any
and all right to trial by jury in any legal proceeding arising out of or
relating to this Note or any of the documents executed in connection therewith
or the transactions contemplated hereby or thereby.


 


[Signatures
on next page]


 


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Executed
as of the date first above written.


 


	
  “PDS”

  	
  “PDS-NV”

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDS GAMING CORPORATION

  	
  PDS GAMING CORPORATION-

  NEVADA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Peter D. Cleary

  	
   

  	
  By:

  	
  /s/
  Peter D. Cleary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
  Peter
  D. Cleary

  	
   

  	
  Print
  Name:

  	
  Peter
  D. Cleary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  President

  	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  “PDS-CO”

  	
  “PDS-MS”

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDS GAMING CORPORATION-

  COLORADO

  	
  PDS GAMING CORPORATION-

  MISSISSIPPI

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Peter D. Cleary

  	
   

  	
  By:

  	
  /s/
  Peter D. Cleary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
  Peter
  D. Cleary

  	
   

  	
  Print
  Name:

  	
  Peter
  D. Cleary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  President

  	
   

  	
  Its:

  	
  President

  	
   

  
																								



 


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