Document:

Exhibit
10.45

 

 

LOAN AGREEMENT

 

 

Dated as of March 11,
2004

 

by and among

 

 

PDS GAMING CORPORATION

PDS GAMING CORPORATION – NEVADA

PDS GAMING CORPORATION – COLORADO

and

PDS GAMING CORPORATION – MISSISSIPPI,

as Borrowers

 

 

THE
LENDERS SIGNATORY HERETO

 

FROM
TIME TO TIME,

as Lenders

 

 

COCHRAN ROAD, LLC,

as Agent

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  AMOUNT AND TERMS OF LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Loan.

  	
   

  
	
  Section 2.2

  	
   

  	
  Prepayment; Lender Prepayment Option.

  	
   

  
	
  Section 2.3

  	
   

  	
  Use of Proceeds.

  	
   

  
	
  Section 2.4

  	
   

  	
  Interest Rate.

  	
   

  
	
  Section 2.5

  	
   

  	
  Receipt of Payments.

  	
   

  
	
  Section 2.6

  	
   

  	
  Application and Allocation of Payments

  	
   

  
	
  Section 2.7

  	
   

  	
  Loan Accounts and Accounting.

  	
   

  
	
  Section 2.8

  	
   

  	
  Indemnity.

  	
   

  
	
  Section 2.9

  	
   

  	
  Access.

  	
   

  
	
  Section 2.10

  	
   

  	
  Taxes.

  	
   

  
	
  Section 2.11

  	
   

  	
  Capital Adequacy; Increased Costs;
  Illegality.

  	
   

  
	
  Section 2.12

  	
   

  	
  Single Loan.

  	
   

  
	
  Section 2.13

  	
   

  	
  Pro Rata Treatment.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  CONDITIONS PRECEDENT TO THE LOAN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Loan Agreement; Loan Documents.

  	
   

  
	
  Section 3.2

  	
   

  	
  Certification by Borrowers.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Organizational Existence; Compliance With
  Laws.

  	
   

  
	
  Section 4.2

  	
   

  	
  Executive Offices; Collateral Locations;
  FEIN; Organizational Information; Trade Names.

  	
   

  
	
  Section 4.3

  	
   

  	
  Organizational Power, Authorization,
  Enforceable Obligations.

  	
   

  
	
  Section 4.4

  	
   

  	
  Financial Statements; Projections.

  	
   

  
	
  Section 4.5

  	
   

  	
  Certain Indebtedness.

  	
   

  
	
  Section 4.6

  	
   

  	
  Material Adverse Effect.

  	
   

  
	
  Section 4.7

  	
   

  	
  Ownership of Property; Liens.

  	
   

  
	
  Section 4.8

  	
   

  	
  Labor Matters.

  	
   

  
	
  Section 4.9

  	
   

  	
  Ventures, Subsidiaries And Affiliates;
  Outstanding Stock and Indebtedness.

  	
   

  
	
  Section 4.10

  	
   

  	
  Government Regulations.

  	
   

  
	
  Section 4.11

  	
   

  	
  Margin Regulations.

  	
   

  
	
  Section 4.12

  	
   

  	
  No Litigation.

  	
   

  
	
  Section 4.13

  	
   

  	
  Brokers.

  	
   

  
	
  Section 4.14

  	
   

  	
  Intellectual Property.

  	
   

  
	
  Section 4.15

  	
   

  	
  Insurance.

  	
   

  
	
  Section 4.16

  	
   

  	
  Government Contracts.

  	
   

  
	
  Section 4.17

  	
   

  	
  Taxes.

  	
   

  
	
  Section 4.18

  	
   

  	
  Accounts Receivable.

  	
   

  
	
  Section 4.19

  	
   

  	
  Customer And Trade Relations

  	
   

  
	
  Section 4.20

  	
   

  	
  Solvency.

  	
   

  

 

i

 

	
  Section 4.21

  	
   

  	
  Full Disclosure.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Maintenance of Existence and Conduct of
  Business.

  	
   

  
	
  Section 5.2

  	
   

  	
  Maintenance of Material Contracts.

  	
   

  
	
  Section 5.3

  	
   

  	
  Payment of Obligations.

  	
   

  
	
  Section 5.4

  	
   

  	
  Books and Records.

  	
   

  
	
  Section 5.5

  	
   

  	
  Insurance; Damage to or Destruction of Collateral.

  	
   

  
	
  Section 5.6

  	
   

  	
  Maintenance of Contract Collateral,
  Casualty.

  	
   

  
	
  Section 5.7

  	
   

  	
  Inspection.

  	
   

  
	
  Section 5.8

  	
   

  	
  Maintenance of Franchises and Licenses;
  Compliance with Laws and Contractual Obligations.

  	
   

  
	
  Section 5.9

  	
   

  	
  Key Man Insurance

  	
   

  
	
  Section 5.10

  	
   

  	
  Reports And Notices.

  	
   

  
	
  Section 5.11

  	
   

  	
  Repayment or Refinance of Certain
  Indebtedness; Consummation of PDSH Merger.

  	
   

  
	
  Section 5.12

  	
   

  	
  Guaranty of PDSH Loan; Assumption of PDSH
  Loan.

  	
   

  
	
  Section 5.13

  	
   

  	
  Intellectual Property.

  	
   

  
	
  Section 5.14

  	
   

  	
  Communication With Accountants.

  	
   

  
	
  Section 5.15

  	
   

  	
  Further Assurances.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  FINANCIAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Minimum Excess Cash Balance.

  	
   

  
	
  Section 6.2

  	
   

  	
  Loan to Value.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Fundamental Changes.

  	
   

  
	
  Section 7.2

  	
   

  	
  Use of Loan Proceeds and Excess Cash.

  	
   

  
	
  Section 7.3

  	
   

  	
  Indebtedness.

  	
   

  
	
  Section 7.4

  	
   

  	
  Liens.

  	
   

  
	
  Section 7.5

  	
   

  	
  Change of Name Or Location; Change of
  Fiscal Year.

  	
   

  
	
  Section 7.6

  	
   

  	
  Last-Out Payments; Transfers of Collateral.

  	
   

  
	
  Section 7.7

  	
   

  	
  Investments; Restricted Payments.

  	
   

  
	
  Section 7.8

  	
   

  	
  Transactions with Affiliates.

  	
   

  
	
  Section 7.9

  	
   

  	
  Bankruptcy, Receivers, Similar Matters.

  	
   

  
	
  Section 7.10

  	
   

  	
  Certain Filings.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  CASH MANAGEMENT SYSTEM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Blocked Account.

  	
   

  
	
  Section 8.2

  	
   

  	
  Control of Blocked Account.

  	
   

  
	
  Section 8.3

  	
   

  	
  Direction of Payment to Blocked Account.

  	
   

  
	
  Section 8.4

  	
   

  	
  Disbursements from the Blocked Account.

  	
   

  
	
  Section 8.5

  	
   

  	
  Cash Collateral.

  	
   

  
	
  Section 8.6

  	
   

  	
  Deposit of Excess Cash.

  	
   

  

 

ii

 

	
  ARTICLE IX

  	
  TERM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Termination.

  	
   

  
	
  Section 9.2

  	
   

  	
  Survival of Obligations Upon Termination.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  EVENTS OF DEFAULT; RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1

  	
   

  	
  Events of Default.

  	
   

  
	
  Section 10.2

  	
   

  	
  Remedies.

  	
   

  
	
  Section 10.3

  	
   

  	
  Waivers By Borrowers.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  ASSIGNMENTS AND PARTICIPATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1

  	
   

  	
  Lender Assignments and Participations.

  	
   

  
	
  Section 11.2

  	
   

  	
  Appointment of Agent.

  	
   

  
	
  Section 11.3

  	
   

  	
  Agent’s Reliance, Etc.

  	
   

  
	
  Section 11.4

  	
   

  	
  Agent and Affiliates.

  	
   

  
	
  Section 11.5

  	
   

  	
  Lender Credit Decision.

  	
   

  
	
  Section 11.6

  	
   

  	
  Indemnification.

  	
   

  
	
  Section 11.7

  	
   

  	
  Successor Agent.

  	
   

  
	
  Section 11.8

  	
   

  	
  Setoff and Sharing of Payments.

  	
   

  
	
  Section 11.9

  	
   

  	
  Payments; Information; Actions in Concert

  	
   

  
	
  Section 11.10

  	
   

  	
  Collateral Matters.

  	
   

  
	
  Section 11.11

  	
   

  	
  Defaults.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  CROSS-GUARANTY; LIMITATIONS ON RECOURSE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1

  	
   

  	
  Cross-Guaranty.

  	
   

  
	
  Section 12.2

  	
   

  	
  Full Recourse.

  	
   

  
	
  Section 12.3

  	
   

  	
  Miscellaneous.

  	
   

  
	
  Section 12.4

  	
   

  	
  Event of Default not Affected by Automatic Stay.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1

  	
   

  	
  Complete Agreement; Modification of
  Agreement.

  	
   

  
	
  Section 13.2

  	
   

  	
  Amendments And Waivers.

  	
   

  
	
  Section 13.3

  	
   

  	
  Fees And Expenses.

  	
   

  
	
  Section 13.4

  	
   

  	
  No Waiver.

  	
   

  
	
  Section 13.5

  	
   

  	
  Remedies.

  	
   

  
	
  Section 13.6

  	
   

  	
  Severability.

  	
   

  
	
  Section 13.7

  	
   

  	
  Conflict of Terms.

  	
   

  
	
  Section 13.8

  	
   

  	
  Confidentiality.

  	
   

  
	
  Section 13.9

  	
   

  	
  GOVERNING LAW.

  	
   

  
	
  Section 13.10

  	
   

  	
  Notices.

  	
   

  
	
  Section 13.11

  	
   

  	
  Section Titles.

  	
   

  
	
  Section 13.12

  	
   

  	
  Counterparts.

  	
   

  
	
  Section 13.13

  	
   

  	
  WAIVER OF JURY TRIAL.

  	
   

  
	
  Section 13.14

  	
   

  	
  Press Releases.

  	
   

  
	
  Section 13.15

  	
   

  	
  Reinstatement.

  	
   

  
	
  Section 13.16

  	
   

  	
  Successors and Assigns.

  	
   

  

 

iii

 

	
  Section 13.17

  	
   

  	
  Advice of Counsel.

  	
   

  
	
  Section 13.18

  	
   

  	
  No Strict Construction.

  	
   

  
	
  Section 13.19

  	
   

  	
  Attorney-In-Fact.

  	
   

  

 

iv

 

	
  Schedules

  	
   

  	
   

  
	
  Schedule 1

  	
  Lenders Information

  	
   

  
	
  Schedule
  2

  	
  Projected
  Route Net Cash Flow

  	
   

  
	
  Schedule
  4.2

  	
  Executive
  Offices; Collateral Locations; FEIN

  	
   

  
	
  Schedule
  4.5

  	
  Certain
  Indebtedness

  	
   

  
	
  Schedule
  4.9

  	
  Outstanding
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
  Exhibit
  A

  	
  Draft
  of 2004 Last-Out

  	
   

  
	
  Exhibit
  2.1(a)

  	
  Form
  of Promissory Note

  	
   

  
	
  Exhibit
  6.2

  	
  Exemplary
  Monthly Holdings Report

  	
   

  
	
  Exhibit
  8.4(b)

  	
  Form
  of Non-Ordinary Course Withdrawal Certificate

  	
   

  
	
  Exhibit
  8.4(c)

  	
  Form
  of Ordinary Course Withdrawal Certificate

  	
   

  

 

v

 

LOAN AGREEMENT

 

This LOAN AGREEMENT (this “Agreement”), dated as
of March 11, 2004, is made by and among PDS GAMING CORPORATION, a Minnesota
corporation (“PDS”), PDS GAMING CORPORATION – NEVADA, a Nevada
corporation (“PDS-NV”), PDS GAMING CORPORATION – COLORADO, a Colorado
corporation (“PDS-CO”), PDS GAMING CORPORATION – MISSISSIPPI, a
Mississippi corporation (“PDS-MS”, and together with PDS, PDS-NV
and PDS-CO, “Borrowers”, and each a “Borrower”), the
financial institutions from time to time party hereto as lenders (“Lenders”,
each a “Lender”) and COCHRAN ROAD, LLC, a Delaware limited
liability company, as agent for Lenders (in such capacity and together with its
successors in such capacity, “Agent”).

 

RECITALS

 

WHEREAS, Borrowers have requested that Lenders extend
a term loan to Borrowers in the principal amount of Six Million One Hundred
Twenty-Two Thousand Four Hundred Forty-Nine United States Dollars
(U.S.$6,122,449) in the aggregate for the purposes of refinancing certain of
PDS’s existing Indebtedness and making certain investments in the gaming
industry, as well as for general corporate purposes, and Lenders are willing to
make such a loan, on a full recourse basis, upon the terms and conditions set
forth herein;

 

WHEREAS, in order to secure the full and prompt
performance by Borrowers of their obligations hereunder (including, without
limitation, the obligations to repay the Loan), Borrowers have agreed to grant
to Agent, for the benefit of the Lender Group, a security interest in and Lien
upon all of Borrowers’ right, title and interest in and to certain cash and
rights to payment of Borrowers, subject to no other Liens other than Permitted
Encumbrances, all as set forth in the Security Agreement, dated as of even date
herewith, between Borrowers and Agent, for the benefit of the Lender Group;

 

WHEREAS, PDS contemplates consummating a going private
transaction (the “Going Private Transaction”) and
Borrowers have requested that Lenders extend an additional term loan to an
Affiliate of Borrowers, PDS Holding Co., LLC (“PDSH”), in the
principal amount of Five Million Five Hundred Thousand United States Dollars
(U.S.$5,500,000) (the “PDSH Loan”) in the aggregate for the
purpose of facilitating the Going Private Transaction and funding expenses in
connection therewith; and

 

WHEREAS, in consideration for Lenders’ willingness to
make the PDSH Loan, each Borrower has agreed to provide a full recourse
guaranty of such loan, which guaranty shall be secured on a pari passu
basis with Collateral under and as described in the Security Agreement.

 

NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:

 

PDSG
Loan Agreement

 

 

ARTICLE I

 

DEFINITIONS

 

Capitalized terms used herein shall have the following
respective meanings and all section references in the following definitions
shall refer to Sections of this Agreement:

 

“2003 Last-Out” means that certain
Amended & Restated Loan Pooling and Last-Out Participation Agreement, dated
as of September 24, 2003, among Last-Out Participant, Canpartners Investments
IV, LLC as a mezzanine lender (“Canpartners”), The Ravich Revocable
Trust of 1989, as a mezzanine lender (“Ravich”), Libra Securities, LLC as a
mezzanine lender (“Libra”), Highbridge/Zwirn Special
Opportunities Fund, L.P., as a mezzanine lender (“Highbridge”, and
together with Canpartners, Libra and Ravich, the “2003 Lenders”) and
Wishnow, Ross, Warsavsky & Company as administrative agent for the 2003
Lenders (“Wishnow”), as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“2004 Last-Out” means that certain Loan
Pooling and Last-Out Participation Agreement to be entered into among Last-Out
Participant, PDS Funding 2004-A, LLC (“2004 Lender”), and Wishnow as
administrative agent for 2004 Lender, a draft of which is attached hereto as Exhibit
A with such changes as are approved by Agent, such approval not to be
unreasonably withheld.

 

“Activation Notice” has the meaning set
forth in Section 8.2.

 

“Administrative Questionnaire” means an
administrative questionnaire in a form reasonably requested by Agent.

 

“Affected Lender” has the meaning
provided in Section 2.11(c).

 

“Affiliate” means, with respect to any
Person, (a) each Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, five percent (5%)
or more of the Stock having ordinary voting power in the election of directors
of such Persons, (b) each Person that controls, is controlled by or is under
common control with such Person, (c) each of such Person’s officers, directors,
joint venturers and partners and (d) in the case of Borrowers, the immediate
family members, spouses and lineal descendants of individuals who are
Affiliates of Borrowers.  For the purposes
of this definition, “control” of a Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” as it relates to any
Borrower shall specifically exclude Agent or any Lender.

 

“Agent” has the meaning set forth in the
introductory paragraph hereto.

 

“Agent’s Account” means the account
number listed below, or such other account as Agent shall specify from time to
time:

 

Citibank, NY

 

2

 

ABA #: 021000089

Bear Stearns Securities Corp

a/c 09253186

fbo: Cochran Road, LLC

a/c 102-29382

 

“Agreement” means this Loan Agreement
dated as of March 11, 2004 by and among Borrowers, Lenders and Agent, as
amended, restated, supplemented or otherwise modified from time to time,
together with all exhibits, schedules and other attachments thereto, each as
amended from time to time.

 

“Assignee” has the meaning set forth in Section
11.1(b).

 

“Assignment Agreement” means an
assignment and acceptance agreement in form and substance satisfactory to
Agent.

 

“Bankruptcy Code” means the provisions
of Title 11 of the United States Bankruptcy Code (11 U.S.C. §§101 et seq.),
as amended, and any successor statute.

 

“Blocked Account” means that certain
segregated deposit account number 35013141 in the name of Borrowers, held at
the Blocked Account Bank and subject to the Control Agreement.

 

“Blocked Account Bank” means Silver
State Bank.

 

“Borrowers” has the meaning set forth in
the introductory paragraph hereto.

 

“Business” means Borrowers’ business of
entering into and investing in gaming or related furniture, fixtures or
equipment financing transactions.

 

“Business Day” means any day that is not
a Saturday, a Sunday or a day on which banks are required or permitted to be
closed in the State of New York.

 

“Cash Management System” means,
collectively, the system for establishing and maintaining the Blocked Account
and Agent’s control thereof, and regulating deposits into the Blocked Account
and disbursements therefrom, all as more fully described in ARTICLE VIII.

 

“Certificate of Exemption” has the
meaning set forth in Section 2.10(c).

 

“Change of Control” means either (a) at
any time, Finley ceases to act as the chief executive officer of each Borrower,
or (b) at any time following the consummation of the Going Private Transaction,
Finley and/or Finley Family Trust ceases to own, directly or indirectly, less
than fifty-one (51%) of the Stock of PDSH.

 

“Charges” means all federal, state,
county, city, municipal, local, foreign or other taxes of a Governmental
Authority, levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or

 

3

 

gross receipts of any Borrower, (d) any
Borrower’s ownership or use of any properties or other assets, or (e) any
other aspect of any Borrower’s business.

 

“Closing Date” means March 11, 2004.

 

“Code” means the Uniform Commercial Code
as the same may, from time to time, be enacted and in effect in the State of
New York; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “Code”
means the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.

 

“Collateral” means the property granted
as security pursuant to the Security Agreement and the other Collateral
Documents, including the Excess Cash, the SPV Equity, the Investment
Transaction Equity, the Blocked Account and all related or associated rights
and all proceeds thereof, and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, for the
benefit of Lender Group, to secure the Obligations.

 

“Collateral Documents” means the
Security Agreement and all other agreements, documents or other instruments
entered into guaranteeing payment of, or granting a Lien upon property as
security for payment of, the Obligations, and all other documents related
thereto.

 

“Contract Collateral” means the gaming
or related furniture, fixtures or equipment or inventory of any Borrower
subject to any gaming or related furniture, fixtures or equipment financing
transaction from time to time set forth in Borrowers’ Monthly Holdings Report,
whether such equipment or inventory is in the possession of a Borrower or an
obligor under a Contract Document.

 

“Contract Documents” means the leases,
installment sales agreements, purchase agreements, bills of sale, certificates
of acceptance and delivery, secretary’s certificates, financing statements,
insurance certifications, invoices and sales orders, repossession or
remarketing agreements, and any other contract, understanding, agreement,
document or instrument underlying any gaming or related furniture, fixtures or
equipment financing transaction from time to time set forth in Borrowers’
Monthly Holdings Report.

 

“Control Agreement” means that certain
Blocked Account Agreement, dated as of the Closing Date, among Borrowers, the
Blocked Account Bank and Agent.

 

“Copyright License” means any and all
rights now owned or hereafter acquired by any Borrower under any written
agreement granting any right to use any Copyright or Copyright registration.

 

“Copyright” or “Copyrights” means all
of the following (now owned or hereafter adopted or acquired by any
Borrower):  (a) all copyrights and
general intangibles of

 

4

 

like nature (whether registered or unregistered), now
owned or existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any state or
territory thereof, or any other country or any political subdivision thereof,
and (b) all reissues, extensions or renewals thereof.

 

“Default” means any event which, with
the passage of time or notice or both, would, unless cured or waived, become an
Event of Default.

 

“Default Rate” has the meaning set forth
in Section 2.4(d).

 

“Defaulting Lender” has the meaning set
forth in Section 11.9(c).

 

“Dollars” or “$” means lawful
currency of the United States of America.

 

“Eligible Bank” means a bank that
(a) either (i) satisfies the Rating Criteria or (ii) is another
bank satisfactory to Agent, and (b) insures the deposits with such bank
through the Federal Deposit Insurance Corporation.

 

“Event of Default” has the meaning set
forth in Section 10.1.

 

“Excess Cash” means, from time to time,
all of Borrowers’ cash and cash equivalents which Borrowers are not
contractually obligated to pay to, or to hold on behalf of, a non-Affiliate
Person in connection with and SPV Transaction or an Investment Transaction,
including the Net Loan Proceeds.

 

“Excess Route Equity” has the meaning
give to such term in Section 2.2(b).

 

“Excess SPV Equity” has the meaning set
forth in Section 2.2(b).

 

“Federal Reserve Board” means the Board
of Governors of the Federal Reserve System, or any successor thereto.

 

“Fee Letter” means that certain Amended
and Restated Fee Letter, dated as of the Closing Date, among PDS and Cochran
Road, LLC, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

“Financial Statements” means the
consolidated income statements, statements of cash flows and balance sheets of
Borrowers, delivered in accordance with Section 4.4,  Section 5.10(a) or
Section 5.10(b).

 

“Financing Documents” means the
financing or loan agreements, promissory notes, security agreements and related
collateral documents, notice, consent and acknowledgement of assignment
letters, the loan pooling documentation, the account control agreements and all
other agreements, instruments, documents and certificates delivered in
connection with any of the foregoing, from time to time underlying any
financing provided to Borrowers in connection with the gaming or related
furniture, fixtures or equipment financing transactions from time to time set
forth in Borrowers’ Monthly Holdings Report.

 

5

 

“Finley” means Johan P. Finley.

 

“Fiscal Quarter” means any of the
quarterly accounting periods of any Borrower, ending on March 31, June 30,
September 30 and December 31 of each year.

 

“Fiscal Year” means any of the annual
accounting periods of any Borrower ending on December 31 of each year.

 

“Foreign Lender” has the meaning set
forth in Section 2.10(c).

 

“Future Loan Pool Arrangement” has the
meaning given to such term in the definition of “SPV Equity”.

 

“GAAP” means generally accepted
accounting principles in the United States of America consistently applied as
such term is further defined in Section 5.10 to this Agreement.

 

“Gaming Authority” shall mean any
agency, authority, board, bureau, commission, department, office or
instrumentality of any nature whatsoever of the United States federal
government, any foreign government, any applicable tribal government, any
state, province or city or other political subdivision or otherwise, whether
now or hereafter in existence, or any officer or official thereof, in each
case, with authority to regulate any gaming operation or activities.

 

“Going Private Transaction” has the
meaning set forth in the recitals hereto.

 

“Governmental Authority” means any
nation or government, any state, municipality, province or other political
subdivision thereof, any applicable tribal government and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, whether
now or hereafter in existence, or any officer or official thereof, including
Gaming Authorities.

 

“Guaranteed Indebtedness” means, as to
any Person, any obligation of such Person guaranteeing, providing comfort or
otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in
any manner, including any obligation or arrangement of such Person to (a)
purchase or repurchase any such primary obligation, (b) advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (d)
protect the beneficiary of such arrangement from loss (other than product
warranties given in the ordinary course of business) or (e) indemnify the owner
of such primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed

 

6

 

Indebtedness, or if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.

 

“Indebtedness” of any Person means
without duplication (a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property, payment for which is deferred six
(6) months or more, but excluding obligations to trade creditors incurred in
the ordinary course of business that are unsecured and not overdue by more than
six (6) months, unless being contested in good faith, (b) all reimbursement and
other obligations with respect to letters of credit, bankers’ acceptances and
surety bonds, whether or not matured, (c) all obligations evidenced by notes,
bonds, debentures or similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all capital lease
obligations and the present value (discounted at the Index Rate as in effect on
the Closing Date) of future rental payments under all synthetic leases, (f) all
obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar agreement
or other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, in each
case whether contingent or matured, (h) all Indebtedness referred to above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or
other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness, and (i) the Obligations.

 

“Indemnified Liabilities” has the
meaning set forth in Section 2.8.

 

“Indemnified Person” has the meaning set
forth in Section 2.8.

 

“Index
Rate” shall mean the prime rate of interest charged by Wells
Fargo Bank, N.A., from time to time.

 

“Instruments” means all “instruments,”
as such term is defined in the Code, now owned or hereafter acquired by any
Borrower, wherever located, and, in any event, including all certificated
securities, all certificates of deposit, and all promissory notes and other,
without limitation, evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel Paper
(as such term is defined in the Code).

 

“Intellectual Property” means any and
all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with
such Trademarks.

 

“Interest Rate” has the meaning provided
in Section 2.4.

 

“Interest Payment Date” means the last
Business Day of each calendar quarter beginning with the calendar quarter
ending June 30, 2004; provided, however, that in addition to the
foregoing, each of (x) the date upon which the Loan and the other Obligations
have been paid

 

7

 

in full and (y) the applicable Maturity Date shall be
deemed to be an “Interest Payment Date” with respect to
any interest that has then accrued under this Agreement.

 

“Investment” means, with respect to any
Person, any stock, evidence of Indebtedness, partnership or limited liability
company interest or other securities of any other Person, any loan, advance,
contribution of capital, extension of credit or commitment therefor, including
without limitation the guaranty of Indebtedness of others or make whole
commitment or similar obligation, and any purchase of or agreement to purchase
(a) any securities of another Person or (b) any business or undertaking of any
other Person or any commitment or option to make any such purchase, provided,
that Investments shall not include current trade and customer accounts
receivable (excluding advances) for goods or services provided or rendered in
the ordinary course of business and payable in accordance with customary
trading terms in the ordinary course of business by such Person.

 

“Investment Banking Fee” has the meaning
provided in Section 13.3(a).

 

“Investment Transaction” means gaming or
related furniture, fixtures or equipment financing transactions, other than SPV
Transactions.

 

“Investment Transaction Equity” means,
with respect to any Borrower, such Borrower’s right to receive payments in
respect of such Borrower’s equity investment, residual value or similar
interest in any Investment Transaction (excluding such Borrower’s rights in
respect of the (i) gaming or related furniture, fixtures or equipment
underlying such Investment Transaction or (ii) obligor payments under the
Contract Documents underlying such Investment Transaction, in each case, to the
extent that such rights do not constitute such Borrower’s right to receive its
equity investment, residual value or similar interest) into which such Borrower
used Excess Cash to make its investment and, as and when made to such Borrower,
all such payments.

 

“Involuntary Borrower Bankruptcy” has
the meaning provided in Section 7.9(b).

 

“IRC” means the Internal Revenue Code of
1986, as amended, any successor legislation thereto and all regulations
promulgated thereunder.

 

“IRS” means the Internal Revenue
Service, or any successor thereto.

 

“Last-Out Documents” means,
collectively, the 2003 Last-Out, the 2004 Last-Out and all loan pooling
documents executed in connection with a Future Loan Pool Arrangement.

 

“Last-Out Participant” means PDS in its
capacity as Participant under (and as defined in) the 2003 Last-Out and the
2004 Last-Out.

 

“Last-Out Payments” means any and all
payments from time to time due to PDS in its capacity as the Last-Out
Participant under Sections 4(e) (described as Last-Out Participant’s
contribution as set forth in the “Note Schedules” attached thereto), 4(f)
(described as “Expenses” thereunder), and 4(g) (described as “Back End
Participation” thereunder) of the 2003 Last-Out, and Sections 4(d) (described
as Last-Out Participant’s contribution as set forth in

 

8

 

the “Note Schedules” attached thereto), 4(e)
(described as “Expenses” thereunder), and 4(f) (described as “Back End
Participation” thereunder) of the 2004 Last-Out.

 

“Lender” and “Lenders” means
initially, Cochran Road, LLC, and, if such Lender shall decide to assign all or
any portion of its obligations hereunder, such term shall include any Assignee
of such Lender.

 

“Lender Group” shall mean, collectively,
Agent, Lenders, and their respective successors and assigns.

 

“License” means any Copyright License,
Patent License, Trademark License or other license of rights or interests now
held or hereafter acquired by any Borrower.

 

“Lien” means any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge,
claim, security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).

 

“Litigation” has the meaning set forth
in Section 4.12.

 

“Loan” has the meaning set forth in Section
2.1(a).

 

“Loan Account” has the meaning set forth
in Section 2.7.

 

“Loan Documents” means this Agreement,
the Note, the Collateral Documents, the Fee Letter, the Notices of Direction,
the Control Agreement, the Last-Out Documents, the Post-Closing Letter and all
other agreements, instruments, documents and certificates executed and
delivered to, or in favor of, Agent or any Lender and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, and all
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Borrower, or any employee of any Borrower, and delivered to Agent
or any Lender in connection with this Agreement or the transactions
contemplated thereby.  Any reference in
this Agreement or any other Loan Document to a Loan Document shall include all
appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to this Agreement
or such other Loan Document as the same may be in effect at any and all times
such reference becomes operative.

 

“LTV” means, with respect to any
Recourse Indebtedness, the ratio (expressed as a percentage) equal to (a) the
principal amount of such Recourse Indebtedness divided by (b) the fair
market value of the gaming or related furniture, fixtures or equipment securing
such Recourse Indebtedness.

 

“Margin Stock” has the meaning set forth
in Section 4.11.

 

9

 

“Match-Funded Indebtedness” means
Indebtedness of any Borrower whereby (a) such Borrower uses the proceeds of
such Indebtedness to purchase gaming or related furniture, fixtures or
equipment and such Borrower, in turn, sells or leases such gaming or related
furniture, fixtures or equipment pursuant to a contract, agreement or
understanding, (b) the projected purchase price, income, rents, issues or
profits (including in connection with any re-lease or re-sale of such gaming or
related furniture, fixtures or equipment) due to such Borrower under such
contract, agreement or understanding is sufficient to satisfy or amortize such
Indebtedness in full, and (c) the schedule of payments of the purchase price,
income, rents, issues or profits due to such Borrower under such contract, agreement
or understanding is substantially similar to the amortization schedule of such
Indebtedness.

 

“Material Adverse Effect” means a
material adverse effect on (a) the business, assets, operations, prospects or
financial or other condition of any Borrower, (b) any Borrower’s ability to pay
the Loan or any of the other Obligations in accordance with the terms of this
Agreement or the other Loan Documents, (c) Agent’s Liens, for the benefit of
Lender Group, on the Collateral or the priority of such Liens, or (d) Agent’s
or any Lender’s rights and remedies under this Agreement and the other Loan
Documents.

 

“Material Contracts” means,
collectively, the Loan Documents, the Contract Documents, the Last-Out
Documents and the Financing Documents.

 

“Maturity Date” means the earliest of
(a) March 11, 2009, (b) the date of termination of Lenders’ obligations to
permit the Loan to remain outstanding pursuant to Section 10.2(b) and
(c) the date of indefeasible payment in full in cash by Borrowers of the Loan
and all other Obligations.

 

“Maximum Lawful Rate” has the meaning
set forth in Section 2.4(e).

 

“Minimum Excess Cash Balance” means at
least $750,000 in immediately available (a) Excess Cash on deposit in the
Blocked Account or (b) cash equivalents which constitute Permitted Investments
of Excess Cash, in each case, for which none of the Borrowers are contractually
or legally obligated to distribute such Excess Cash or cash equivalents to
other Persons.

 

“Monthly Holdings Report” means the
monthly portfolio holdings report and treasury report, including, without
limitation, each and every gaming or related furniture, fixtures or equipment
financing transaction of Borrowers as of the date of such reports, in form and
substance satisfactory to Agent, delivered by Borrowers to Agent pursuant to Section
5.10(d).

 

“MW Post” has the meaning set forth in Section
5.11.

 

“Net Loan Proceeds” means the aggregate
principal amount of the Loan less (a) the OID Amount less
(b) the Investment Banking Fee less (c) the fees and expenses
required to be paid by Borrowers pursuant to Section 3.1(i)  less
(d) the Senior Subordinated Note Payoff Amount.

 

“Net Worth Covenants” has the meaning
set forth in Section 4.5.

 

10

 

“Non-Consenting Lender” has the meaning
set forth in Section 13.2(c).

 

“Note” has the meaning set forth in Section
2.1(a).

 

“Notices of Direction” means (a) in
respect of the 2003 Last-Out, that certain Irrevocable Notice of Direction,
dated as of the Closing Date, by PDS, acknowledged and agreed to by Wishnow and
consented to by Canyon Capital Advisors LLC in its capacity as the “Collateral
Agent” set forth on the “Note Schedules” to the 2003 Last-Out and (b) in
respect of the 2004 Last-Out, any Future Loan Pool Arrangement and any
Investment Transaction, a Notice of Direction in form and substance reasonably
satisfactory to Agent.

 

“Notice of Default” has the meaning set
forth in Section 11.11.

 

“Obligations” means the Loan, all debts,
liabilities and obligations, for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing
by any Borrower to Agent or any Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not
evidenced by the Note or any agreement or other instrument, arising under this
Agreement or any of the other Loan Documents. 
This term includes all principal, interest (including all interest which
accrues after the commencement of any case or proceeding by or against any
Borrower in bankruptcy whether or not allowed in such case or proceeding),
fees, Charges, expenses, attorneys’ fees and any other sum chargeable to any
Borrower under this Agreement or any of the other Loan Documents.

 

“OID Amount” means One Hundred
Twenty-Two Thousand Four Hundred Forty-Nine Dollars ($122,449), which amount
constitutes a portion of the Loan.

 

“Other Lender” has the meaning set forth
in Section 11.9(c).

 

“Participant” has the meaning set forth
in Section 11.1(f).

 

“Patent License” means rights under any
written agreement now owned or hereafter acquired by any Borrower granting any
right with respect to any invention on which a Patent is in existence.

 

“Patents” means all of the following in
which any Borrower now holds or hereafter acquires any interest (a) all letters
patent of the United States or any other country, all registrations and
recordings thereof, and all applications for letters patent of the United
States or any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State or territory thereof, or any
other country, and (b) all reissues, continuations, continuations-in-part or
extensions thereof.

 

“PDSH” has the meaning set forth in the
recitals hereto.

 

“PDSH Loan” has the meaning set forth in
the recitals hereto.

 

11

 

“PDSH Merger” means the merger
transaction between PDS and PDSH, the result of which merger transaction is
that PDS will be the surviving Person. 
The PDSH Merger shall be effected on terms reasonably satisfactory to
Agent.

 

“Permitted Encumbrances” means (a) the
presently existing or hereafter created Liens in favor of Agent, for the
benefit of Lender Group, (b) the Liens granted by PDS under the 2003 Last-Out
for the benefit of the 2003 Lenders and (c) the Liens to be granted by PDS
under the 2004 Last-Out for the benefit of the 2004 Lender.

 

“Permitted Investments” means (i)
marketable direct obligations issued or unconditionally guaranteed by the
United States of America or any agency thereof maturing within one (1) year
from the date of acquisition thereof, (ii) commercial paper maturing no more
than one (1) year from the date of creation thereof and currently having one of
the two highest ratings obtainable from either S&P or Moody’s Investors
Service, Inc., (iii) certificates of deposit, maturing no more than one (1)
year from the date of creation thereof, issued by an Eligible Bank, (iv) time
deposits, maturing no more than thirty (30) days from the date of creation
thereof with an Eligible Bank, and (v) mutual funds that invest solely in one
or more of the investments described in clauses (i) through (iv) above.

 

“Person” means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public
benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).

 

“Post-Closing Letter” means that certain
letter agreement, dated as of the Closing Date, among Borrowers and Agent, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.

 

“Pro Rata Share” means with respect to all
matters relating to any Lender, prior to the Maturity Date, the percentage
obtained by dividing (i) the aggregate outstanding principal balance of the
Loan held by such Lender, by (ii) the outstanding principal balance of the Loan
held by all Lenders, as any such percentages may be adjusted by assignments
permitted pursuant to Section 11.1. 
The Pro
Rata Shares of Lenders as of the Closing Date are set forth on Schedule
1 attached hereto.

 

“Projections” means Borrowers’ financial
projections dated December 4, 2003 with respect to Borrowers’ future performance
and other matters contained therein that are provided to Agent or Lenders prior
to or after the Closing Date, together with appropriate supporting details and
a statement of underlying assumptions.

 

“Proposed Change” has the meaning set
forth in Section 13.2(c).

 

“Qualified Assignee” means (a) any
Lender, any Affiliate of any Lender and, with respect to any Lender that is an
investment fund that invests in commercial loans, any other investment fund
that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor, and (b) any commercial bank, savings and loan association or savings
bank or any other Person which is an

 

12

 

“accredited investor” (as defined in Regulation D
under the Securities Act of 1933) which extends credit or buys loans as one of
its businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, which, through its applicable
lending office, is capable of lending to Borrowers without the imposition of
any withholding or similar taxes, provided, however, that any Qualified
Assignee shall be permitted to be a lender to Borrowers under all applicable
gaming laws or regulations.

 

“Rating Agency” means any of S&P,
Moody’s Investors Service, Inc., Duff & Phelps Credit Rating Co.,
Fitch IBCA, Inc., or any other nationally-recognized statistical rating
organization designated by Agent and/or Lenders in its/their sole discretion.

 

“Rating Criteria” with respect to any
Person, means that (i) the short-term unsecured debt obligations of such
Person are rated at least “AA” by S&P and, if rated by another Rating
Agency, are rated in an equivalent category by such other Rating Agency, if
deposits are held by such Person for a period of less than one year, or
(ii) the long-term unsecured debt obligations of such Person are rated at
least “AA-” by S&P and, if rated by another Rating Agency, are rated in an
equivalent category by such other Rating Agency, if deposits are held by such
Person for a period of one year or more.

 

“Recourse Indebtedness” means, without
double counting, Indebtedness and Guaranteed Indebtedness, the terms and
conditions of which Indebtedness or Guaranteed Indebtedness, as the case may
be, permit the lender of such Indebtedness or Guaranteed Indebtedness, as the
case may be, to seek recourse directly to any Borrower upon default by a
Borrower under or with respect to such Indebtedness or Guaranteed Indebtedness.

 

“Register” has the meaning set forth in Section
11.1(c).

 

“Related Person” has the meaning set
forth in Section 8.7.

 

“Replacement Lender” has the meaning
provided in Section 2.11(c).

 

“Requisite Lenders” means Lenders having
more than sixty-six and two-thirds percent (66 2/3%) of the aggregate
outstanding amount of the Loan.

 

“Restricted Payment” means, with respect
to any Borrower, any of the following: (a) the declaration or payment of
any dividend or distribution or the incurrence of any liability to make any
other payment or distribution of cash or other property or assets in respect of
Stock (including, without limitation, a return of capital) other than (i)
dividends by PDS-NV, PDS-CO or PDS-MS to PDS and (ii) in connection with the
Going Private Transaction in such amounts and to such Persons as shall be
approved by Agent; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Borrower’s Stock or any
other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Borrower now or hereafter outstanding;
(d) any payment of a claim for the rescission of the purchase or sale of,
or for material damages arising from the purchase or sale of, such Borrower’s
Stock or of a claim for reimbursement, indemnification or contribution arising
out of or related to any such claim for damages or rescission; (e) any
payment, loan, loan repayment, contribution, or other transfer of

 

13

 

funds or other property to any direct or indirect
holder of the Stock of such Borrower other than (i) payment of compensation in
the ordinary course of business consistent with past practice to holders of the
Stock who are directors, officers or employees of such Person and (ii) the fee
payable to Finley, chief executive officer of Borrowers, in exchange for
Finley’s personal guaranty of Indebtedness owing by Borrowers to First State
Bank of Thermopolis in the aggregate principal amount of $7,700,000;  (f)
any payment of management or consulting fees (or other fees of a similar nature)
to any Affiliate or to any holder of the Stock of such Borrower or its
Affiliates, except, in the case of (g) only, management fees (or other fees of
a similar nature) under that certain Management Agreement, in form and
substance reasonably satisfactory to Agent, to be entered into between PDS and
PDSH (the “PDSH Management Agreement”).

 

“Route Equity” means, with respect to
any calendar month, the amount by which the actual net cash flow received by
Borrowers from the Contract Documents subject to the Route Note exceeds the
projected “Net Cash Flow” for such calendar month, as such projected Net Cash
Flows are set forth on Schedule 2.

 

“Route Note” means that certain Second
Amended and Restated Promissory Note, dated as of August 6, 2003 and amended and
restated as of January 15, 2004, by Borrowers in favor of Canyon Capital
Advisors LLC, as agent for the lenders named therein, in the principal amount
of $12,204,319, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

“S&P” means Standard &
Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

 

“Security Agreement” means that certain
Pledge and Security Agreement, dated as of the Closing Date, by and between
Borrowers and Agent, for the benefit of Lender Group, relating to the
Collateral, as amended, restated, supplemented or otherwise modified from time
to time.

 

“Senior Subordinated Note Payoff Amount”
means $5,634,252.50, which represents the amount required to pay in full those
certain existing 10% Senior Subordinated Notes of PDS due July 1, 2004 and 12%
Senior Subordinated Notes of PDS due July 1, 2007.

 

“Settlement Date” has the meaning set
forth in Section 11.9(a).

 

“Solvent” shall mean, with respect to
any Person on a particular date, that on such date (a) the fair value of
the property of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability
to pay as such debts and liabilities mature and (d) such Person is not engaged
in a business or transaction, and is not about to engage in a business or
transaction, for which such Person’s property would constitute an unreasonably
small capital.  The amount of contingent
liabilities (such as litigation, guarantees and pension plan liabilities) at
any time shall be computed as the

 

14

 

amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.

 

“SPV Equity” means (a) any and all
Last-Out Payments under the 2003 Last-Out or 2004 Last-Out as and when
distributed pursuant to the terms of the 2003 Last-Out or 2004 Last-Out, as the
case may be, and (b) any and all payments due to any Borrower (other than fees
due to such Borrower in exchange for such Borrower’s performance of the
servicing obligations with respect to the gaming or related furniture, fixtures
or equipment included in such arrangement) under any future loan pooling (or
similar) arrangement relating to any SPV Transaction (each such arrangement is
referred to herein as a “Future Loan Pool Arrangement”), as and
when distributed pursuant to the terms of such Future Loan Pool Arrangement.

 

“SPV Transactions” means all gaming or
related furniture, fixtures or equipment financing transactions that are from
time to time subject to the Last-Out Documents.

 

“Stock” means all shares, options,
warrants, general or limited partnership interests, membership interests or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).

 

“Subsidiary” shall mean, with respect to
any Person, (a) any corporation of which an aggregate of more than 50% of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned legally or beneficially by such Person or one or
more Subsidiaries of such Person, or with respect to which any such Person has
the right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of a Borrower.

 

“Taxes” means taxes, levies, imposts,
deductions, Charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on or measured by the net income of Agent or any Lender
by the jurisdictions under the laws of which Agent or such Lender is organized
or conducts business or any political subdivision thereof.

 

“Termination Date” means the date on
which (a) the Loan has been indefeasibly repaid in full in cash and (b) all
other Obligations under this Agreement and the other Loan Documents have been
completely discharged.

 

15

 

“Trademark License” means rights under
any written agreement now owned or hereafter acquired by any Borrower granting
any right to use any Trademark.

 

“Trademarks” means all of the following
now owned or hereafter existing, adopted or acquired by any Borrower:  (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof, (b) all reissues,
extensions or renewals thereof, and (c) all goodwill associated with or
symbolized by any of the foregoing.

 

All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the meanings
given to such terms under the Code to the extent the same are used or defined
therein.  All accounting terms not
otherwise defined herein, unless the context indicates otherwise, shall have
the meanings given to such terms under GAAP to the extent the same are used or
defined therein. Unless otherwise specified, references in this Agreement to a
section, subsection or clause refer to such section, subsection or clause as
contained in this Agreement.  The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole, including all Appendices, as the same may from time
to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement or any
such Appendices.

 

Whenever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders.  The words “including”, “includes” and “include” shall be deemed
to be followed by the words “without limitation”; references to Persons include
their respective successors and assigns (to the extent and only to the extent
permitted by the Loan Documents) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
the same and any successor statutes and regulations.  The term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or”.  Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Borrower, such words are intended to
signify that such Borrower has actual knowledge or awareness of a particular
fact or circumstance or that such Borrower, if it had exercised reasonable diligence,
would have known or been aware of such fact or circumstance.

 

ARTICLE II

AMOUNT AND TERMS OF LOAN

 

Section 2.1                                   Loan.

 

(a)           Subject
to the terms and conditions hereof, each Lender agrees to make a term loan to
Borrowers, on the Closing Date, in the aggregate principal amount of Six
Million

 

16

 

One Hundred
Twenty-Two Thousand Four Hundred Forty-Nine United States Dollars
(U.S.$6,122,449), which aggregate principal amount shall include its Pro Rata
Share of OID Amount (the “Loan”), in the amount set forth for
each such Lender on Schedule 1. 
The obligations of each Lender hereunder shall be separate and not joint
and several.  The Loan shall be
evidenced by a promissory note substantially in the form of Exhibit 2.1(a)
(the “Note”)
and Borrowers shall execute and deliver the Note to Agent, for the benefit of
the Lender Group.  The Note shall
represent the obligation of Borrowers to pay to Agent, for the benefit of the
Lender Group, the full principal amount of the Loan (including the OID Amount),
together with interest thereon as prescribed in Section 2.4.  The amount of the Loan funded by each Lender
to Borrowers on the Closing Date shall be reduced by such Lender’s Pro Rata
Share of the OID Amount.

 

(b)           The
Loan proceeds representing the Senior Subordinated Note Payoff Amount and the
items described in clauses (b) and (c) of the definition of “Net Loan Proceeds”
shall be deposited by Lenders as directed by Borrowers and the Net Loan
Proceeds shall be deposited by Lenders as described in Section 8.1
hereof.  The Loan proceeds shall be used
only as permitted under Section 2.3 hereto.

 

(c)           The
aggregate outstanding principal balance of the Loan shall be due and payable in
full, together with interest thereon as described in Section 2.4, in
immediately available funds, on the Maturity Date, if not sooner paid in
full.  No payment or prepayment with
respect to the Loan may be reborrowed.

 

(d)           Each
payment or prepayment of principal with respect to the Loan shall be paid to
Agent for the ratable benefit of each Lender, ratably in proportion to each
such Lender’s respective Pro Rata Share.

 

Section 2.2                                   Prepayment;
Lender Prepayment Option.

 

(a)           Voluntary
Prepayments.  Borrowers may prepay
the Loan in whole or in part at any time at the prepayment price established as
follows:  (i) for prepayments occurring
during the period from the Closing Date through and including March 11, 2005,
105% (expressed as a percentage of the then outstanding principal amount of the
Loan and accrued interest thereon), (ii) for prepayments occurring during the
period from March 12, 2005 through and including March 11, 2006, 104%
(expressed as a percentage of the then outstanding principal amount of the Loan
and accrued interest thereon), (iii) for prepayments occurring during the
period from March 12, 2006 through and including March 11, 2007, 103%
(expressed as a percentage of the then outstanding principal amount of the Loan
and accrued interest thereon), (iv) for prepayments occurring during the period
from March 12, 2007 through and including March 11, 2008, 102% (expressed as a
percentage of the then outstanding principal amount of the Loan and accrued
interest thereon), and (v) for prepayments occurring during the period from
March 12, 2008 through but excluding March 11, 2009, 101% (expressed as a
percentage of the then outstanding principal amount of the Loan and accrued
interest thereon).

 

17

 

(b)           Mandatory
Prepayments.

 

(i)            Immediately
upon receipt by any Borrower of any SPV Equity as to which none of Borrowers
are contractually obligated to distribute such SPV Equity to, or hold on behalf
of, other non-Affiliate Persons (“Excess SPV Equity”), Borrowers shall
prepay the Loan in an amount equal to thirty-three and one-third percent (33
1/3%) of such Excess SPV Equity.  The
determination of which portion, if any, of the SPV Equity Borrowers are
contractually obligated to distribute to other Persons shall not limit
Borrowers’ obligation to deposit into the Blocked Account all SPV Equity
immediately upon any Borrower’s receipt thereof pursuant to Section 8.3(b).

 

(ii)           On
the fifth day of each calendar month, Borrowers shall prepay the Loan in an
amount equal to thirty-three and one-third percent (33 1/3%) of the portion of
Route Equity, if any, as to which none of Borrowers are contractually obligated
to distribute to, or hold on behalf of, other non-Affiliate Persons (“Excess
Route Equity”).

 

For the avoidance of doubt, any mandatory
prepayment pursuant to this Section 2.2(b) shall not be treated as a
voluntary prepayment pursuant to Section 2.2(a) for purposes of
determining the prepayment price.

 

(c)           Application
of Prepayments.  Prepayments made by
Borrowers pursuant to Section 2.2(a) or Section 2.2(b) shall be
applied as follows:  first, to
fees and reimbursable expenses of Agent then due and payable pursuant to this
Agreement or any of the Loan Documents; second, to any fees and
reimbursable expenses of any Lender then due and payable pursuant to this Loan
Agreement or any of the Loan Documents; third, to interest then due and
payable on the Loan; fourth, to prepay the Loan, until paid in full; and
last, to the repayment of any other Obligations.

 

(d)           No
Implied Consent.  Nothing in this Section
2.2 shall be construed to constitute Agent’s or any Lender’s consent to any
transaction that is not expressly permitted by other provisions of this
Agreement or the other Loan Documents.

 

Section 2.3                                   Use
of Proceeds.

 

Borrowers shall utilize the proceeds of the Loan
solely (a) to pay in full the Senior Subordinated Note Payoff Amount, (b) to
make investments in SPV Transactions, and (c) for general corporate purposes,
provided that in the case of the purposes described in time (b) and (c), such
proceeds are applied in accordance with the procedures set forth in Section
8.4 hereto and in accordance with the covenants set forth in Section
8.3(b) and Section 7.2.

 

Section 2.4                                   Interest
Rate.

 

(a)           Borrowers
shall pay interest on the Loan to Agent for the ratable benefit of Lenders, in
arrears for the prior calendar quarter on each applicable Interest Payment
Date, at a rate of twelve percent (12%) per annum (the “Interest Rate”); provided
that for the first Interest Payment Date following the Closing Date, Borrowers
shall pay interest on the Loan in arrears for the period extending from and
including the Closing Date through and including such Interest Payment Date.

 

18

 

(b)           If
any payment on the Loan becomes due and payable on a day other than a Business
Day, the maturity thereof will be extended to the next succeeding Business Day
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.

 

(c)           All
computations of interest shall be made on the basis of a three hundred and
sixty (360) day year, in each case for the actual number of days occurring in
the period for which such interest is payable.

 

(d)           So
long as a Default or Event of Default has occurred and is continuing, the
Interest Rate shall be increased by five percentage points (5%) per annum
above the rate of interest otherwise applicable hereunder (the “Default
Rate”), and all outstanding Obligations shall bear interest at
the Default Rate.  Interest at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.

 

(e)           Notwithstanding
anything to the contrary set forth in this Section 2.4, if a court of
competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum
Lawful Rate”), then so long as the Maximum Lawful Rate would be
so exceeded, the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest which would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  Thereafter,
interest hereunder shall be paid at the rate of interest and in the manner
otherwise provided in this Section 2.4, unless and until the rate of
interest again exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply.  In no event shall
the total interest received by any Lender pursuant to the terms hereof exceed
the amount which such Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful
Rate.  If the Maximum Lawful Rate is
calculated pursuant to this paragraph, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made. 
If, notwithstanding the provisions of this Section 2.4(e), a
court of competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate, Agent shall,
to the extent permitted by applicable law, promptly apply such excess in the
order specified in Section 2.6 and thereafter shall refund any excess to
Borrowers or as a court of competent jurisdiction may otherwise order.

 

Section 2.5                                   Receipt
of Payments.

 

Borrowers shall make each payment or prepayment under
this Agreement not later than 1:00 p.m.
(New York time) on the day when due, in immediately available funds, in Dollars
to the Agent’s Account.  For purposes of
computing interest and fees, all payments shall be deemed received on the first
Business Day following the Business Day on which immediately available funds
therefor are received in the Agent’s Account prior to 1:00 p.m. (New York time).

 

19

 

Payments received after 1:00 p.m. (New York time) on any Business Day or on a day that is
not a Business Day shall be deemed to have been received on the following
Business Day.

 

Section 2.6                                   Application
and Allocation of Payments

 

So long as no Default or Event of Default has occurred
and is continuing, (i) payments matching specific scheduled payments then
due shall be applied to those scheduled payments, and (ii) prepayments
shall be applied in accordance with Section 2.2(c).  All payments and prepayments applied to the
Loan shall be applied ratably to the portion thereof held by each Lender as
determined by its Pro Rata Share. 
In the absence of a specific determination by Agent with respect
thereto, payments shall be applied to amounts then due and payable in the
following order:  first, to
Agent’s expenses reimbursable hereunder; second, to interest on the
Loan; third, to principal payments on the Loan; and fourth, to
all other Obligations, including expenses of Lenders.

 

Section 2.7                                   Loan
Accounts and Accounting.

 

Agent shall maintain a Loan Account (a “Loan
Account”) on its books to record all payments made by Borrowers,
and all other debits and credits as provided in this Agreement with respect to
the Loan or any other Obligations.  All
entries in the Loan Account shall be made in accordance with Agent’s customary
accounting practices as in effect from time to time.  The balance in the Loan Account, as recorded on Agent’s most
recent printout or other written statement, shall, absent manifest error, be
presumptive evidence of the amounts due and owing to Agent and Lenders by
Borrowers; provided, however, that any failure to so record or
any error in so recording shall not limit or otherwise affect Borrowers’ duty
to pay the Obligations.

 

Section 2.8                                   Indemnity.

 

Each Borrower shall jointly and
severally indemnify and hold harmless Agent, each Lender and each of
their respective Affiliates, and each such Person’s respective officers,
directors, employees, attorneys, agents and representatives (each, an “Indemnified
Person”), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys’ fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
the Loan having been extended, suspended or terminated under this Agreement and
the other Loan Documents and the administration of the Loan, and in connection
with, relating to or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith,
including any and all legal costs and expenses arising out of, relating to or
incurred in connection with disputes between or among any parties (other than
disputes between or among Lenders or Agent) to any of the Loan Documents
(collectively, “Indemnified Liabilities”); provided,
however, that no such Borrower shall be liable for any indemnification
to an Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from that Indemnified
Person’s gross negligence or willful misconduct.  NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING

 

20

 

CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF THE LOAN HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.

 

Section 2.9                                   Access.

 

Each Borrower shall, during normal business hours,
from time to time upon one (1) Business Day’s prior notice as frequently as
Agent determines to be appropriate (i) provide Agent, any Affiliate of Agent
and any of their respective officers, employees and agents access to its
properties, facilities, advisors and employees (including officers and any
other persons who constitute management) of such Borrower and to the
Collateral, (ii) permit Agent, any Affiliate of Agent and any of their
respective officers, employees and agents, to inspect, audit and make extracts
from such Borrower’s books and records with respect to the Collateral, and
(iii) permit Agent, any Affiliate of Agent and any of their respective officers,
employees and agents, to inspect, review, evaluate and make test verifications
and counts of the Collateral.  If a
Default or Event of Default has occurred and is continuing or if access is
necessary to preserve or protect the Collateral, as determined by Agent, each
Borrower shall provide such access to Agent and each Lender at all times and
without advance notice.  Each Borrower
shall make available to Agent and its counsel and advisors, as quickly as is
possible under the circumstances, originals or copies of all books and records
relating to the Business which Agent may request.  Each Borrower shall deliver any document or instrument necessary
for Agent, as it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for such Borrower, and
shall maintain duplicate records or supporting documentation on media,
including computer tapes and discs owned by such Borrower.  Agent will give Lenders at least five (5)
days’ prior written notice of regularly scheduled audits.  Representatives of the Lenders may accompany
Agent’s representatives on regularly scheduled audits at no charge to
Borrowers.

 

Section 2.10                            Taxes.

 

(a)           Any
and all payments by Borrowers hereunder or under the Note shall be made, in
accordance with this Section 2.10, free and clear of and without
deduction for any and all present or future Taxes.  If Borrowers shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under the Note, (i) the sum payable
shall be increased as much as shall be necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.10), Agent or Lenders, as applicable, receive an
amount equal to the sum they would have received had no such deductions been
made, (ii) Borrowers shall make such deductions, and (iii) Borrowers shall
pay the full amount deducted to the relevant taxing or other authority in
accordance with applicable law.  Within
thirty (30) days after the date of any payment of Taxes, Borrowers shall
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof or other evidence of payment reasonably satisfactory to
Agent.  Agent and Lenders shall not be
obligated to return or refund any amounts received pursuant to this Section.

 

21

 

(b)           Each
Borrower that is a party hereto shall, jointly and severally, indemnify (for
the avoidance of doubt, which indemnification shall survive indefinitely) and,
within ten (10) days of demand therefor, pay Agent, for the benefit of the
Lender Group, for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 2.10) arising in
connection with the transactions contemplated by the Loan Documents and paid by
Agent or a Lender, as appropriate, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally asserted.

 

(c)           Each
Lender organized under the laws of a jurisdiction outside the United States (a
“Foreign
Lender”) as to which payments to be made under this Agreement or
under the Note are exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Borrowers and Agent a properly completed
and executed IRS Form W-8BEN or Form W-8ECI or other applicable form,
certificate or document prescribed by the IRS or the United States certifying
as to such Foreign Lender’s entitlement to such exemption (a “Certificate
of Exemption”).  Any
foreign Person that seeks to become a Lender under this Agreement shall provide
a Certificate of Exemption to Borrowers and Agent prior to becoming a Lender
hereunder.  No foreign Person may become
a Lender hereunder if such Person fails to deliver a Certificate of Exemption
in advance of becoming a Lender.

 

Section 2.11                            Capital
Adequacy; Increased Costs; Illegality.

 

(a)           If
any Lender shall have determined that any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority materially increases or would have the effect of
materially increasing the amount of capital, reserves or other funds required
to be maintained by such Lender and thereby reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder, then Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to Agent), pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction.  A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by the
Affected Lender to Borrowers and to Agent shall, absent manifest error, be
final, conclusive and binding for all purposes.

 

(b)           If,
due to either (i) the introduction of or any change in any law or regulation
(or any change in the interpretation thereof), including gaming laws or
regulations, or (ii) the compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force
of law), in each case adopted after the Closing Date, there shall be any increase
in the cost to any Lender of agreeing to make or making, funding or maintaining
the Loan, then Borrowers shall from time to time, upon demand by such Lender
(with a copy of such demand to Agent), pay to Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost.  A certificate as to the
amount of such increased cost, submitted to Borrowers and to Agent by such
Lender, shall be conclusive and binding on Borrowers for all purposes, absent
manifest error.  Each Lender

 

22

 

agrees that, as
promptly as practicable after it becomes aware of any circumstances referred to
above which would result in any such increased cost, the Affected Lender shall,
to the extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this Section
2.11(b).

 

(c)           Within
fifteen (15) days after receipt by Borrowers of written notice and demand from
any Lender (an “Affected Lender”) for payment of
additional amounts or increased costs as provided in Section 2.11(a) or Section
2.11(b) Borrowers may, at their option, notify Agent and such Affected
Lender of its intention to replace the Affected Lender.  So long as no Default or Event of Default
has occurred and is continuing, Borrowers, with the consent of Agent, may
obtain, at Borrower’ expense, a replacement Lender (“Replacement Lender”)
for the Affected Lender, which Replacement Lender must be reasonably
satisfactory to Agent.  If Borrowers
obtain a Replacement Lender within ninety (90) days following notice of its
intention to do so, the Affected Lender must sell and assign its Pro Rata
Share to such Replacement Lender for an amount equal to the principal balance
of the Pro
Rata Share of such Affected Lender and all accrued interest and fees
with respect thereto through the date of such sale, provided that
Borrowers shall have reimbursed such Affected Lender for the additional amounts
or increased costs that it is entitled to receive under this Agreement through
the date of such sale and assignment.

 

Section 2.12                            Single
Loan.

 

The Loan and all of the other Obligations of Borrowers
arising under this Agreement and the other Loan Documents shall constitute one
general obligation of Borrowers secured, until the Termination Date, by all of
the Collateral.

 

Section 2.13                            Pro Rata
Treatment.

 

Except to the extent otherwise provided herein, the Loan
shall be made by Lenders in accordance with their respective Pro Rata
Shares, and (a) each payment or prepayment by Borrowers of principal of the
Loan, (b) each payment by Borrowers of interest on the Loan, and (c) each
payment by Borrowers of any fees payable to Lenders (and not to Agent or a
Lender alone) shall be made to Agent for the accounts of Lenders, pro rata
in accordance with their respective Pro Rata Shares of the Loan.

 

ARTICLE III

CONDITIONS PRECEDENT TO THE LOAN

 

The Loan will be funded in full on the Closing Date; provided,
however, that none of Lenders shall be obligated to fund their
respective Pro
Rata Shares of the Loan on the Closing Date or to take, fulfill, or
perform any other action hereunder or under any other Loan Document, unless and
until the following conditions have been satisfied or provided for as of the
Closing Date, in Agent’s sole discretion, or waived in writing by Agent:

 

23

 

Section 3.1                                   Loan
Agreement; Loan Documents.

 

This Agreement or counterparts hereof shall have been
duly executed by, and delivered to, Borrowers, Agent and Lenders and all Loan
Documents shall remain in full force and effect, and Agent and Lenders shall
have received such documents, instruments, agreements and legal opinions as
Agent or Lenders shall reasonably request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including the
following, each in form and substance satisfactory to Agent:

 

(a)           Loan
Documents.  Each of the following
documents duly executed by each party thereto:

 

(i)            this
Agreement;

 

(ii)           the
Note;

 

(iii)          the Fee Letter;

 

(iv)          the
Security Agreement and each other Collateral Document;

 

(v)           the
Control Agreement;

 

(vi)          the
Notice of Direction in respect of the 2003 Last-Out; and

 

(vii)         the Post-Closing Letter.

 

(b)           Insurance.  Satisfactory evidence that the insurance
policies required by Section 5.5 are in full force and effect.

 

(c)           Liens.  Evidence that Agent, for the benefit of the
Lender Group, has a valid and perfected security interest in the Collateral
(subject to no other Liens other than Permitted Encumbrances), including such
documents duly executed by each Borrower (including financing statements under
the Code and other applicable documents under the laws of any jurisdiction with
respect to the perfection of Liens) as Agent may request in order to perfect
Agent’s security interests, for the benefit of the Lender Group, in the
Collateral.

 

(d)           Deposit
of Excess Cash.  Agent shall have
received evidence that Borrowers have deposited Excess Cash (as such term is
defined as of the Closing Date), other than Net Loan Proceeds, into the Blocked
Account.

 

(e)           Certificate
of Good Standing.  For each
Borrower, such Person’s (i) good standing certificates (including
verification of tax status) in its state of formation and (ii) good
standing certificates (including verification of tax status) and certificates
of qualification to conduct business in each jurisdiction where its ownership
or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified
by the applicable Secretary of State or other authorized Governmental
Authority.

 

24

 

(f)            Secretary’s
Certificates.  Duly executed
originals of a certificate of the secretary of each Borrower, dated as of the
Closing Date, attaching (i) the certificate of incorporation or charter
documents for such Borrower and all amendments thereto and certifying that such
certificate of incorporation or charter documents, as applicable, and all
amendments thereto are in full force and effect as of the date of the
secretary’s certificate without any other modification or amendment, (ii) the
bylaws for such Borrower and all amendments thereto and certifying that such
bylaws and all amendments thereto are in full force and effect as of the date
of the secretary’s certificate without any other modification or amendment,
(iii) the resolutions by such Borrower’s board of directors or manager
approving and authorizing the execution, delivery and performance of the Loan
Documents to which such Borrower is a party and the transactions to be
consummated in connection therewith and certifying that such resolutions are in
full force and effect as of the date of the secretary’s certificate without any
other modification or amendment, and (iv) the signature and incumbency
certificates of the officers of each Borrower executing any of the Loan Documents
and certifying that such officers are authorized to execute and deliver the
Loan Documents and that the signatures opposite the names of such officers are
such officers true and correct signatures.

 

(g)           Officer’s
Certificate.  Duly executed
originals of a certificate of the chief executive officer and chief financial
officer of each Borrower, dated the Closing Date, stating that as of the
Closing Date:  (i) each representation
by or warranty of such Borrower contained herein or in any of the other Loan
Documents is true and correct as of such date, except to the extent that such
representation or warranty expressly relates to an earlier date and except for
changes therein expressly permitted or expressly contemplated by this
Agreement; (ii) no Default or Event of Default has occurred and is continuing
or would result after giving effect to the transactions contemplated herein or
under any of the other Loan Documents; (iii) since December 31, 2002, except as
disclosed in writing to Agent and Lenders prior to the Closing Date, (A) no
event or condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect, (B) there has been no material
adverse change in the industry in which such Borrower operates, (C) no
Litigation has been commenced, or is pending or threatened which, if
successful, would have a Material Adverse Effect or could challenge, on any
ground, any of the transactions contemplated by this Agreement and the other
Loan Documents, and (D) there has been no material increase in
liabilities, liquidated or contingent, and no material decrease in assets of
such Borrower; and (iv) both before and after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents, said Borrower is
Solvent.

 

(h)           Opinions
of Counsel.  Duly executed original
opinion of Hinshaw & Culbertson, counsel for PDS, in form and substance
satisfactory to Agent and its counsel, dated the Closing Date, and accompanied
by a letter addressed to such counsel from PDS, authorizing and directing such
counsel to address its opinion to the Lender Group and to include in such
opinion an express statement to the effect that each of Agent and Lenders is
authorized to rely on such opinion. 
Duly executed original opinion of in-house counsel to Borrowers, in form
and substance satisfactory to Agent and its counsel, dated the Closing Date.

 

(i)            Payment
of Fees.  Borrowers shall have paid
to Libra the Investment Banking Fee, and to Agent and Lenders, (i) all of
the fees set forth in the Fee Letter that are due and payable as of the Closing
Date pursuant to the terms of the Fee Letter, and (ii) all legal fees

 

25

 

and other fees,
costs and expenses incurred by Agent or Lenders in connection with considering,
documenting or providing the Loan.

 

(j)            Approvals.  Agent shall have received (i) satisfactory
evidence that Borrowers have obtained all required consents and approvals of
all Persons, including all requisite Governmental Authorities and all requisite
approvals under the 2003 Last-Out, to the execution, delivery and performance
of this Agreement and the other Loan Documents, or (ii) an officer’s
certificate in form and substance satisfactory to Agent affirming that no such
consents or approvals are required.

 

(k)           Other
Documents.  Such other certificates,
documents and agreements respecting any of Borrowers as Agent may reasonably
request.

 

Section 3.2                                   Certification
by Borrowers.

 

The request and acceptance by Borrowers of the
proceeds of the Loan shall be deemed to constitute, as of the date of such
request or acceptance (a) a representation by and warranty of each Borrower
that the conditions in this ARTICLE III have been satisfied, (b) a
reaffirmation of each Borrower of the granting and continuance of Agent’s
Liens, for the benefit of the Lender Group, pursuant to the Collateral
Documents and (c) a reaffirmation by each Borrower of the cross-guaranty
provisions set forth in Section 12.1.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loan and to induce Agent
to undertake its obligations hereunder and under the other Loan Documents,
Borrowers executing this Agreement, jointly and severally, make the following
representations and warranties to Agent and each Lender, each and all of which
representations and warranties shall survive the execution and delivery of this
Agreement.

 

Section 4.1                                   Organizational
Existence; Compliance With Laws.

 

Each Borrower (a) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization as described in the preamble to this Agreement, (b)
is duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not result in a Material Adverse Effect, (c) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now, heretofore and
hereafter proposed to be conducted, (d) has all licenses, permits,
consents or approvals (including, without limitation, gaming licenses, permits,
consents and approvals) from or by, and has made all filings with, and has
given all notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct, (e) is in compliance
with its charter and bylaws, and (f) is in compliance with all applicable
provisions of law (including, without limitation, all applicable gaming laws)
and all rules, regulations and orders of all Governmental Authorities.

 

26

 

Section 4.2                                   Executive
Offices; Collateral Locations; FEIN; Organizational Information; Trade Names.

 

As of the Closing Date, the current location of each
Borrower’s chief executive office, principal place of business, other offices,
the warehouses and premises within which any Collateral is stored or located,
and the locations of each Borrower’s books and records concerning the
Collateral are as set forth on Schedule 4.2 hereto.  In addition, Schedule 4.2 lists the
federal employer identification number of each Borrower.  The exact legal name of each Borrower is as
set forth in the preamble to this Agreement. 
During the five years prior to the Closing Date, none of Borrowers has
been known as or used any corporate, fictitious or trade name.  Each Borrower’s jurisdiction of organization
is as set forth in the preamble to this Agreement.

 

Section 4.3                                   Organizational
Power, Authorization, Enforceable Obligations.

 

The execution, delivery and performance by each
Borrower of the Loan Documents to which it is a party and the creation of all
Liens on its property provided for therein (a) are within such Person’s power,
(b) have been duly authorized by all necessary corporate action, (c) do
not contravene any provision of such Person’s charter or bylaws, (d) do not
violate any law or regulation, or any order or decree of any court or
Governmental Authority, (e) do not conflict with or result in the breach or
termination of, constitute a default  under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, contract, agreement or other instrument to which such Person is a
party or by which such Person or any of its property is bound, (f) do not
result in the creation or imposition of any Lien upon any of the property of
such Person other than those in favor of Agent, for the benefit of Lender
Group, pursuant to the Loan Documents, and (g) do not require the consent or
approval of any Governmental Authority or any other Person, except those which
will have been duly obtained, made or complied with prior to the Closing
Date.  Each of the Loan Documents has
been duly executed and delivered by each Borrower that is a party thereto and
each such Loan Document constitutes a legal, valid and binding obligation of
such Borrower enforceable against such Borrower in accordance with its terms.

 

Section 4.4                                   Financial
Statements; Projections.

 

(a)           Financial
Statements.  All Financial
Statements referenced below have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed
therein and except, with respect to unaudited Financial Statements, for the
absence of footnotes and normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby
as at the dates thereof and the results of such Person’s operations and cash
flows for the periods then ended.  The
following Financial Statements have been delivered as of the date hereof:

 

(i)            The
audited consolidated balance sheets for the Fiscal Years ended December 31,
2002, 2001 and 2000 and the related statements of income and cash flows of each
Borrower for the Fiscal Years then ended, audited by Piercy, Bowler, Taylor
& Kern.

 

27

 

(ii)           The
unaudited consolidated balance sheet(s) at September 30, 2003 and the related
statement(s) of income and cash flows of Borrowers for the 9 months then ended.

 

(b)           Projections.  The Projections delivered to Agent on or
prior to the date hereof have been prepared by Borrowers in light of the past
operations of the Business.  The
Projections are based upon estimates and assumptions stated therein, all of
which Borrowers believe to be reasonable and fair in light of current
conditions and current facts known to them and, as of the Closing Date, reflect
Borrowers’ good faith and reasonable estimates of the future financial
performance of Borrowers and of the other information projected therein for the
period set forth therein.

 

Section 4.5                                   Certain
Indebtedness.

 

Schedule 4.5
hereto lists all of the Indebtedness of the Borrowers as of the Closing Date,
under which Indebtedness any of the Borrowers is required to maintain a minimum
net worth or minimum shareholder equity or similar requirement (such
requirements are referred to herein as “Net Worth Covenants”).  Schedule 4.5 hereto additionally
lists all of the Recourse Indebtedness of the Borrowers as of the Closing Date
in connection with any transaction involving Trump Hotels & Casino Resorts
Inc. or its Subsidiaries.

 

Section 4.6                                   Material
Adverse Effect.

 

Between December 31, 2002 and the Closing Date, (a) no
Borrower has incurred any obligations, contingent or non-contingent
liabilities, liabilities for Charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the Financial Statements and
which, alone or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Borrower or has become binding upon any
Borrower’s assets and no law or regulation applicable to any Borrower has been
adopted which has had or could reasonably be expected to have a Material
Adverse Effect, and (c) no Borrower is in default and to the best of Borrowers’
knowledge no third party is in default under any contract, lease or other
agreement or instrument, which alone or in the aggregate could reasonably be
expected to have a Material Adverse Effect. 
Between December 31, 2002 and the Closing Date, no event has occurred
which, alone or together with other events, could reasonably be expected to
have a Material Adverse Effect.

 

Section 4.7                                   Ownership
of Property; Liens.

 

Borrowers own the Collateral free and clear of any
Liens, other than Permitted Encumbrances, and there are no facts, circumstances
or conditions known to any Borrower that may result in any Liens on the
Collateral, other than Permitted Encumbrances. 
Each Borrower has received all assignments, waivers, consents or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Borrower’s right, title and interest in and to all Collateral.  The Liens granted to Agent, for the benefit
of Lender Group, pursuant to the Collateral Documents will at all times be
fully perfected first priority Liens in and to the Collateral described
therein.  Each Borrower has rights in
and the power to transfer each item of the Collateral upon which it

 

28

 

purports to grant a Lien under the Security Agreement
free and clear of any Liens other than Permitted Encumbrances.

 

Section 4.8                                   Labor
Matters.

 

As of the Closing Date (a) no strikes or other
material labor disputes against any Borrower are pending or, to any Borrower’s
knowledge, threatened, (b) hours worked by and payment made to employees of
each Borrower comply with all federal, state, local or foreign law applicable
to such matter, (c) all payments due from any Borrower for employee health and
welfare insurance have been paid or accrued as a liability on the books of such
Borrower, (d) there is no organizing activity involving any Borrower
pending or, to any Borrower’s knowledge, threatened by any labor union or group
of employees, (e) there are no representation proceedings pending or, to any
Borrower’s knowledge, threatened with the National Labor Relations Board, and
no labor organization or group of employees of any Borrower has made a pending
demand for recognition, and (f) there are no complaints or charges against
any Borrower pending or, to the knowledge of any Borrower, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any individual by any of Borrowers.

 

Section 4.9                                   Ventures,
Subsidiaries And Affiliates; Outstanding Stock and Indebtedness.

 

As of the Closing Date, none of Borrowers has any
material Subsidiaries, is engaged in any joint venture or partnership with any
other Person, or is an Affiliate of any other Person, except that each of
PDS-NV, PDS-CO and PDS-MS is a wholly-owned subsidiary of PDS.  Except as set forth on Schedule 4.9,
all outstanding Indebtedness and Guaranteed Indebtedness of each Borrower as of
the Closing Date (except the Obligations) is described in the Financial
Statements.

 

Section 4.10                            Government
Regulations.

 

None of Borrowers is an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act
of 1940, as amended.  None of Borrowers
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, or any other federal or state statute that restricts or
limits such Borrower’s ability to incur Indebtedness or to perform its
obligations hereunder.  As of the
Closing Date, none of (a) the undertakings by Agent of its obligations
hereunder and under the other Loan Documents, nor (b) the making of the Loan by
Lenders to Borrowers, nor (c) the making of any other loan by any Lender to any
Borrower pursuant to any other contract, agreement or understanding in
existence as of the Closing Date, nor (d) the application of the proceeds
thereof and repayment thereof will violate any provision of any such statute or
any rule, regulation or order issued by any Governmental Authority or require
any filing with or licensing from any Governmental Authority (other than, in
the case of filings only, periodic transaction reports or similar documents
submitted to Governmental Authorities in the ordinary course of Borrowers’
Business, consistent with past practices).

 

29

 

Section 4.11                            Margin
Regulations.

 

None of Borrowers is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” as such
terms are defined in Regulation U of the Federal Reserve Board as now and from
time to time hereafter in effect (such securities being referred to herein as “Margin
Stock”).  None of
Borrowers owns any Margin Stock, and none of the proceeds of the Loan will be
used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose which might cause the Loan to be considered a “purpose credit” within
the meaning of Regulation T, U or X of the Federal Reserve Board.  None of Borrowers will take or permit to be
taken any action which might cause any Loan Document to violate any regulation
of the Federal Reserve Board.

 

Section 4.12                            No
Litigation.

 

No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Borrower, threatened
against any Borrower or any of its officers or directors, before any
Governmental Authority or before any arbitrator or panel of arbitrators
(collectively, “Litigation”), (a) that challenges such
Borrower’s right or power to enter into or perform any of its obligations under
the Loan Documents to which it is a party, or the validity or enforceability of
any Loan Document or any action taken thereunder, or (b) that has a reasonable
risk of being determined adversely to such Borrower or any of its officers or
directors and which, if so determined, could have a Material Adverse
Effect.  As of the Closing Date there is
no Litigation pending or threatened which seeks damages in excess of One
Hundred Thousand Dollars ($100,000) or injunctive relief against or alleges
criminal misconduct of any Borrower or any of its officers or directors.

 

Section 4.13                            Brokers.

 

No broker or finder brought about the obtaining,
making or closing of the Loan or the transactions contemplated hereby, and no
Borrowers nor any Affiliate of any of them has any obligation to any Person in
respect of any finder’s or brokerage fees in connection therewith, other than
the Investment Banking Fee payable by Borrowers to Libra on or before the
Closing Date.

 

Section 4.14                            Intellectual
Property.

 

As of the Closing Date, each Borrower owns or has
rights to use all Intellectual Property necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by
it.  Each Borrower conducts its business
and affairs without infringement of or interference with any Intellectual
Property of any other Person in any material respect.  No Borrower is aware of any infringement claim by any other
Person with respect to any Intellectual Property.

 

30

 

Section 4.15                            Insurance.

 

Borrowers maintain policies of insurance from
reputable insurance providers, which policies provide adequate coverage for the
reasonably foreseeable risks to and losses of Borrowers and their
business.  Borrowers’ insurance under
such policies satisfies the requirements contained in Section 5.5
hereof.  No notice of cancellation has
been received with respect to such policies, and Borrowers are in compliance
with all conditions contained in such policies.  Borrowers have not, as of the date hereof, and will not,
subsequent to the date hereof, collaterally assigned the key man life insurance
policies described in Section 5.9 or the benefits thereof to any other
Person, other than to Agent, for the benefit of the Lender Group.

 

Section 4.16                            Government
Contracts.

 

As of the Closing Date, none of Borrowers is a party
to any contract or agreement with any Governmental Authority and none of
Borrowers’ accounts (as defined in the Code) are subject to the Federal
Assignment of Claims Act (31 U.S.C. Section 3727), as amended, or any similar
state or local law.

 

Section 4.17                            Taxes.

 

All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Borrower have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid).  Proper and accurate amounts have been
withheld by each Borrower from its respective employees for all periods in full
and complete compliance with all applicable federal, state, local and foreign
law and such withholdings have been timely paid to the respective Governmental
Authorities.  None of Borrowers’ tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority.  No Borrower has
executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges.  None of Borrowers and their respective predecessors are liable
for any Charges (a) under any agreement (including any tax sharing agreement)
or (b) to each Borrower’s knowledge, as a transferee.  As of the Closing Date, no Borrower has agreed or been requested
to make any adjustment under Section 481(a) of the IRC, by reason of a change
in accounting method or otherwise, which could have a Material Adverse Effect.

 

Section 4.18                            Accounts
Receivable.

 

All accounts and lease and loan receivables of
Borrowers have arisen from bona fide transactions by a Borrower in
the ordinary course of its business. 
All such accounts and lease and loan receivables are good and
collectible (net of reasonable reserves therefor taken consistently with
Borrowers’ past practices) in the ordinary course of business at the aggregate
recorded amounts thereof.  All such
accounts and lease and loan receivables that have been purchased by a Borrower
have been sold and duly transferred to Borrowers and constitute the assets of
Borrowers and no other Person has any ownership thereof or any Lien thereon.

 

31

 

Section 4.19                            Customer
And Trade Relations

 

As of the Closing Date, there exists no actual or, to
the knowledge of any Borrower, threatened termination or cancellation of, or
any material adverse modification or change in (a) the business relationship of
any Borrower with any customer or group of customers whose purchases during the
preceding twelve (12) months caused them to be ranked among the ten (10)
largest customers of such Borrower, (b) the business relationship of any
Borrower with any supplier material to its operations or (c) the business
relationship of any Borrower with any of its lenders.

 

Section 4.20                            Solvency.

 

Both before and after giving effect to (a) the Loan, (b)
the disbursement of the proceeds of the Loan, (c) the consummation of the other
transactions contemplated hereby and by the Material Contracts, (d) any other
action or transfer of any kind permitted by the Loan Documents and (e) the
payment and accrual of all transaction costs in connection with the foregoing,
each Borrower is and will be Solvent.

 

Section 4.21                            Full
Disclosure.

 

No information contained in this Agreement, any of the
other Loan Documents, any Projections, Financial Statements or other reports
from time to time delivered hereunder or any written statement furnished by or
on behalf of any Borrower to Agent or Lenders contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Each Borrower executing this Agreement jointly and
severally agrees that from and after the Closing Date and until the Termination
Date:

 

Section 5.1                                   Maintenance
of Existence and Conduct of Business.

 

Each Borrower shall (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its
organizational existence and its rights and franchises, (b) obtain all
necessary and appropriate third party and governmental waivers and consents, (c) continue
to conduct its business substantially as now conducted or as otherwise
permitted hereunder, and (d) at all times maintain, preserve and protect all of
its assets and properties used or useful in the conduct of its business, and
keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices.

 

32

 

Section 5.2                                   Maintenance
of Material Contracts.

 

Each Borrower shall duly and punctually perform,
observe and comply with all of the terms, provisions, conditions, obligations,
covenants and agreements on its part to be performed under the Material
Contracts.

 

Section 5.3                                   Payment
of Obligations.

 

Each Borrower shall pay and discharge or cause to be
paid and discharged promptly all Charges payable by it, including (a) Charges
imposed upon it, its income and profits, or any of its property (real, personal
or mixed) and all Charges with respect to tax, social security and unemployment
withholding with respect to its employees, (b) lawful claims for labor,
materials, supplies and services or otherwise, before any thereof shall become
past due, and (c) all storage or rental charges payable to warehousemen or
bailees, in each case, before any thereof shall become past due.

 

Section 5.4                                   Books
and Records.

 

Each Borrower shall keep adequate books and records
with respect to its business activities in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financial Statements.

 

Section 5.5                                   Insurance;
Damage to or Destruction of Collateral.

 

(a)           Borrowers
will maintain or cause to be maintained with financially sound and reputable
insurers satisfying the criteria specified herein, public liability, property
damage, business interruption and other types of insurance with respect to the
Contract Collateral against all losses, hazards, casualties, liabilities and
contingencies as customarily carried or maintained by Persons of established
reputation engaged in similar businesses and as Agent and/or Lenders shall
reasonably require and in such amounts and for such periods as Agent and/or
Lenders shall reasonably require.

 

(b)           Each
carrier providing any insurance, or portion thereof, required by this Section
5.5 shall be licensed to do business in the jurisdiction or jurisdictions
in which any Contract Collateral is located, and shall have an A.M. Best rating
of not less than A.

 

(c)           All
insurance policies and renewals thereof (i) shall be in a form acceptable to
Agent and Lenders, (ii) shall provide for a term of not less than one year,
(iii) shall provide by way of endorsement, rider or otherwise that such
insurance policy shall not be canceled, endorsed, altered, or reissued to
effect a change in coverage unless such insurer shall have first given Agent 30
days prior written notice thereof, (iv) shall provide for claims to be made on
an occurrence basis, (v) shall include coverage for terrorism, if the cost of
obtaining such coverage for any Contract Collateral will not increase by more
than thirty percent (30%) the renewal premium for such insurance for any
Contract Collateral, as compared to the renewal premium for substantially
identical insurance that does not provide terrorism coverage, and
(vi) shall contain an agreed value clause updated annually (if the amount
of coverage under such policy is based upon the replacement cost of any
Contract Collateral).  All property
damage insurance policies must automatically reinstate after each loss.

 

33

 

(d)           Borrowers
shall provide to Agent, at the request of Agent or any Lenders, a summary
report, in the level of detail as Agent shall reasonably request, with respect
to all such insurance coverage.

 

Section 5.6                                   Maintenance
of Contract Collateral, Casualty.

 

(a)           Borrowers
will maintain or cause to be maintained in good repair, working order and
condition (ordinary wear and tear excepted) all Contract Collateral, and will
make or cause to be made all appropriate repairs, renewals and replacements
thereof.  Borrowers will repair any
Contract Collateral to which any casualty has occurred to at least its
pre-casualty condition.  All work
required or permitted under this Agreement shall be performed in a workmanlike
manner and in compliance with all applicable laws.

 

(b)           In
the event of casualty or loss of any Contract Collateral, Borrowers shall give
prompt written notice of the same to the insurance carrier and to Agent.  Borrowers hereby authorize, empower and
appoint Agent as attorney-in-fact for Borrowers to make proof of loss, to
adjust and compromise any claim under insurance policies, to appear in and
prosecute any action arising from such insurance policies, to collect insurance
proceeds and, to the extent Borrowers are not contractually obligated to
distribute such proceeds to third Persons, hold such insurance proceeds, and to
deduct therefrom Agent’s and Lenders’ expenses incurred in the collection of
such proceeds; provided however, that Agent may not exercise any of the
foregoing actions unless Borrowers fail to take such actions promptly on their
own and nothing contained in this Section 5.6 shall require Agent or
Lenders to incur any expense or take any action hereunder.

 

Section 5.7                                   Inspection.

 

Borrowers shall permit any authorized representatives
designated by Agent or Lenders to visit the offices of Borrowers and inspect
the Collateral, including its financial and accounting records, and to make
copies and take extracts therefrom, and to discuss its affairs, finances and
business with its officers and independent public accountants, at such times
and as often as Agent or any Lender request.

 

Section 5.8                                   Maintenance
of Franchises and Licenses; Compliance with Laws and Contractual Obligations.

 

Borrowers will (a) comply with the requirements
of all present and future applicable laws, rules, regulations and orders of any
Governmental Authority, including without limitation, all gaming laws, rules
and regulations, (b) maintain in full force and effect all licenses,
franchises and permits now held or hereafter acquired by any of them, in each case,
that are material to Borrowers’ Business, and (c) perform, observe, comply
and fulfill all of their respective obligations, covenants and conditions with
respect to the Material Contracts.

 

Section 5.9                                   Key
Man Insurance

 

Borrowers will (a) collaterally assign an existing key
man life insurance policy on the life of Finley in the amount of Two Million
Dollars ($2,000,000) and (b) establish with an insurance provider reasonably
satisfactory to Agent, one or more replacement key man life

 

34

 

insurance policies on the life of Finley, with terms
aggregating not less than 10 years, in an amount not less than Five Million
Dollars ($5,000,000), in each case, in accordance with the Post-Closing
Letter.  Additionally, Borrowers timely
will pay all premiums in respect of such key man life insurance policies as and
when due.  Borrowers shall collaterally
assign such replacement key man life insurance policies to Agent, for the
benefit of the Lender Group, in accordance with the Post-Closing Letter and
Borrowers shall maintain such replacement key man life insurance policies in
full force and effect from the date on which Borrowers are required to obtain
such replacement key man life insurance policies pursuant to the Post-Closing
Letter through and including the Termination Date.

 

Section 5.10                            Reports
And Notices.

 

Borrowers shall deliver to Agent and each Lender (or
to an Affiliate of Agent or any Lender, if Agent or such Lender, as the case
may be, shall designate to Borrowers, in writing) the Financial Statements,
notices, and other information as follows:

 

(a)           Monthly
Financials.  Within thirty (30) days
after the end of each calendar month, financial information regarding Borrowers
and their Subsidiaries, consisting of consolidated unaudited balance sheets and
the related statements of income, in each case, as of the close of such month,
and, in each case, for that portion of the Fiscal Year ending as of the close
of such month, each prepared in accordance with GAAP (subject to the absence of
footnotes and normal year-end adjustments).

 

(b)           Annual
Audited Financials.  Within ninety
(90) days after the end of each Fiscal Year, audited Financial Statements for
each Borrower and their respective Subsidiaries on a consolidated basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in
accordance with GAAP, certified as to such consolidated statements without
qualification, by Piercy, Bowler, Taylor & Kern or an independent certified
public accounting firm of national standing or otherwise acceptable to
Agent.  Such Financial Statements shall
be accompanied by a report from such accounting firm to the effect that, in
connection with its audit examination, nothing has come to its attention to
cause them to believe that a Default or Event of Default has occurred (or
specifying those Defaults and Events of Default that they became aware of), it
being understood that such audit examination extended only to accounting
matters and that no special investigation was made with respect to the
existence of Defaults or Events of Default, (ii) a letter addressed to Agent,
in form and substance reasonably satisfactory to Agent and subject to standard
qualifications required by nationally recognized accounting firms, signed by
such accounting firm acknowledging that Agent and Lenders are entitled to rely
upon such accounting firm’s certification of such audited Financial Statements,
and (iii) the annual letters to such accountants in connection with its audit
examination detailing contingent liabilities and material litigation matters.

 

(c)           Compliance
Certificate.  Each Financial
Statement delivered pursuant to Section 5.10(a) or (b) shall be
accompanied by a certificate of the chief financial officer of Borrowers (i)
certifying that (A) such consolidated financial information presents fairly in
accordance with GAAP (subject in the case of monthly financial information to
the absence of

 

35

 

footnotes and
normal year-end adjustments) the financial position and results of operations
of Borrowers, on a consolidated basis, (B) any other information presented
therein is true and correct and complete in all material respects, and (C)
there was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default, and (ii) setting forth calculations (with such specificity as the
Agent may reasonably request) of the period then ended which demonstrate
compliance with ARTICLE VI hereof.

 

(d)           Monthly
Holdings Report.  Within thirty (30)
days after the expiration of each calendar month, Borrowers shall deliver to
Agent a true, complete and correct Monthly Holdings Report as of the end of the
prior calendar month and in form and substance reasonably satisfactory to
Agent.

 

(e)           Management
Letters.  Within five (5) Business
Days after receipt thereof by any Borrower, copies of all management letters,
exception reports or similar letters or reports received by such Borrower from
its independent certified public accountant.

 

(f)            Default
Notices; Covenant Relief Notices. 
As soon as practicable, and in any event within two (2) Business Days
after an executive officer of any Borrower has actual knowledge of the
existence of any Default, Event of Default or other event which has had a
Material Adverse Effect, telephonic or telecopied notice specifying the nature
of such Default or Event of Default or other event, including the anticipated
effect thereof, which notice, if given telephonically, shall be promptly
confirmed in writing on the next Business Day. 
As soon as possible, and in any event within one (1) Business Day of
Borrowers making the determination that they are entitled to relief from certain
covenants pursuant to Section 5.12 or Section 12.1(a), Borrowers
shall deliver to Agent, a written notice setting forth, in such detail as Agent
shall request, (i) the adverse determination by the relevant Governmental
Authority, (ii) the steps Borrowers took to obtain approval and/or waiver from
such Governmental Authority, and (iii) the extent to which Borrowers will be
unable to comply with the covenants set forth in Section 5.12 or Section
12.1(a), as the case may be.

 

(g)           Shareholder
Reports and Press Releases. 
Promptly upon their becoming available, copies of (i) all Financial
Statements, reports, notices and proxy statements made available by PDS to its
security holders, (ii) all regular and periodic reports filed by any Borrower
with any governmental or private regulatory authority, and (iii) all press
releases and other statements made available by any Borrower concerning
material changes or developments in the business of such Borrower.

 

(h)           Litigation.  Promptly upon learning thereof, written
notice of any Litigation commenced or threatened against any Borrower that (i)
seeks damages in excess of One Hundred Thousand Dollars ($100,000) or could
reasonably be expected to exceed One Hundred Thousand Dollars ($100,000), (ii)
seeks injunctive relief or (iii) alleges criminal misconduct by any Borrower.

 

(i)            Insurance
Notices.  Disclosure of losses or
casualties required to be covered by insurance in accordance with Section
5.5 of this Agreement.

 

36

 

(j)            Lease
Default Notices.  Within two (2) Business
Days of receipt thereof, copies of (i) any and all default notices received
under or with respect to any leased location or public warehouse where
Collateral is located and (ii) such other notices or documents as Agent may
request in its reasonable discretion.

 

(k)           Governmental
Authority Notices.  Immediately upon
receipt thereof (i) copies of any and all notices, letters, demands or other
correspondence received from a Governmental Authority and (ii) written notice
of any oral communications between any employee, officer or agent of any
Borrower and any Governmental Authority, which communication could have, either
at the moment or with the passage of time, a Material Adverse Effect; provided
that with respect to notices, letters, demands or other correspondence or oral
communications regarding Agent, any Lender or any agent or lender under the
Last-Out Documents, Borrowers shall forward copies of such notices, letters,
demands or other correspondence or written notice of such oral communications,
irrespective of whether such communication could have a Material Adverse
Effect.

 

(l)            Certain
Filings; Requests for Information. 
Without limiting Borrowers’ obligations under Section 7.10,
within seven (7) calendar days prior to the date on which any Borrower
anticipates making such filing, copies of any and all filings with any
Governmental Authority, whether pursuant to a licensing or permitting
requirement or otherwise, which filing includes a reference to Agent, Lender or
any agent or lender under the Last-Out Documents, whether such reference is by
name or by other identifying information. 
Concurrent with the making of any such filing with a Governmental
Authority, Borrowers shall delivered to Agent and Lenders a complete copy of
such filing (redacting information in such filing to the extent that Borrowers
are required to maintain such information confidential) in the form it was
filed with such Governmental Authority. 
The prior notice requirement set forth in this Section 5.10(l)
shall not apply where the subject filing, or any component thereof, was
provided or prepared in whole or in party by Agent or any Lender or a Person
acting as a representative of Agent or any Lender.

 

(m)          Other
Documents.  Such other financial and
other information respecting Borrowers’ business or financial condition as
Agent or any Lender shall from time to time reasonably request, including
without limitation, financial reports in form and substance satisfactory to
Agent and Lenders regarding Borrowers.

 

Section 5.11                            Repayment
or Refinance of Certain Indebtedness; Consummation of PDSH Merger.

 

On or prior to April 1, 2005, Borrowers shall repay,
refinance or otherwise satisfy in full all of the Indebtedness set forth on Schedule
4.5, except with respect to the Indebtedness owed by Borrowers to MW Post
Advisory Group, LLC (“MW Post”), and except to the extent
that the Net Worth Covenants included in such Indebtedness would not be
breached by (i) PDS’s consummation of the PDSH Merger, or (ii) Borrowers’
performance of the obligations set forth in Section 5.12.  With respect to the Indebtedness owed by
Borrowers to MW Post, each Borrower shall use reasonable best efforts to either
(a) obtain a waiver from MW Post of the obligations with respect to the Net
Worth Covenant included in such Indebtedness to the extent that such Net Worth
Covenant would be breached by consummation of the PDSH Merger or

 

37

 

Borrowers’ performance of the obligations described in
Section 5.12, or (b) repay or refinance such Indebtedness in full, in
each case, prior to April 1, 2005.  With
respect to any refinancing of any of the Indebtedness set forth on Schedule
4.5 (including the Indebtedness owed by Borrowers to MW Post), Borrowers
shall give priority consideration to the 2004 Lender to provide such
refinancing, which priority consideration shall include providing the 2004
Lender with fifteen (15) days’ notice prior to the date on which Borrowers
anticipate approaching lenders other than 2004 Lender in respect of any such
refinancing and not consummating any such refinancing on terms that are equal
to or more favorable to such lenders than the terms offered by the 2004
Lender.  Within sixty (60) days of
Borrowers having repaid, refinanced or otherwise satisfied in full the
Indebtedness set forth on Schedule 4.5 (other than Indebtedness owed by
Borrowers to MW Post) and Borrowers having obtained a waiver from MW Post (as
set forth in clause (a) above) or having repaid or refinanced in full the
Indebtedness owing to MW Post (as set forth in clause (b) above) PDS shall
consummate the PDSH Merger.

 

Section 5.12                            Guaranty
of PDSH Loan; Assumption of PDSH Loan.

 

In the event that Lenders make the PDSH Loan to PDSH,
each Borrower shall provide to Lenders a guaranty of PDSH’s prompt and complete
payment and performance of the PDSH Loan and the obligations related thereto,
which guaranty shall be on a full recourse basis and which guaranty shall be
secured by the Collateral on a pari passu basis with the Loan.  At such time, Borrowers shall execute and
deliver to Lenders such documentation and shall take such other action as the
Lenders request to evidence such guaranty and such security interest.   Borrowers shall not be required to comply
with the covenant set forth in the first two sentences of this Section 5.12
to the extent, and solely to the extent, that a Governmental Authority has
determined that compliance with such covenant will require approval of a
Governmental Authority or will be in contravention of a law, rule or regulation
promulgated by a Governmental Authority and, notwithstanding each Borrowers’
exercise of best efforts to obtain approval from such Governmental Authority or
to obtain a waiver in respect of such law, rule or regulation, as the case may be,
the Borrowers were unable to obtain such approval or such waiver, as the case
may be.  From time to time following the
consummation of the PDSH Loan, Borrowers shall assume (through such structures
as are reasonably acceptable to Lenders and to Borrowers) the PDSH Loan to the
maximum extent permitted by any then outstanding Net Worth Covenants pursuant
to which Borrowers are obligated.

 

Section 5.13                            Intellectual
Property.

 

Each Borrower will conduct its business and affairs
without infringement of or interference with any intellectual property of any
other Person.

 

Section 5.14                            Communication
With Accountants.

 

Each Borrower authorizes Agent and each Lender to
communicate directly with its independent certified public accountants and
authorizes and, at Agent’s or a Lender’s request, shall instruct those
accountants to disclose and make available to Agent and each Lender any and all
Financial Statements and other supporting financial documents, schedules and
information relating to any Borrower (including copies of any issued management
letters) with respect to the business, financial condition and other affairs of
any Borrower.

 

38

 

Section 5.15                            Further
Assurances.

 

Each Borrower executing this Agreement agrees that it
shall, at the expense of Borrowers, duly execute and deliver, or cause to be
duly executed and delivered, to Agent and Lenders such further instruments, and
do and cause to be done such further acts, as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any of the Loan Documents.

 

ARTICLE VI

FINANCIAL COVENANTS

 

Section 6.1                                   Minimum
Excess Cash Balance.

 

Borrowers at all times shall maintain the Minimum
Excess Cash Balance on deposit in the Blocked Account.

 

Section 6.2                                   Loan
to Adjusted Book Equity.

 

The outstanding principal amount of the Loan shall at
no time exceed fifty percent (50%) of the amount set forth as “Total PDS
Equity” in Borrowers’ Monthly Holdings Report from time to time delivered
hereunder pursuant to Section 5.10(d). 
With respect to each Monthly Holdings Report, Borrowers shall prepare
the amount identified “Total PDS Equity” in such Monthly Holdings Report in a
manner that is consistent with Borrowers’ preparation of the amount identified
as “Total PDS Equity” in the Monthly Holdings Report attached hereto as Exhibit
6.2.

 

ARTICLE VII

NEGATIVE COVENANTS

 

Each Borrower executing this Agreement jointly and
severally agrees as to both of them, from and after the date hereof until the
Termination Date:

 

Section 7.1                                   Amendments
to Organization Documents.

 

No Borrower shall amend its charter or bylaws in a
manner which would adversely affect Agent or any Lender or such Borrower’s duty
or ability to repay the Obligations.

 

Section 7.2                                   Use
of Loan Proceeds and Excess Cash.

 

(a)           Borrowers
shall not use the (i) Senior Subordinated Note Payoff Amount for any purpose
other than to pay in full those certain existing 10% Senior Subordinated Notes
of PDS due July 1, 2004 and 12% Senior Subordinated Notes of PDS due July 1,
2007, and (ii) Net Loan Proceeds for any purpose other than as described in Section
2.3.

 

(b)           Borrowers
shall not use the Excess Cash (as it is from time to time defined hereunder)
for any other purpose other than (i) for general corporate purposes, (ii) to
make scheduled payments of interest on each Interest Payment Date, (iii) to
make prepayments of principal and interest from time to time pursuant to Section
2.2, (iv) to invest in SPV

 

39

 

Transactions and
Permitted Investments and (v) to invest in Investment Transactions that are in
the ordinary course of Borrowers’ Business, consistent with past
practices.  Further, Borrowers shall not
use the Excess Cash (as it is from time to time defined hereunder) in
connection with (A) transactions that are not in the ordinary course of any
Borrowers’ Business, consistent with past practices, that will require Excess
Cash (1) in any single calendar quarter, in excess of $50,000 or (2) in the
aggregate after the Closing Date, in excess of $250,000, provided that,
the one time use by Borrowers of an additional amount of Excess Cash toward
acquisition of a building, such amount of additional Excess Cash not to exceed
$250,000 (the “Specified Real Property Investment”),
shall not be included in determining the amounts set forth in clause (1) (with
respect to the calendar quarter in which such one time use is made) or (2) (in
the aggregate), or (B) an Investment Transaction or SPV Transaction that is in
the ordinary course of Borrowers’ Business, consistent with past practices, but
will require Excess Cash in excess of $1,500,000, provided that, with
respect to (B) only, if Agent is a lender in respect of such SPV Transaction,
Borrowers need not obtain Agent’s or Lenders’ consent prior to using Excess
Cash in connection with such SPV Transaction.

 

(c)           Disbursements
of Excess Cash (including Net Loan Proceeds) to Borrowers for any of the
aforementioned purposes shall not be made other than in accordance with the
procedures set forth in Section 8.4.

 

Section 7.3                                   Indebtedness.

 

(a)           Borrowers
shall not, directly or indirectly, incur any Indebtedness or Guaranteed
Indebtedness secured by all or any portion of the Collateral or the Route
Equity, other than in favor of Agent or Lenders in connection with the PDSH
Loan, and, with respect to the Route Equity only, in connection with the Route
Note.  From and after the Closing Date,
Borrowers shall not incur any additional Indebtedness or Guaranteed
Indebtedness except for Match-Funded Indebtedness, other than Indebtedness or
Guaranteed Indebtedness in favor of Agent or Lenders in connection with the
PDSH Loan.  Notwithstanding the immediately
preceding sentence, Borrowers shall not incur any Indebtedness, the terms and
conditions of which Indebtedness (a) include a Net Worth Covenant, the
threshold of which is in excess of $6,000,000 or (b) would be breached by the
consummation of the PDSH Merger or by Borrowers’ performance of their
obligations under Section 5.12.

 

(b)           Without
limiting Section 7.3(a) or Section 7.3(c), Borrowers shall not,
directly or indirectly, incur Recourse Indebtedness in excess of $36,450,000,
other than Indebtedness in favor of Agent or Lenders in connection with the
PDSH Loan.  Without limiting the
immediately preceding sentence and without limiting Section 7.3(a) or Section
7.3(c), Borrowers shall not, directly or indirectly, incur Recourse
Indebtedness with an LTV that exceeds seventy-five percent (75%), other than
(i) Recourse Indebtedness in the principal amount of no more than $3,000,000
incurred in connection with any single SPV Transaction or Investment
Transaction, or (ii) Recourse Indebtedness in an aggregate principal amount
greater than $2,000,000 but less than $10,000,000 with one or more pooled SPV
Transactions or Investment Transactions so long as the Recourse Indebtedness on
any single transaction within the pool does not exceed $3,000,000.

 

40

 

(c)           Borrowers
shall not, directly or indirectly, amend, restate, modify, extend, restructure
or refinance any of Borrowers’ Indebtedness
or Guaranteed Indebtedness, the amendment, restatement, modification,
extension, restructuring or refinancing of which would (i) increase the principal amount of such
Indebtedness or Guaranteed Indebtedness, (ii) increase the interest rate of
applicable to Indebtedness, (iii) increase the amortization payments of such
Indebtedness, (iv) modify materially the collateral for such Indebtedness or
Guaranteed Indebtedness, (v) make more restrictive the covenants applicable to
such Indebtedness or Guaranteed Indebtedness or (vi) shorten the maturity of
such Indebtedness.

 

Section 7.4                                   Liens.

 

Borrowers shall not create, incur, assume or permit to
exist any Lien on or with respect to all or any portion Collateral or the Route
Equity, other than Permitted Encumbrances and in connection with the PDSH Loan
and, with respect to the Route Equity only, other than in connection with the
Route Note.  Without limiting the
immediately preceding sentence, Borrowers shall not create, incur, assume or
permit to exist any Lien on or with respect to any assets of any of Borrowers
other than the Collateral and the Route Equity, except that Borrowers may
create, incur, assume or permit to exist Liens on or with respect to the gaming
or related furniture, fixtures or equipment and projected income, rents,
issues, profits or purchase price due to any Borrower pursuant to a contract,
agreement or understanding concerning the selling or leasing of such gaming or
related furniture, fixtures or equipment, in each case, in connection with
Indebtedness permitted pursuant to Section 7.3(a) or Section 7.3(b).

 

Section 7.5                                   Change
of Name Or Location; Change of Fiscal Year.

 

No Borrower shall change its exact legal name, its
jurisdiction of organization or its chief executive office, principal place of
business and other offices, warehouses or premises at which Collateral is held
or stored, or the location of its records concerning the Collateral from the
information referenced in Section 4.2, in each case without at least
thirty (30) days’ prior written notice to Agent and after Agent’s written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including any action necessary to continue the perfection of any
Liens in favor of Agent, for the benefit of Lender Group, in any Collateral,
has been completed or taken, and provided, further, that any such
new location shall be in the continental United States.  Without limiting the generality of the
foregoing, no Borrower shall change its name, identity or organizational
structure in any manner which might make any financing or continuation statement
filed in connection with this Agreement or any other Loan Document seriously
misleading within the meaning of Sections 9-503(a)(4) and 9-507 of the Code or
any other then applicable provision of the Code except upon prior written
notice to Agent and after Agent’s written acknowledgment that any reasonable
action requested by Agent in connection therewith, including any action
necessary to continue the perfection of any Liens in favor of Agent, for the
benefit of Lender Group, in any Collateral, has been completed or taken.  No Borrower shall change its Fiscal Year.

 

41

 

Section 7.6                                   Last-Out
Payments; Transfers of Collateral.

 

No Borrower shall direct Wishnow to make any Last-Out
Payments other than to the Blocked Account. 
No Borrower shall transfer any right, title or interest in or to any
Collateral.

 

Section 7.7                                   Investments;
Restricted Payments.

 

No Borrower shall make any Investments other than in
Investment Transactions that are in the ordinary course of Borrowers’ Business,
consistent with past practices, SPV Transactions and Permitted Investments; provided
that any and all proceeds, products and profits of any such Investments
(including, in the case of SPV Transactions, SPV Equity and, in the case of
Investment Transactions, Investment Transaction Equity) shall become Excess
Cash and shall be deposited into the Blocked Account in accordance with Section
8.3(b); provided  further that Borrowers shall provide Agent
notice prior to making any Investment permitted hereunder. No Borrower shall make
any Restricted Payment.

 

Section 7.8                                   Transactions
with Affiliates.

 

No Borrower shall directly or indirectly enter into or
permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
any Borrower, except transactions in the ordinary course of and pursuant to the
reasonable requirements of the Business and upon fair and reasonable terms
which are no less favorable to the applicable Borrower than would be obtained in
a comparable arm’s length transaction with a Person that is not an Affiliate of
a Borrower and except (a) with respect to the Management Agreement, (b) in
connection with the PDSH Merger or the PDSH Loan and (c) for the fee payable to
Finley, chief executive officer of Borrowers, in exchange for Finley’s personal
guaranty of Indebtedness owing by Borrowers to The First State Bank of
Thermopolis in the aggregate principal amount of $7,700,000.  No Borrower shall make any payment or permit
any payment, dividend or distribution to be made to any Affiliate of any
Borrower when or as to any time when any Event of Default shall exist.  Agent shall promptly be notified of any such
agreements and provided with copies thereof.

 

Section 7.9                                   Bankruptcy,
Receivers, Similar Matters.

 

(a)           Voluntary
Cases.  No Borrower shall commence a
voluntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect.

 

(b)           Involuntary
Cases, Receivers, etc.  No Borrower
or Related Person of any Borrower shall apply for, consent to, or aid, solicit,
support, or otherwise act, cooperate or collude to cause the appointment of or
taking possession by, a receiver, trustee or other custodian for all or a
substantial part of the assets of any Borrower.  As used in this Agreement, an “Involuntary Borrower Bankruptcy”
means any involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, in
which any Borrower is a debtor or the Collateral, or any portion thereof, is
property of the estate therein.  No
Borrower nor any Related Person of any Borrower shall file a petition for,
consent to the filing of a petition for, or aid, solicit, support, or otherwise
act, cooperate or collude to cause

 

42

 

the filing of a
petition for an Involuntary Borrower Bankruptcy.  In any Involuntary Borrower Bankruptcy, no Borrower nor any
Related Person of any Borrower shall, without the prior written consent of
Agent and/or Lenders, consent to the entry of any order, file any motion, or
support any motion (irrespective of the subject of the motion), and no Borrower
nor any such Related Person shall file or support any plan of reorganization.  A Borrower having any interest in any
Involuntary Borrower Bankruptcy shall do all things reasonably requested by
Agent and/or Lenders to assist Lenders in obtaining such relief as Lenders
shall seek, and shall in all events vote as directed by Agent and/or
Lenders.  Without limitation of the
foregoing, each such Borrower shall do all things reasonably requested by Agent
and/or Lenders to support any motion for relief from stay or plan of
reorganization proposed or supported by Agent and/or Lenders.

 

Section 7.10                            Certain
Filings.

 

No Borrower shall make any filing with any
Governmental Authority, which filing includes a reference to Agent, Lender, any
agent or lender under the Last-Out Documents or any other lender of any
Borrower, whether such reference is by name or by other identifying
information, unless such filing is required by a law, rule, regulation or order
of a Governmental Authority applicable to Borrowers.

 

ARTICLE VIII

CASH MANAGEMENT SYSTEM

 

Section 8.1                                   Blocked
Account.

 

On or before the Closing Date and until the
Termination Date, Borrowers shall establish with the Blocked Account Bank the
Blocked Account, which Blocked Account shall be maintained by Borrowers.  On the Closing Date, (a) Lenders shall
deposit into the Blocked Account the Net Loan Proceeds and (b) Borrowers shall
deposit into the Blocked Account all Excess Cash (other than Net Loan Proceeds)
as of the Closing Date.  Borrowers
hereby covenant and agree that until the Termination Date, none of them shall
close the Blocked Account or move the Blocked Account to another bank or
financial institution other than the Blocked Account Bank without the prior
written consent of Agent.  Except in
accordance with Section 8.3(b), Borrowers shall not commingle any other
funds with Excess Cash from time to time on deposit in the Blocked
Account.  Except in accordance with Section
8.4, Borrowers shall not withdraw the Excess Cash from time to time on
deposit in the Blocked Account.

 

Section 8.2                                   Control
of Blocked Account.

 

On or before the Closing Date, Borrowers, Agent, for
the benefit of the Lender Group, and the Blocked Account Bank shall have
entered into the Control Agreement with respect to the Blocked Account.  In the Control Agreement, the Blocked
Account Bank shall agree, among other things, that (i) all funds from time to
time deposited into the Blocked Account and proceeds thereof are to be held by
the Blocked Account Bank as agent or bailee-in-possession for Agent, for the
benefit of the Lender Group, (ii) the Blocked Account Bank has no rights of
setoff or recoupment or any other claim against such account, as the case may
be, other than for payment of its service fees and other charges directly
related to the administration of

 

43

 

such account and for returned checks or other items of
payment, in each case, as expressly set forth in the Control Agreement, and
(iii) from and after the receipt of a notice (an “Activation Notice”)
from Agent, Agent shall have exclusive dominion and control of the Blocked
Account, to the exclusion of Borrowers, and the Blocked Account Bank shall
forward immediately all amounts then on deposit in the Blocked Account to the
Agent’s Account and shall commence the process of daily sweeps from the Blocked
Account into the Agent’s Account.  The
parties hereto agree that notwithstanding Section 3(b) of the Control
Agreement, Agent may deliver an Activation Notice to Blocked Account Bank at
any time that (A) a Default or Event of Default has occurred and is continuing
or (B) (1) Agent reasonably believes based upon information available to it
that a Default or Event of Default has occurred, (2) Agent has delivered
written notice to Borrowers identifying the purported Default or Event of
Default and setting forth in reasonable detail Agent’s basis for believing that
a Default or Event of Default has occurred and (3) within four days following
delivery of such notice, Borrowers have not delivered to Agent evidence
satisfactory to it that such Default or Event of Default has not occurred.

 

Section 8.3                                   Direction
of Payment to Blocked Account.

 

(a)           On
or before the Closing Date, Borrowers shall obtain a Notice of Direction
countersigned by Wishnow, directing Wishnow to make any and all Last-Out
Payments from time to time due and payable to PDS pursuant to the terms of the
2003 Last-Out, to the Blocked Account. 
Within three (3) calendar days of (i) entering into the 2004 Last-Out,
Borrowers shall obtain a Notice of Direction countersigned by Wishnow and 2004
Lender, notifying Wishnow that Borrowers have granted a Lien to Agent, for the
benefit of the Lender Group, in their rights to any and all Last-Out Payments
from time to time due and payable to PDS pursuant to the terms of the 2003
Last-Out and that any and all such payments shall be made directly to the
Blocked Account and (ii) entering into any Future Loan Pool Arrangement or
Investment Transaction, Borrowers shall deliver a Notice of Direction to the
Person responsible under such arrangement for directing payments due to parties
under such arrangement, notifying such Person that Borrowers have granted a
Lien to Agent, for the benefit of the Lender Group, in their rights to all
payments payable to a Borrower under such arrangement and that (A) any and all
payments (other than fees due to any Borrower in exchange for such Borrower’s
performance of the servicing obligations with respect to the gaming or related
furniture, fixtures or equipment included in such arrangement), in the case of
Future Loan Pool Arrangements, and (B) any and all payments of Investment
Transaction Equity, in the case of Investment Transactions, in each case, due
and payable from time to time to any Borrower under such arrangement, shall be
made directly to the Blocked Account.

 

(b)           Immediately
upon receipt of any (i) SPV Equity, (ii) Investment Transaction Equity, (iii)
proceeds, products and profits of any Permitted Investments or (iv) cash or
cash equivalents as to which none of Borrowers are contractually obligated to
distribute to, or hold on behalf of, non-Affiliate Persons, Borrowers shall
deposit such SPV Equity, Investment Transaction Equity, proceeds, products and
profits of any Permitted Investments, cash and cash equivalents into the
Blocked Account.  Such SPV Equity,
Investment Transaction Equity, proceeds, products and profits of any Permitted
Investments, cash and cash equivalents shall constitute “Excess Cash” and
“Collateral” for all purposes hereunder and under the other Loan Documents,
subject to Agent’s Lien, for the benefit of the Lender Group, and subject to no
other Lien other than Permitted Encumbrances.

 

44

 

Section 8.4                                   Disbursements
from the Blocked Account.

 

So long as no Default or Event of Default has
occurred, Agent shall permit the Borrowers from time to time to withdraw funds
on deposit in the Blocked Account at the request of Borrowers in accordance
with the following procedures:

 

(a)           Subject
to Section 8.4(b) and Section 8.4(c), at any time, Borrowers may
withdraw Excess Cash from the Blocked Account so long as (i) each purpose for
which such Excess Cash will be used is a permitted use under Section 7.2,
and (ii) after giving effect to the amount to be withdrawn, no less than the
Minimum Excess Cash Balance shall be on deposit in the Blocked Account, and
(iii) after giving effect to the amount to be withdrawn, no Default or Event of
Default shall have occurred or be continuing.

 

(b)           At
any time, Borrowers may withdraw Excess Cash from the Blocked Account for use
in connection with a transaction that is not in the ordinary course of any
Borrowers’ Business, consistent with past practices, if, concurrently with such
withdrawal, Borrowers deliver to Agent a certificate of withdrawal (a “Withdrawal
Certificate”) substantially in the form attached hereto as Exhibit
8.4(b).  Each Withdrawal Certificate
delivered pursuant to this Section 8.4(b) shall be signed by a
responsible officer of each Borrower, shall set forth (i) the amount of Excess
Cash to be withdrawn from the Blocked Account, (ii) each purpose for which such
Excess Cash will be used and (iii) a brief description of the nature of the out
of the ordinary course transaction, and shall certify that (A) each purpose for
which such Excess Cash will be used is a permitted use under Section 7.2,
(B) after giving effect to the amount to be withdrawn, Borrowers shall have
withdrawn no more than $50,000 in any single calendar quarter (excluding the
Specified Real Property Investment if such investment occurred in the calendar
quarter applicable to such Withdrawal Certificate) or $250,000 in the aggregate
(excluding the Specified Real Property Investment) for use in connection with
transactions that are not in the ordinary course of any Borrower’s Business,
(C) after giving effect to the amount to be withdrawn, no less than the Minimum
Excess Cash Balance shall be on deposit in the Blocked Account, and (D) after
giving effect to the amount to be withdrawn, no Default or Event of Default
shall have occurred or be continuing. 
For the avoidance of doubt, the exclusion of the Specified Real Property
Investment from the certifications set forth in clauses (A) and (B) above does
not relieve Borrowers from the duty under this Section 8.4(b) to deliver
to Agent a Withdrawal Certificate in respect of the Specified Real Property
Investment.  Further, the Withdrawal
Certificate delivered in connection with the Specified Real Property Investment
shall include an additional certification that, after giving effect to the
amount to be withdrawn, Borrowers have not withdrawn more than $250,000 in
Excess Cash in the aggregate for use toward the Specified Real Property
Investment. In the event that Borrowers obtain prior consent under Section
7.2(b), concurrent with any withdrawal of Excess Cash to be used in
connection with an out of the ordinary course transaction that will require
Excess Cash (1) in any single calendar quarter, in excess of $50,000 or (2) in
the aggregate, in excess of $250,000, Borrowers shall deliver to Agent a
Withdrawal Certificate setting forth each of the items described in clauses (i)
through (iii) above and certifying as to each of the items set forth in clauses
(A), (C) and (D) above, in each case, after giving effect to such prior
consent.

 

(c)           At
any time, Borrowers may withdraw from Excess Cash from the Blocked Account for
use in connection with an Investment that, although in the ordinary course

 

45

 

of each Borrower’s
Business, consistent with past practices, will require an amount of Excess Cash
equal to or in excess of $500,000 if, concurrently with such withdrawal,
Borrowers deliver to Agent a Withdrawal Certificate substantially in the form
attached hereto as Exhibit 8.4(c).  
Each Withdrawal Certificate delivered pursuant to this Section 8.4(c),
shall be signed by a responsible officer of each Borrower, shall set forth (i)
the amount of Excess Cash to be withdrawn from the Blocked Account, (ii) each
purpose for which such Excess Cash will be used and (iii) a brief description
of the nature of the ordinary course Investment, and shall certify that (A)
each purpose for which such Excess Cash will be used is a permitted use under Section
7.2, (B) the Investment for which such Excess Cash will be used is in the
ordinary course of a Borrowers’ Business, consistent with past practices, (C)
after giving effect to the amount to be withdrawn, no less than the Minimum
Excess Cash Balance shall be on deposit in the Blocked Account, and (D) after
giving effect to the amount to be withdrawn, no Default or Event of Default
shall have occurred or be continuing. 
In the event that Borrowers obtain prior consent under Section 7.2(b),
concurrent with any withdrawal of Excess Cash to be used in connection with an
ordinary course transaction that will require Excess Cash in excess of
$1,500,000, Borrowers shall deliver to Agent a Withdrawal Certificate setting
forth each of the items described in clauses (i) through (iii) above and
certifying as to each of the items set forth in clauses (A) through (D) above,
in each case, after giving effect to such prior consent.

 

Section 8.5                                   Consolidation
of Existing Deposit Accounts.

 

Within ninety days following the Closing Date,
Borrowers shall have consolidated into the Blocked Account, all of the amounts
on deposit in all existing deposit accounts of any Borrower that are not, as of
the Closing Date, subject to a contractual Lien of a third Person.  Additionally, within such ninety-day period,
Borrowers shall have directed all Persons making deposits into such existing
deposit accounts, including by way of automated clearing house or other form of
electronic deposit or by way of cash or check payment, to make such deposits
into the Blocked Account.  Borrowers
shall provide Agent with evidence reasonably satisfactory to Agent of the
consolidation of deposit accounts and direction of payment described in this Section
8.5.

 

Section 8.6                                   Cash
Collateral.

 

The Blocked Account shall be a cash collateral
account, with all cash, checks and other similar items of payment in such
account securing payment of the Loan and all other Obligations, and in which
Borrowers shall have granted a first priority Lien to Agent, for the benefit of
Lender Group, pursuant to the Security Agreement.

 

Section 8.7                                   Deposit of Excess
Cash.

 

Each Borrower shall and shall cause its Affiliates,
officers, employees, agents or directors or other Persons acting for or in
concert with such Borrower (each a “Related Person”) to (i) hold in
trust for Agent, for the benefit of the Lender Group, all checks, cash and
other items of payment constituting Excess Cash (including as supplemented
pursuant to Section 8.3(b)) received by such Borrower or any such
Related Person, and (ii) within one (1) Business Day after receipt by such
Borrower or any such Related Person of any such checks, cash or other items of
payment, deposit the same into the Blocked Account.  Each Borrower and each Related

 

46

 

Person thereof acknowledges and agrees that all cash,
checks or other items of payment constituting Excess Cash (including as
supplemented pursuant to Section 8.3(b)) or other proceeds of Collateral
are part of the Collateral.

 

ARTICLE IX

TERM

 

Section 9.1                                   Termination.

 

Notwithstanding anything herein to the contrary, the
transactions contemplated hereby shall be in effect until the Maturity Date,
upon which the Loan and all other Obligations shall be automatically due and
payable in full on such date.

 

Section 9.2                                   Survival
of Obligations Upon Termination.

 

Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure) of
any provision under this Agreement or under any of the other Loan Documents
shall in any way affect or impair the obligations, duties and liabilities of
Borrowers or the rights of Agent or any Lender relating to any unpaid portion
of the Loan or any other Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination, or
any transaction or event, the performance of which is required after the
Maturity Date.  Except as otherwise
expressly provided in this Agreement and the other Loan Documents, all
undertakings, agreements, covenants, warranties and representations of or binding
upon Borrowers, and all rights of Agent or each Lender, all as contained in the
Loan Documents, shall not terminate or expire, but rather shall survive any
such termination or cancellation and shall continue in full force and effect
until the Termination Date; provided, however, that in all events
the provisions of ARTICLE XIII, the obligations under Section 2.8
and Section 2.11, and the other indemnities contained in the Loan
Documents shall survive the Termination Date.

 

ARTICLE X

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

Section 10.1                            Events
of Default.

 

The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an “Event of
Default” hereunder:

 

(a)           Borrowers
(i) fail to make any payment of principal of, or interest on, the Loan or any
of the other Obligations when due and payable, or (ii) fail to pay or
reimburse Agent or any Lender for any expense reimbursable hereunder or under
any other Loan Document within five (5) days following Agent’s demand for such
reimbursement or payment of expenses.

 

(b)           Any
Borrower fails or neglects to perform, keep or observe any of the provisions of
Section 2.3, ARTICLE VI, ARTICLE VII or ARTICLE VIII
respectively, which such Borrower is expressly obligated by such sections or
articles to perform, keep or observe.

 

47

 

(c)           Any
Borrower fails or neglects to perform, keep or observe any of the provisions of
ARTICLE V or any other covenants contained herein, and the same shall
remain unremedied for five (5) Business Days or more.

 

(d)           Any
Borrower fails or neglects to perform, keep or observe any other provision of
this Agreement or any of the other Loan Documents (other than any provision
embodied in or covered by any other clause of this Section 10.1) and the
same shall remain unremedied for ten (10) Business Days or more.

 

(e)           Any
representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate made or delivered to
Agent or any Lender by any Borrower is untrue or incorrect in any material
respect as of the date when made or deemed made.

 

(f)            Collateral
with a fair market value of One Hundred Thousand Dollars ($100,000) or more is
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Borrower and such condition continues for
thirty (30) days or more.

 

(g)           A
case or proceeding is commenced against any Borrower seeking a decree or order
in respect of such Borrower (i) under the Bankruptcy Code, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for such Borrower or for any substantial part of any of
such Borrower’s assets, or (iii) ordering the winding-up or liquidation of the
affairs of such Borrower, and such case or proceeding shall remain undismissed
or unstayed for sixty (60) days or more or a decree or order granting the
relief sought in such case or proceeding shall be entered by a court of
competent jurisdiction.

 

(h)           Any
Borrower (i) files a petition seeking relief under the Bankruptcy Code, or any
other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consents to or fails to contest in a timely and appropriate manner
the institution of proceedings thereunder or the filing of any such petition or
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Borrower or
for any substantial part of any of such Borrower’s assets, (iii) makes an
assignment for the benefit of creditors, (iv) takes any action in furtherance
of any of the foregoing, or (v) admits in writing its inability to, or is
generally unable to, pay its debts as such debts become due.

 

(i)            A
final judgment or judgments for the payment of money in excess of One Hundred
Thousand Dollars ($100,000) in the aggregate at any time are outstanding
against any Borrower and the same are not, within thirty (30) days after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay.

 

(j)            Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or Borrower shall
challenge the enforceability of any Loan Document or shall assert in writing,
or engage in any action or

 

48

 

inaction based on
any such assertion, that any provision of any of the Loan Documents has ceased
to be or otherwise is not valid, binding and enforceable in accordance with its
terms), or any Lien created under any Loan Document ceases to be a valid and
perfected first priority Lien (except as otherwise permitted herein or therein)
in any of the Collateral purported to be covered thereby.

 

(k)           There
shall occur a cessation of a substantial part of the business of Borrowers.

 

(l)            Any
Borrower fails to keep and maintain in full force and effect each of its
governmental licenses and permits required to conduct its business as presently
conducted, including, without limitation, all governmental authorizations,
licenses and permits required for Borrower to exploit the Collateral,
including, without limitation, all gaming authorizations, licenses and permits.

 

(m)          Any
breach or default shall occur under any other agreement, document or instrument
to which any Borrower is a party which is not cured within any applicable grace
period therefor, and such default or breach (i) involves the failure to make
any payment when due in respect of any Indebtedness (other than the
Obligations) of any Borrower in excess of One Hundred Thousand Dollars
($100,000) in the aggregate (including (x) undrawn committed or available
amounts and (y) amounts owing to all creditors under any combined or syndicated
credit agreements), or (ii) causes, or permits any holder of such Indebtedness
or a trustee to cause, Indebtedness or a portion thereof in excess of One
Hundred Thousand Dollars ($100,000) in the aggregate to become due prior to its
stated maturity or prior to its regularly scheduled dates of payment, or cash
collateral in respect thereof to be demanded, in each case, regardless of
whether such default is waived, or such right is exercised, by such holder or
trustee.

 

(n)           Any
Borrower directly or indirectly merges with or consolidates with any Person or
sells, assigns or otherwise transfers or disposes of all or substantially all
of such Borrower’s assets, other than in connection with the Going Private
Transaction.

 

(o)           PDS
sells, assigns, pledges, conveys or otherwise disposes of or encumbers any of
the Stock of PDS-NV, PDS-CO or PDS-MS (whether in a public or private offering)
in any manner which results in the Stock of any of PDS-NV, PDS-CO or PDS-MS
being owned, directly or indirectly, less than one hundred percent (100%) by PDS,
which sale, assignment, pledge, conveyance or other disposition of Stock shall
occur without the prior written approval of the Agent (given or withheld in
accordance with Section 13.2) and of any applicable Governmental
Authority.

 

(p)           At
any time following the consummation of the Going Private Transaction until the
Termination Date, PDS permits its Stock to be sold, assigned, pledged, conveyed
or otherwise disposed of or encumbered in any manner which results in its Stock
being owned, directly or indirectly, less than one hundred percent (100%) by
PDSH, which sale, assignment, pledge, conveyance or other disposition of Stock
shall occur without the prior written approval of the Agent (given or withheld
in accordance with Section 13.2) and of any applicable Governmental
Authority.

 

49

 

(q)           At
any of PDS-NV, PDS-CO or PDS-MS shall create or permit to exist any direct or
indirect Subsidiary or PDS shall create or permit to exist any direct or
indirect Subsidiary other than PDS-NV, PDS-CO and PDS-MS, in each case, which
creation or permission to exist shall occur without the prior written approval
of the Agent (given or withheld in accordance with Section 13.2) and of
any applicable Governmental Authority, except as may be required to effectuate
the Going Private Transaction; provided that any Borrower may create or
permit to exist a wholly-owned Subsidiary of such Borrower if such Borrower
takes, and causes such new Subsidiary to take, such steps as requested by Agent
for such new Subsidiary to become a “Borrower” hereunder and a “Grantor” under
the Security Agreement.

 

(r)            At
any time following the consummation of the Going Private Transaction, PDSH
shall create or permit to exist any direct or indirect Subsidiary other than
Borrowers, which creation or permission to exist shall occur without the prior
written approval of the Agent (given or withheld in accordance with Section
13.2) and of any applicable Governmental Authority; provided that
PDSH may create or permit to exist a wholly-owned Subsidiary of it if PDSH
takes, and causes such new Subsidiary to take, such steps as requested by Agent
for such new Subsidiary to become a “Borrower” hereunder and a “Grantor” under
the Security Agreement.

 

(s)           Any
Change of Control occurs.

 

(t)            PDS
shall fail to consummate the PDSH Merger on or prior to April 1, 2005.

 

Section 10.2                            Remedies.

 

(a)           If
any Default or Event of Default has occurred and is continuing, Agent may, and
shall upon the written request of Requisite Lenders, without notice, issue an
Activation Notice, as provided in ARTICLE VIII, and cause all amounts in
the Blocked Account to be transferred to the Agent’s Account for prepayment of
the Loan.  If any Default or Event of
Default has occurred and is continuing, Agent may (and at the written request
of Requisite Lenders shall), without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Loan to the
Default Rate.

 

(b)           If
any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice:  (i) declare all or any portion of the
Obligations, including all or any portion of the Loan, to be forthwith due and
payable, all without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by Borrowers; or (ii) exercise any
rights and remedies provided to Agent or Lender Group under the Loan Documents
or at law or equity, including all remedies provided under the Code; provided,
that upon the occurrence of an Event of Default specified in Section 10.1(g)
or Section 10.1(h), the Loan shall be immediately terminated and all of
the Obligations shall become immediately due and payable without declaration,
notice or demand by any Person.

 

Section 10.3                            Waivers
By Borrowers.

 

Except as otherwise provided for in this Agreement or
by applicable law, each Borrower irrevocably waives (including for purposes of Section
12.1) (a) presentment, demand

 

50

 

and protest and notice of presentment, dishonor,
notice of intent to accelerate, notice of acceleration, protest, default,
nonpayment, maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guaranties at any time held by Agent or any Lender on which
any Borrower may in any way be liable, and hereby ratifies and confirms
whatever Agent or any Lender may do in this regard, (b) all rights to notice
and a hearing prior to Agent’s or any Lender’s taking possession or control of,
or to Agent’s or any Lender’s replevy, attachment or levy upon, the Collateral
or any bond or security which might be required by any court prior to allowing Agent
or any Lender to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.

 

Section 10.4                            Event of Default not
Affected by Automatic Stay.

 

If an actual Event of Default under this ARTICLE X
is prevented from occurring by reason of the automatic stay in any bankruptcy
or by reason of any provision in the Bankruptcy Code or similar law which
prevents or tolls the giving of default notice, the lapse of time in which to
cure, or the declaration or maturation of an Event of Default, then,
nonetheless, an Event of Default shall be deemed to occur for purposes of this ARTICLE
X if the applicable underlying condition or event shall have occurred (and
in any case where notice and opportunity to cure otherwise would be required
under this ARTICLE X but is prevented as aforesaid, 30 days shall have
passed after the first occurrence of the underlying condition or event).

 

ARTICLE XI

ASSIGNMENTS AND PARTICIPATIONS

 

Section 11.1                            Lender
Assignments and Participations.

 

(a)           No
assignments or participations of any Lender’s rights or obligations hereunder
shall be made except in accordance with this Section 11.1.

 

(b)           Each
Lender may further assign to one or more Person (an “Assignee”) all or a
portion of its rights and obligations hereunder in accordance with the
provisions of this Section 11.1. 
Each assignment by a Lender (other than to a Lender or an Affiliate of a
Lender) shall be approved by Agent and, so long as no Event of Default has
occurred, Borrowers, which approval shall not be unreasonably withheld or
delayed.  The parties to each such
assignment shall execute and deliver to Agent an Assignment and Acceptance,
and, if such Assignee is not then a Lender, an Administrative Questionnaire,
for its acceptance and recording in the Register.  Upon such execution, delivery, acceptance and recording in the
Register, from and after the effective date specified in each Assignment and
Acceptance and agreed to by Agent and, reasonably, by Borrowers, (x) the
Assignee thereunder shall, in addition to any rights and obligations hereunder
held by it immediately prior to such effective date, if any, have the rights
and obligations hereunder that have been assigned to it pursuant to such
Assignment and Acceptance and shall, to the fullest extent permitted by law,
have the same rights and benefits hereunder as if it were an original Lender
hereunder and (y) the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
hereunder (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of such

 

51

 

assigning Lender’s
rights and obligations hereunder, the assigning Lender shall cease to be a
party hereto).  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this paragraph shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 11.1(f).

 

(c)           Agent,
acting solely for this purpose as an agent for Borrowers, shall maintain at its
address in effect pursuant to Section 13.10 a copy of each assignment
document delivered to and accepted by it and a register (the “Register”)
for the recordation of the names and addresses of Lenders under the Loan, the
principal amount of the Loan owing to each Lender from time to time and whether
such Lender is an original Lender or the assignee of another Lender pursuant to
an assignment document.  The Register
shall include an account for each Lender, in which accounts (taken together)
shall be recorded (i) the effective date and amount of each assignment
document delivered to and accepted by it and the parties thereto, (ii) the
amount of any principal or interest or fees due and payable or to become due
and payable from Borrowers to each Lender hereunder or under the Note, and
(iii) the amount of any sum received by Agent from any Borrower hereunder
and each Lender’s share thereof.  The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Borrowers, Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes
hereof.  The Register shall be available
for inspection by any Lender and any Borrower at any reasonable time and from
time to time upon reasonable prior notice.

 

(d)           Upon
its receipt of an Assignment and Acceptance executed by the assigning Lender
and an Assignee and (unless waived by Agent) a processing and recordation fee
of $1,000 (payable by the assigning Lender or the Assignee, as shall be agreed
between them), Agent shall, if such Assignment and Acceptance has been
completed and is in compliance herewith and in substantially the form of a
transfer document as shall reasonably be agreed to by Agent hereto,
(i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to
Borrowers and the other Lenders.

 

(e)           Any
Lender may, in connection with any assignment or proposed assignment pursuant
to this Section 11.1, disclose to the Assignee or proposed Assignee any
information relating to Borrowers furnished to such Lender by Agent or by or on
behalf of any Borrower.

 

(f)            Each
Lender may sell participations in or to all or a portion of its rights and
obligations under and in respect of the Loan hereunder to one or more Persons
(the “Participant”);
provided, however, that (i) such Lender’s obligations
hereunder shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) Borrowers, Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations hereunder and (iv) such Participant’s rights to
agree or to restrict such Lender’s ability to agree to the modification, waiver
or release of any of the terms of the Loan Documents or to the release of any
Collateral covered by the Loan Documents, to consent to any action or failure
to act by any party to any of the Loan Documents or any of their respective Subsidiaries
or Affiliates, or to exercise or refrain from exercising any powers or rights
which any Lender may have under or in respect of the Loan Documents or any
Collateral, shall be limited to the right to

 

52

 

consent to
(A) reduction of the principal of, or rate or amount of interest on, the
Loan subject to such participation (other than by the payment or prepayment
thereof), (B) postponement of any scheduled date for any payment of
principal of, or interest on, the Loan subject to such participation (except
with respect to any modifications of the applicable provisions relating to
prepayment of the Loan and other Obligations) and (C) release of any
guarantor of the Obligations or all or any substantial portion of the
Collateral.  No holder of a
participation in all or any part of the Loan shall be a “Lender” for any
purposes hereunder by reason of such participation.  Each Lender shall promptly notify Agent of the identity of any
holder of a participation.

 

(g)           Agent
shall provide notice to Borrowers within five (5) Business Days after the
finalization of an assignment or participation pursuant to this Section 11.1.

 

Section 11.2                            Appointment
of Agent.

 

Each Lender hereby irrevocably appoints and authorizes
Cochran Road, LLC to act as its Agent under this Agreement and the other Loan
Documents with such powers as are specifically delegated to it to act on behalf
of all Lenders as Agent under this Agreement and the other Loan Documents.  The provisions of this Section 11.2
are solely for the benefit of Agent and Lenders (other than as expressly set
forth in Section 11.1(c))and no Borrowers nor any other Person shall
have any rights as a third party beneficiary of any of the provisions
hereof.  In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for any Borrower or any other Person. 
Agent shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Loan Documents.  The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender. 
Except as expressly set forth in this Agreement and the other Loan
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Borrower or any of
their respective Subsidiaries that is communicated to or obtained by Agent or
any of its respective Affiliates in any capacity.  Neither Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents or representatives shall be
liable to any Lender for any action taken or omitted to be taken by Agent
hereunder or under any other Loan Documents, or in connection herewith or
therewith, except for damages caused by its or their own gross negligence or
willful misconduct.  No Borrower (a)
shall have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or of
the other Loan Documents by Agent and (b) shall incur any liability under or in
respect of this Agreement or the other Loan Documents by acting upon notice,
consent, certificate or other instrument or writing (which may be by telecopy,
telegram, cable or telex) believed by it to be genuine and signed or sent by
Agent.  Rather, each Borrower in its
dealings with Agent shall be entitled conclusively to presume that all actions
of Agent have been duly authorized, absent written notice to Borrowers to the
contrary.

 

If Agent shall request instructions from Requisite
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless and

 

53

 

until Agent shall have received instructions from
Requisite Lenders, as the case may be, and Agent shall not incur liability to
any Person by reason of so refraining. 
Agent shall be fully justified in failing or refusing to take any action
hereunder or under any other Loan Document (a) if such action would, in the
opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document or (b) if Agent shall not first be indemnified to its
satisfaction against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting hereunder or under any other Loan Document in
accordance with the instructions of Requisite Lenders.

 

Section 11.3                            Agent’s
Reliance, Etc.

 

Neither Agent nor any of its Affiliates nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages caused by
its or their own gross negligence or willful misconduct.  Without limiting the generality of the
foregoing, Agent:  (a) may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (b) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations
made in or in connection with this Agreement or the other Loan Documents; (c)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or
the other Loan Documents on the part of Borrowers or to inspect the Collateral
(including the books and records) of Borrowers; (d) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; and
(e) shall incur no liability under or in respect of this Agreement or the other
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.

 

Section 11.4                            Agent
and Affiliates.

 

With respect to its Pro Rata Share hereunder, if
any, Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any other Lender and may exercise the same as though
not an Agent; and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated, include Agent, in its individual capacity.  Agent and its Affiliates may lend money to,
invest in, and generally engage in any kind of business with, any Borrower, any
of their respective Affiliates and any Person who may do business with or own
securities of any Borrower or any such Affiliate, all as if Agent were not
Agent and without any duty to account therefor to Lenders.  Agent and its Affiliates may accept fees and
other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

 

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Section 11.5                            Lender
Credit Decision.

 

Each Lender acknowledges that it has, independently
and without reliance upon Agent or any other Lender and based on the Financial
Statements referred to in Section 4.4 and such other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of Borrowers and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.  Each Lender
acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loan, and expressly
consents to, and waives any claim based upon, such conflict of interest.

 

Section 11.6                            Indemnification.

 

Each Lender agrees to indemnify and hold harmless
Agent (to the extent not reimbursed by Borrowers and without limiting the
obligations of Borrowers hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted to be taken by Agent in
connection therewith; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent’s gross negligence or willful misconduct.  Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for its Pro Rata Share of any
out-of-pocket expenses (including counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Borrowers.

 

Section 11.7                            Successor
Agent.

 

Agent may resign at any time by giving not less than
thirty (30) days’ prior written notice thereof to Lenders and Borrowers.  Upon any such resignation, the Requisite
Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within thirty (30) days after the resigning Agent’s giving notice of
resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank or financial institution
or a subsidiary of a commercial bank or financial institution if such
commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least Three Hundred Million Dollars ($300,000,000).  If no successor Agent has been appointed
pursuant to the foregoing, within thirty (30) days after the date such notice
of resignation was given by the resigning Agent, such resignation shall become
effective and the Requisite Lenders shall thereafter perform all the

 

55

 

duties of such resigning Agent hereunder until such
time, if any, as the Requisite Lenders appoint a successor Agent as provided
above.  Any successor Agent appointed by
Requisite Lenders hereunder shall be subject to the approval of Borrowers, such
approval not to be unreasonably withheld or delayed; provided that such
approval shall not be required if a Default or an Event of Default has occurred
and is continuing.  Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Agent.  Upon
the earlier of the acceptance of any appointment as Agent hereunder by a
successor Agent or the effective date of the resigning Agent’s resignation, the
resigning Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents, except that any indemnity rights or
other rights in favor of such resigning Agent shall continue.  After any resigning Agent’s resignation
hereunder, the provisions of this ARTICLE XI shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents. 
After the date of this Agreement, Lenders and Agent may determine to
divide the duties of Agent between an administrative agent and a collateral
agent; Borrowers agree to take all actions requested by Agent or Lenders in
implementing such revised structure, including, without limitation, the
amendment and restatement of any of the Loan Documents.

 

Section 11.8                            Setoff
and Sharing of Payments.

 

In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default and subject to Section
11.9, each Lender is hereby authorized at any time or from time to time,
without notice to any Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
balances held by it at any of its offices for the account of any Borrower
(regardless of whether such balances are then due to such Borrower) and any
other properties or assets at any time held or owing by that Lender to or for
the credit or for the account of any Borrower against and on account of any of
the Obligations which are not paid when due. 
Any Lender exercising a right to set off or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof shall
purchase for cash (and the other Lenders shall sell) such participations in
each such other Lender’s Pro Rata Share of the Obligations as would
be necessary to cause such Lender to share the amount so set off or otherwise
received with each other Lender in accordance with their respective Pro Rata
Shares (other than set off rights exercised by any Lender with respect to Section
2.9 or Section 2.11).  Each
Borrower agrees, to the fullest extent permitted by law, that (a) any Lender
may exercise its right to set off with respect to amounts in excess of its Pro Rata
Share of the Obligations and may purchase participations in such amount so set
off from other Lenders and (b) any Lender so purchasing a participation in the
Loan made or other Obligations held by other Lenders may exercise all rights of
set off, bankers’ lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of the Loan and
the other Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any
portion of the set-off amount or payment otherwise received is thereafter
recovered from Lender that has exercised the right of set-off, the purchase of
participations by that Lender shall be rescinded and the purchase price
restored without interest.

 

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Section 11.9                            Payments;
Information; Actions in Concert

 

(a)           Payments.  On the second (2nd) Business Day of each
calendar quarter or more frequently at Agent’s election (each, a “Settlement
Date”), Agent shall advise each Lender by telephone, or telecopy
of the amount of such Lender’s Pro Rata Share of principal, interest and
fees paid for the benefit of Lenders with respect to the Loan.  Agent shall pay to each Lender such Lender’s
Pro Rata
Share of principal, interest and fees paid by Borrowers since the previous
Settlement Date.  Payments shall be made
by wire transfer to each Lender’s account (as specified by each Lender on Schedule
1 or the applicable Assignment and Acceptance) not later than 10:00 a.m. (Los Angeles time) on the next
Business Day following each Settlement Date.

 

(b)           Return
of Payments.

 

(i)            If
Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from
Borrowers and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without set off,
counterclaim or deduction of any kind.

 

(ii)           If
Agent determines at any time that any amount received by Agent under this
Agreement must be returned to Borrowers or paid to any other Person pursuant to
any insolvency law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent will not be
required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent
on demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrowers or such other Person, without set-off, counterclaim or deduction of
any kind.

 

(c)           Defaulting
Lenders.  The failure of any Lender
(a “Defaulting
Lender”) to make any payment required by it hereunder on the
date specified therefor shall not relieve any other Lender (each such other
Lender, an “Other Lender”) of its obligations to make such payment or
purchase such participation on such date, but neither any Other Lender nor
Agent shall be responsible for the failure of any Defaulting Lender to purchase
a participation or make any other payment required hereunder.  Notwithstanding anything set forth herein to
the contrary, a Defaulting Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a “Lender” (or be
included in the calculation of “Requisite Lenders” hereunder) for any voting or
consent rights under or with respect to any Loan Document.  With Borrowers’ consent (which consent shall
not be unreasonably withheld), Agent or a Person reasonably acceptable to
Agent, including without limitation an Other Lender, shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation)
to purchase from any Defaulting Lender, and each Defaulting Lender agrees that
it shall, at Agent’s request, sell and assign to Agent or such Person, such
Defaulting Lender’s Pro Rata Share for an amount equal to the
principal balance of the Loan allocable to such Lender and all accrued interest
and fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment and Acceptance.

 

57

 

(d)           Dissemination
of Information.  Agent shall use
reasonable efforts to provide Lenders with any Notice of Default received by
Agent from, or delivered by Agent to, any Borrower, with notice of any Event of
Default of which Agent has actually become aware and with notice of any action
taken by Agent following any Event of Default; provided, however,
that Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent’s gross negligence or
willful misconduct.  Lenders acknowledge
that Borrowers are required to provide Financial Statements to Lenders in
accordance with Section 5.10 hereto and agree that Agent shall not have
a duty to provide the same to Lenders.

 

(e)           Actions
in Concert.  Anything in this
Agreement to the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement, the Note or any of the other Loan
Documents (including exercising any rights of set-off) without first obtaining
the prior written consent of Agent and Requisite Lenders, it being the intent
of Lenders that any such action to protect or enforce such rights shall be
taken in concert and at the direction or with the consent of Agent.

 

Section 11.10                     Collateral
Matters.

 

Each Lender hereby irrevocably appoints and authorizes
Cochran Road, LLC to act as its agent with respect to all Collateral
matters.  Except as otherwise expressly
provided for in this Agreement, Agent shall have no obligation whatsoever to
any Lender or any other Person to investigate, confirm or assure that the
Collateral exists or is owned by Borrowers or is cared for, protected or
insured or has been encumbered, or whether any particular reserves are
appropriate, or that the Liens granted to Agent, for the benefit of Lender
Group, herein or pursuant hereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any duty
of care, disclosure or fidelity, or to continue exercising, any of the rights
authorities and powers granted or available to Agent in this Agreement or any
of the other Loan Documents, it being understood and agreed that (i) in respect
of the Collateral, or any act, omission or event related thereto, Agent may act
in any manner deemed appropriate, in its sole discretion, and (ii) that Agent
shall have no duty or liability whatsoever to any other Lender, other than
liability for its own gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction.  Each Lender hereby appoints each other Lender as its agent for
the purpose of perfecting Agent’s security interest for the benefit of Lender
Group in assets which, in accordance with Article 9 of the Code, can be
perfected only by possession.  Should
any Lender (other than Agent) obtain possession of any such Collateral, such
Lender shall notify Agent thereof and, promptly upon Agent’s request therefor,
shall deliver such Collateral to Agent or in accordance with Agent’s
instructions.

 

Section 11.11                     Defaults.

 

Agent shall not be deemed to have knowledge or notice
of the occurrence of a Default or Event of Default (in each case, other than
the non-payment of principal of or interest on the Loan) unless Agent has received
notice from a Lender or a Borrower specifying such Default or Event of Default
which states that such notice is a “Notice of Default.”  In the event

 

58

 

that Agent receives such a notice of the occurrence of
a Default or an Event of Default, Agent shall give prompt notice thereof to
Lenders (and shall give each Lender prompt notice of each such
non-payment).  Agent shall take such
action with respect to such Default or Event of Default as shall be directed by
Requisite Lenders; provided, however, that unless and until Agent
shall have received such directions, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interest of
Lenders except to the extent that this Agreement expressly requires that such
action be taken, or not be taken, only with the consent or upon the
authorization of Requisite Lenders or all of Lenders, as is required in such
circumstance.

 

ARTICLE XII

CROSS-GUARANTY; LIMITATIONS ON RECOURSE

 

Section 12.1                            Cross-Guaranty.

 

(a)           Cross-Guaranty.
 Each Borrower hereby agrees that,
except solely to the extent that a Governmental Authority has determined that
compliance with this Section 12.1 will require approval of a
Governmental Authority or will be in contravention of a law, rule or regulation
promulgated by a Governmental Authority and, notwithstanding each Borrowers’
exercise of best efforts to obtain approval from such Governmental Authority or
to obtain a waiver in respect of such law, rule or regulation, as the case may
be, the Borrowers were unable to obtain such approval or such waiver, as the
case may be, such Borrower is jointly and severally liable for, and hereby
absolutely and unconditionally guarantees to Agent and Lenders and their
respective successors and assigns, the full and prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of, the Loan and
all other Obligations owed or hereafter owing to Agent and Lenders by
Borrowers.  Each Borrower agrees that
its guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section
12.1 shall not be discharged until payment and performance, in full, of the
Loan and the other Obligations has occurred, and that its obligations under
this Section 12.1 shall be absolute and unconditional, irrespective of,
and unaffected by:

 

(i)            the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Borrower is or may become a party;

 

(ii)           the
absence of any action to enforce this Agreement (including this ARTICLE XII)
or any other Loan Document or the waiver or consent by Agent and Lenders with
respect to any of the provisions thereof;

 

(iii)          the existence, value or condition of, or
failure to perfect its Lien against, any security for the Loan or the other
Obligations or any action, or the absence of any action, by Agent and Lenders
in respect thereof (including the release of any such security);

 

(iv)          the
insolvency of any Borrower; or

 

(v)           any
other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.

 

59

 

Each Borrower shall be regarded, and shall be
in the same position, as principal debtor with respect to the Obligations
guaranteed hereunder.

 

(b)           Waivers
by Borrowers.  Each Borrower
expressly waives all rights it may have now or in the future under any statute,
or at common law, or at law or in equity, or otherwise, to compel Agent or
Lenders to marshal assets or to proceed in respect of the Obligations
guaranteed hereunder against any other Borrower, any other Person or against
any security for the payment and performance of the Obligations before
proceeding against, or as a condition to proceeding against, such
Borrower.  It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 12.1 and such waivers,
Agent and each Lender would decline to enter into this Agreement.

 

(c)           Benefit
of Guaranty.  Each Borrower agrees
that the provisions of this Section 12.1 are for the benefit of Agent
and each Lender and their respective successors, transferees, endorsees and
assigns, and nothing herein contained shall impair, as between any other
Borrower and Agent or Lender, the obligations of such other Borrower under the
Loan Documents.

 

(d)           Subordination
of Subrogation, Etc. 
Notwithstanding anything to the contrary in this Agreement or in any
other Loan Document, and except as set forth in Section 12.1(g), each Borrower
hereby expressly and irrevocably subordinates to payment of the Obligations any
and all rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off from any other Borrower and any and
all defenses available to a surety, guarantor or accommodation co-obligor until
the Obligations are indefeasibly paid in full in cash.  Each Borrower acknowledges and agrees that
this subordination is intended to benefit Agent and each Lender and shall not
limit or otherwise affect such Borrower’s liability hereunder or the
enforceability of this Section 12.1, and that Agent, each Lender and
their respective successors and assigns are intended third party beneficiaries
of the waivers and agreements set forth in this Section 12.1(d).

 

(e)           Election
of Remedies.  If Agent or any Lender
may, under applicable law, proceed to realize its benefits under any of the
Loan Documents giving such Agent or such Lender a Lien upon any Collateral,
whether owned by a Borrower or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at
its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Section 12.1.  If, in the exercise of any of its rights and
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against a Borrower or any
other Person, whether because of any applicable laws pertaining to “election of
remedies” or the like, each Borrower hereby consents to such action by Agent or
such Lender and waives any claim based upon such action, even if such action by
Agent or such Lender shall result in a full or partial loss of any rights of
subrogation that each Borrower might otherwise have had but for such action by
Agent or such Lender.  Any election of
remedies that results in the denial or impairment of the right of Agent or any
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower’s obligation to pay the full amount of the Obligations.  In the event Agent or any Lender shall bid
at any foreclosure or trustee’s sale or at any private sale permitted by law or
the Loan

 

60

 

Documents, Agent
or such Lender may bid all or less than the amount of the Obligations and the
amount of such bid need not be paid by Agent or such Lender but shall be
credited against the Obligations.  The
amount of the successful bid at any such sale, whether Agent, any Lender or any
other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations guaranteed under this Section 12.1,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
or any Lender might otherwise be entitled but for such bidding at any such
sale.

 

(f)            Limitation.  Notwithstanding any provision herein
contained to the contrary, each Borrower’s liability under this Section 12.1
shall be limited to an amount not to exceed as of any date of determination the
greater of:

 

(i)            the
net amount of the Loan advanced under this Agreement; and

 

(ii)           the
amount that could be claimed by Agent or any Lender from such Borrower under
this Section 12.1 without rendering such claim voidable or avoidable
under Section 548 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
or common law after taking into account, among other things, such Borrower’s
right of contribution and indemnification from the other Borrower under Section
12.1(g).

 

(g)           Contributions
with Respect to Guaranty Obligations.

 

(i)            To
the extent that any Borrower shall make a payment under this Section 12.1
of all or any of the Obligations (a “Guarantor Payment”) that, taking into
account all other Guarantor Payments then previously or concurrently made by
any other Borrower, exceeds the amount that such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of each of Borrowers as
determined immediately prior to the making of such Guarantor Payment, then,
following indefeasible payment in full in cash of the Obligations and
termination of the Loan, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, the other
Borrowers for the amount of such excess, Pro Rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment.

 

(ii)           As
of any date of determination, the “Allocable Amount” of each Borrower
shall be equal to the maximum amount of the claim that could then be recovered
from such Borrower under this Section 12.1 without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.

 

(iii)          This Section 12.1(g) is intended only
to define the relative rights of Borrowers and nothing set forth in this Section
12.1(g) is intended to or shall impair the obligations of Borrowers,
jointly and severally, to pay any amounts as and when the same shall

 

61

 

become due and
payable in accordance with the terms of this Agreement, including Section
12.1(a).  Nothing contained in this Section
12.1(g) shall limit the liability of any Borrower to pay the Loan and
accrued interest, fees and expenses with respect thereto, for which each such
Borrower shall remain jointly and severally liable.

 

(iv)          The
parties hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of Borrower to which such contribution and
indemnification is owing.

 

(v)           The
rights of the indemnifying Borrower against other Borrowers under this Section
12.1(g) shall be exercisable upon the full and indefeasible payment of the
Obligations and the termination of the Loan.

 

(h)           Liability
Cumulative.  The liability of each
Borrower under this Section 12.1 is in addition to and shall be
cumulative with all liabilities of each Borrower to Agent and Lenders under
this Agreement and the other Loan Documents to which such Borrower is a party
or in respect of any Obligations or obligation of other Borrowers, without any
limitation as to amount of such liability, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary.

 

Section 12.2                            Full
Recourse.

 

Notwithstanding any provision of the Loan Documents to
the contrary, Each Borrower shall be fully and personally liable for the
payment and performance of the Loan and all other Obligations arising under
this Agreement, the Note and the other Loan Documents.

 

Section 12.3                            Miscellaneous.

 

No provision of this ARTICLE XII shall (i)
release or reduce the debt evidenced by the Note, (ii) impair the lien of the
Security Agreement or any other security document, (iii) impair the rights
of Agent or any Lender to enforce any provisions of the Loan Documents, or (iv)
limit Agent’s ability to obtain a deficiency judgment or judgment on the Loan
or otherwise against any Borrower to the extent necessary to obtain any amount
for which such Borrower may be liable in accordance with this ARTICLE XII
or any other Loan Document.

 

ARTICLE XIII

MISCELLANEOUS

 

Section 13.1                            Complete
Agreement; Modification of Agreement.

 

The Loan Documents constitute the complete agreement
among the parties with respect to the subject matter thereof and may not be
modified, altered or amended except as set forth in Section 13.2 of this
Agreement.  Any letter of interest,
proposal letter, commitment letter, confidentiality agreement or fee letter
between or among any Borrower, Agent or any Lender or any of their respective
Affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.

 

62

 

Section 13.2                            Amendments
And Waivers.

 

(a)           Except
for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
of the other Loan Documents, or any consent to any departure by Borrowers
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent and Borrowers, and by the Requisite Lenders, as
applicable.  Except as set forth in subsection
(b) below, all such amendments, modifications, terminations or waivers
requiring the consent of any Lenders shall require the written consent of the
Requisite Lenders.

 

(b)           No
amendment, modification, termination or waiver shall, unless in writing and
signed by Agent and each of Lenders, do any of the following:  (i) increase any Lender’s Pro Rata
Share of the Loan; (ii) reduce the principal of, rate of interest on or fees
payable with respect to the Loan; (iii) extend any scheduled payment date or
final maturity date of the principal amount of the Loan; (iv) waive, forgive,
defer, extend or postpone any payment of interest or fees; (v) release any
guaranty or, except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Borrower to sell or otherwise dispose of, any
Collateral; (vi) change the Pro Rata Shares or the aggregate unpaid
principal amount of the Loan which shall be required for Lenders or any of them
to take any action hereunder; and (vii) amend or waive this Section 13.2
or the definitions of the term “Requisite Lenders” insofar as such definitions
affect the substance of this Section 13.2.  Furthermore, no amendment, modification, termination or waiver
affecting the rights or duties of Agent under this Agreement or any other Loan
Document shall be effective unless in writing and signed by Agent, in addition
to Lenders required hereinabove to take such action.  Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.  No amendment,
modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document.  No notice to or demand on a Borrower in any case shall entitle
any Borrower to any other or further notice or demand in similar or other
circumstances.  Any amendment,
modification, termination, waiver or consent effected in accordance with this Section
13.2 shall be binding upon each of the parties hereto.

 

(c)           If,
in connection with any proposed amendment, modification, waiver or termination
(a “Proposed
Change”) requiring the consent of all Lenders, the consent of
Requisite Lenders is obtained, but the consent of a Lender whose consent is
required is not obtained (any such Lender whose consent is not obtained herein
being referred to as a “Non-Consenting Lender”), then, at
Borrowers’ request, Agent or a Person reasonably acceptable to Agent shall have
the right with Agent’s consent and in Agent’s sole discretion (but shall have
no obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting
Lender agrees that it shall, upon Agent’s request, sell and assign to Agent or
such Person, such Non-Consenting Lender’s Pro Rata Share of the unpaid principal
amount of the Loan for an amount equal to the Pro Rata Share of the
principal balance of the Loan held by such Non-Consenting Lender plus all
accrued interest and fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.

 

(d)           Upon
indefeasible payment in full in cash and performance of all of the Obligations
(other than indemnification Obligations) and a release of all claims against
Agent and Lenders, and so long as no suits, actions, proceedings, or claims are
pending or threatened

 

63

 

against any
Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrowers termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations.

 

Section 13.3                            Fees
And Expenses.

 

(a)           Investment
Banking Fee.  In connection with
obtaining the Loan, Borrowers shall pay, on or before the Closing Date, to
Libra Securities, LLC, a fee (the “Investment Banking Fee”) in the amount
of three percent (3.00%) of the aggregate principal amount of the Loan.

 

(b)           Other
Fees and Expenses.  In
addition to payment of the fees set forth in the Fee Letter (in accordance with
the terms of the Fee Letter), Borrowers shall reimburse (i) Agent for all fees,
costs and expenses (including the reasonable fees and expenses of all of its
counsel, advisors, consultants and auditors) and (ii) Agent (and, with
respect to clauses (iii) and (iv) below, all Lenders) for all
fees, costs and expenses, including the reasonable fees, costs and expenses of
counsel or other advisors (including environmental and management consultants
and appraisers), incurred in connection with the negotiation and preparation of
the Loan Documents and incurred in connection with:

 

(i)            the
forwarding to Borrowers or any other Person on behalf of Borrowers by Agent of
the proceeds of the Loan (including a wire transfer fee of Twenty Five Dollars
($25.00) per wire transfer);

 

(ii)           any
amendment, modification or waiver of, consent with respect to, or termination
of, any of the Loan Documents or advice in connection with the syndication or
administration of the Loan made pursuant hereto or its rights hereunder or
thereunder;

 

(iii)          any review of a Withdrawal Certificate;

 

(iv)          any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, a Borrower or any other Person and whether as a party
witness or otherwise) in any way relating to the Collateral, any of the Loan
Documents or any other agreement to be executed or delivered in connection
herewith or therewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against any Borrower or any other Person that may be
obligated to Agent or any Lender by virtue of the Loan Documents, including any
such litigation, contest, dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the Loan during the pendency
of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than Agent, such reimbursement shall
be limited to one counsel for all such Lenders in each jurisdiction in which
any litigation, contest, dispute, suit, proceeding or action is commenced; provided,
further, that no Person shall be entitled to reimbursement under this clause
(iv) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person’s gross
negligence or willful misconduct;

 

64

 

(v)           any
attempt to enforce any remedies of Agent or any Lender against one or both of
Borrowers or any other Person that may be obligated to Agent or any Lender by
virtue of any of the Loan Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the Loan during
the pendency of one or more Events of Default; provided, that in the
case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;

 

(vi)          any
work-out or restructuring of the Loan during the pendency of one (1) or more
Events of Default; and

 

(vii)         efforts to (i) monitor the Borrowers’ uses of
Excess Cash, (ii) evaluate, observe or assess Borrowers or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral,
including, as to each of clauses (i) through (vi) above, all
reasonable attorneys’ and other professional and service providers’ fees
arising from such services and other advice, assistance or other
representation, including those in connection with any appellate proceedings;
and all reasonable expenses, costs, charges and other fees incurred by such
counsel and others in any way or respect arising in connection with or relating
to any of the events or actions described in this Section 13.3 all of
which shall be payable, on demand, by Borrowers to Agent.

 

Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: 
fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial overtime charges;
and expenses for travel, lodging and food paid or incurred in connection with
the performance of such legal or other advisory services.  Agent and Lenders agree to provide Borrowers
with notice in the event that the Agent or the Lenders expects the fees, costs
or expenses for which either of them are entitled to pursuant to this Section
13.3 to exceed $150,000.

 

Section 13.4                            No
Waiver.

 

Any failure by Agent or any Lender, at any time or
times, to require strict performance by Borrowers of any provision of this
Agreement or any other Loan Documents shall not waive, affect or diminish any
right of Agent or any Lender thereafter to demand strict compliance and
performance herewith or therewith.  Any
suspension or waiver of an Event of Default shall not suspend, waive or affect
any other Event of Default whether the same is prior or subsequent thereto and
whether the same or of a different type. 
None of the undertakings, agreements, warranties, covenants and
representations of any Borrower contained in this Agreement or any of the other
Loan Documents and no Default or Event of Default by Borrowers shall be deemed
to have been suspended or waived by Agent or any Lender, unless such suspension
or waiver is by a written instrument signed by an officer of or other
authorized employee of Agent and the applicable required Lenders, and directed
to Borrowers specifying such suspension or waiver.

 

65

 

Section 13.5                            Remedies.

 

Agent’s and each Lender’s rights and remedies under
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement,
including without limitation the other Loan Documents, by operation of law or
otherwise.  Recourse to the Collateral
shall not be required.

 

Section 13.6                            Severability.

 

Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.

 

Section 13.7                            Conflict
of Terms.

 

Except as otherwise provided in this Agreement or any
of the other Loan Documents by specific reference to the applicable provisions of
this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provision contained in this Agreement shall govern and control.

 

Section 13.8                            Confidentiality.

 

Agent and each Lender agree to use its respective
commercially reasonable efforts (equivalent to the efforts that Agent or any
Lender applies to maintaining the confidentiality of its respective
confidential information) to maintain as confidential all confidential
information provided to it by Borrowers and designated as confidential for a
period of two (2) years following receipt thereof, except that Agent and each
Lender may disclose such information (a) to Persons employed or engaged by
Agent and each Lender in evaluating, approving, structuring or administering
the Loan, (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed to comply with the covenant
contained in this Section 13.8 (and any such bona fide assignee or
participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as described in clause (a)
of this Section 13.8), (c) as required or requested by any Governmental
Authority or reasonably believed by Agent or any Lender to be compelled by any
court decree, subpoena or legal or administrative order or process, (d) as, on
the advice (which need not be in writing) of Agent’s or any Lender’s counsel,
required by law, (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any Litigation to which Agent or
any Lender is a party, or (f) which ceases to be confidential through no fault
of Agent or any Lender.

 

Section 13.9                            GOVERNING
LAW.

 

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS (AND IN ANY SUCH CASE, STRICTLY LIMITED TO THE EXTENT PROVIDED),
IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS

 

66

 

SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND INTENDED TO BE PERFORMED IN THAT STATE AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. 
EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR
AMONG ANY OF THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, HOWEVER
THAT EACH OF THE PARTIES THERETO ACKNOWLEDGES THAT ANY APPEALS FROM ANY OF SUCH
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY
OF NEW YORK, NEW YORK AND, PROVIDED, FURTHER, HOWEVER,
THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT OR
ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR
ANY LENDER.  EACH BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION
WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM
NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH BORROWER HEREBY WAIVES PERSONAL SERVICE
OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS
SET FORTH IN SECTION 13.10 OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER’S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID.

 

Section 13.10                     Notices.

 

Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States

 

67

 

Mail as otherwise provided in this Section 13.10),
(c) one (1) Business Days after deposit with a reputable overnight courier
with all charges prepaid or (d) when delivered, if hand-delivered by messenger,
all of which communications shall be addressed to the party to be notified and
sent to the address or facsimile number indicated below or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided.  The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice.  Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrowers or
Agent) designated below to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.

 

Notice to Agent and to
Cochran Road, LLC as Lender shall be addressed to:

 

Cochran Road, LLC

225 Broadway, Suite 1515

New York, New York 10007

Attention: Steven M. Golub

Facsimile: (212) 693-0090

 

with a copy to:

 

Sidley Austin Brown & Wood LLP

555 West 5th Street, Suite 4000

Los Angeles, CA  90013

Attention:  Gary J. Cohen, Esq.

Facsimile:  (213) 896-6600

 

Notices to Ravich
Revocable Trust of 1989 as Lender shall be addressed to:

 

Ravich Revocable Trust of 1989

11766 Wilshire Boulevard, Suite 870

Los
Angeles, California  90025

Attention:  Jess Ravich

Facsimile:  (310)-312-5658  

 

Notices to Borrowers
shall be addressed to:

 

PDS Gaming Corporation

6171 McLeod Drive

Las Vegas, Nevada 89120

Attention: Johan P. Finley

Facsimile: (702) 740-8692

 

Section 13.11                     Section
Titles.

 

The Section titles and Table of Contents contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement among the parties hereto.

 

68

 

Section 13.12                     Counterparts.

 

This Agreement may be executed in any number of
separate original or facsimile counterparts, each of which shall collectively
and separately constitute one agreement.

 

Section 13.13                     WAIVER
OF JURY TRIAL.

 

BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, EACH OF THE PARTIES HERETO WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG EITHER AGENT,
ANY LENDER AND ANY BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATING HERETO AND
THERETO.

 

Section 13.14                     Press
Releases.

 

Each Borrower executing this Agreement agrees that
neither it nor its Affiliates will in the future issue any press releases or other
public disclosure using the names of Agent or any or each of its Affiliates or
referring to this Agreement and any of the other Loan Documents without at
least two (2) Business Days’ prior notice to Agent, as applicable, and without
the prior written consent of Agent, as applicable, unless (and only to the
extent that) such Borrower or Affiliate is required to do so under law and
then, in any event, such Borrower or Affiliate will consult with Agent before
issuing such press release or other public disclosure.  Each Borrower consents to the publication by
Agent or any Lender of a tombstone or similar advertising material relating to
the financing transactions contemplated by this Agreement, subject to the
approval of Borrowers, which approval shall not be unreasonably withheld or
delayed.  Agent reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements with Borrowers’ consent, which consent
shall not be unreasonably withheld or delayed.

 

Section 13.15                     Reinstatement.

 

This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Borrower for liquidation or reorganization, should any Borrower become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
any Borrower’s assets, and this Agreement shall continue to be effective or to
be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is,

 

69

 

pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

Section 13.16                     Successors
and Assigns.

 

This Agreement and the other Loan Documents shall be
binding on and shall inure to the benefit of each Borrower, Agent and each
Lender and their respective successors and assigns (including, in the case of
Borrowers, a debtor-in-possession on behalf of a Borrower), except as otherwise
provided herein or therein.  No Borrower
may assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents
without the prior express written consent of Agent and Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Borrower without the prior express
written consent of Agent and Lenders shall be null and void ab initio.  The terms and provisions of this Agreement
are for the purpose of defining the relative rights and obligations of each Borrower,
Agent and each Lender with respect to the transactions contemplated hereby and
no Person shall be a third party beneficiary of any kind of any of the terms
and provisions of this Agreement or any of the other Loan Documents.

 

Section 13.17                     Advice
of Counsel.

 

Each of the parties hereto represents to each other
party hereto that it has discussed this Agreement and each of the provisions,
terms and conditions hereof, and, specifically, the provisions of Section
12.1, Section 13.9, Section 13.13 and Section 13.19
with its respective counsel.

 

Section 13.18                     No
Strict Construction.

 

The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

 

Section 13.19                     Attorney-In-Fact.

 

(a)           Each
Borrower hereby irrevocably appoints Agent as its attorney-in-fact, coupled
with an interest, with full authority in the place and stead of each Borrower,
and in the name of each Borrower or otherwise, from time to time after the
occurrence of and during the continuation of an Event of Default, in Agent’s
discretion, to take any action and to execute any instrument which Agent or
Lenders may deem necessary or advisable to accomplish the purpose of this
Agreement or any other Loan Document, including, without limitation, the
following:  (i) to ask, demand,
collect, sue for, recover, compromise, receive and give acquittance and
receipts for monies due and to become due under or in respect of the Collateral;
(ii) to receive, endorse, and collect (A) any SPV Equity, Investment
Transaction Equity or other payments in

 

70

 

respect of the
Collateral, (B) any instruments made payable to any Borrower representing
any dividend, payment of principal, interest, redemption price, purchase price
or other distribution or payment in respect of the Blocked Account, or
(C) any other instruments, documents and chattel paper received in
connection with this Agreement or any other Loan Document; (iii) to file any
claims, or take any action or institute any proceedings which Agent or Lenders
shall deem necessary or desirable for the collection of any SPV Equity or
Investment Transaction Equity in the event that Borrowers shall fail to do so,
or otherwise to enforce the rights of Agent and Lenders with respect to this
Agreement and the other Loan Documents; (iv) to execute and/or file any
Uniform Commercial Code financing statements, continuation statements, or other
filing, and any amendment thereof, relating to the Collateral (including the
Blocked Account and the Excess Cash); (v) to give notice to any third
parties which may be required to perfect Agent’s Lien, for the benefit of the
Lender Group, in the Collateral (including the Blocked Account and the Excess
Cash); and (vi) to register, purchase, sell, assign, transfer, pledge or
take any other action with respect to any Collateral (including the Blocked
Account and the Excess Cash) in accordance with this Agreement or, to the
extent applicable, any other Loan Document.

 

(b)           Agent
or Lenders may, from time to time, at their sole option, perform any act which
Borrowers agree hereunder to perform which Borrowers shall fail to perform, and
Agent and Lenders may from time to time take any other action which Agent or
Lenders deem reasonably necessary for the maintenance, preservation or
protection of any of the rights granted to Agent and Lenders hereunder.

 

(c)           The
powers conferred on Agent and Lenders hereunder, other than the obligations
expressly set forth in this Agreement, shall not impose upon Agent or Lenders
any duty as to the Collateral (including the Blocked Account and the Excess
Cash), or any responsibility for (i) ascertaining or taking action with
respect to any matters relative to the Collateral (including the Blocked
Account and the Excess Cash), whether or not Agent or Lenders have or are
deemed to have knowledge of such matters or (ii) taking any necessary
steps to preserve rights against prior parties or any other rights pertaining
to the Collateral (including the Blocked Account and the Excess Cash).

 

[Signature pages to follow]

 

71

 

IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.

 

	
  Borrowers:

  
	
   

  
	
  PDS GAMING CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Peter D.
  Cleary

  	
   

  
	
  Name:

  	
  Peter D. Cleary

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  PDS GAMING CORPORATION – NEVADA

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Peter D.
  Cleary

  	
   

  
	
  Name:

  	
  Peter D. Cleary

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  PDS GAMING CORPORATION – COLORADO

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Peter D.
  Cleary

  	
   

  
	
  Name:

  	
  Peter D. Cleary

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  PDS GAMING CORPORATION –
  MISSISSIPPI

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Peter D.
  Cleary

  	
   

  
	
  Name:

  	
  Peter D. Cleary

  	
   

  
	
  Title:

  	
  President

  	
   

  
						

 

1

 

	
  Agent:

  
	
   

  
	
  COCHRAN ROAD, LLC

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Steven M.
  Golub

  	
   

  
	
  Name:

  	
  Steven M. Golub

  	
   

  
	
  Title:

  	
  Attorney-in-fact

  	
   

  
	
   

  
	
   

  
	
  Lender:

  
	
   

  
	
  COCHRAN ROAD, LLC

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Steven M.
  Golub

  	
   

  
	
  Name:

  	
  Steven M. Golub

  	
   

  
	
  Title:

  	
  Attorney-in-fact

  	
   

  
						

 

2

 

	
  Lender:

  
	
   

  
	
  RAVICH REVOCABLE TRUST OF 1989

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Jess M.
  Ravich

  	
   

  
	
  Name:

  	
  Jess M. Ravich

  	
   

  
	
  Title:

  	
  Trustee

  	
   

  
						

 

3

 

Schedule 1

to

LOAN AGREEMENT

 

Lender Information

 

	
  Lender

  	
   

  	
  Loan Amount

  	
   

  	
  Pro Rata Share

  	
   

  	
  Account Information

  
	
  Cochran
  Road, LLC

  	
   

  	
  $

  	
  5,102,041

  	
   

  	
  83.33

  	
  %

  	
  Citibank, NY

  ABA #: 021000089

  

  Bear Stearns Securities Corp

  

  a/c 09253186

  fbo: Cochran Road, LLC

  a/c 102-29382

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ravich
  Revocable Trust of 1989

  	
   

  	
  $

  	
  1,020,408

  	
   

  	
  16.67

  	
  %

  	
  The Bank of
  New York, New York, NY

  ABA#: 021000018

  FTAO BNY Clearing Services LLC

  Acct#: 8900402148

  

  For Further Credit to: Ravich Revocable Trust of 1989

  Account #: 71397972

  

 

 

Schedule 2

to

LOAN AGREEMENT

 

 

Projected Route Net Cash Flow

 

[see attached]

 

 

Schedule
4.2

to

LOAN AGREEMENT

 

Executive Offices;
Collateral Location; FEIN

 

	
  Borrower

  	
   

  	
  FEIN

  	
   

  	
  Chief Executive Office

  	
   

  	
  Collateral Locations

  
	
  PDS Gaming
  Corporation

  	
   

  	
  41-1605970

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDS Gaming
  Corporation – Nevada

  	
   

  	
  88-0357859

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDS Gaming
  Corporation – Mississippi

  	
   

  	
  72-1379221

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDS Gaming
  Corporation – Colorado

  	
   

  	
  88-0433506

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  	
   

  	
  6171 McLeod Drive

  Las Vegas, NV  89120-4048

  

 

 

Schedule
4.5

to

LOAN AGREEMENT

 

Certain Indebtedness

 

 

Schedule
4.9

to

LOAN AGREEMENT

 

Outstanding Indebtedness

 

 

Exhibit
A

to

LOAN AGREEMENT

 

Draft of 2004 Last-Out

 

[see attached]

 

 

Exhibit
2.1(a)

to

LOAN AGREEMENT

 

Form of Promissory Note

 

 

[see
attached]

 

 

Exhibit
6.2

to

LOAN AGREEMENT

 

Exemplary
Monthly Holdings Report

 

[see
attached]

 

 

Exhibit
8.4(b)

to

LOAN AGREEMENT

 

Form
of Non-Ordinary Course Withdrawal Certificate

 

The
undersigned, in the undersigned’s capacity as duly appointed
[                       ]
of [each of] [PDS Gaming Corporation][PDS Gaming Corporation – Nevada][PDS
Gaming Corporation – Colorado][PDS Gaming Corporation – Mississippi], hereby
certifies in connection with that certain Loan Agreement, dated as of March 11,
2004 (as amended from time to time, the “Agreement”), and for the benefit of
Cochran Road, LLC, in its capacity as Agent under the Agreement, and for the
benefit of each other member of the Lender Group, as follows:

 

1.               Capitalized terms
used in this certificate without definition have the meanings given to such
terms in the Agreement.

 

2.               On [INSERT DATE],
Borrower will withdraw
$[                         ]
from the Blocked Account (“Withdrawal
Amount”), which Excess Cash will be used for [LIST EACH PURPOSE
FOR WHICH EXCESS CASH WILL BE USED].

 

3.               [INSERT BRIEF
DESCRIPTION OF THE NATURE OF THE OUT OF THE ORDINARY COURSE TRANSACTION]

 

4.               Each of the
purposes listed in Section 2 of this certificate is a permitted use under
Section 7.2 of the Agreement.

 

5.               After giving effect
to the Withdrawal Amount, Borrowers shall have withdrawn no more than $50,000
in any single calendar quarter or $250,000 in the aggregate for a transaction
or series of related transactions that are not in the ordinary course of each
Borrower’s Business [include, if applicable pursuant to Section 8.4 of the Loan
Agreement, an exclusion for the Specified Real Property Investment].

 

6.               After giving effect
to the Withdrawal Amount, no less than the Minimum Excess Cash Balance shall be
on deposit in the Blocked Account.

 

7.               After giving effect
to the Withdrawal Amount, no Default or Event of Default shall have occurred or
be continuing under the Agreement.

 

 

	
  Date:

  	
  [

  	
                              

  	
  ]

  	
  [INSERT BORROWER NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

Exhibit 8.4(c)

to

LOAN AGREEMENT

 

Form
of Ordinary Course Withdrawal Certificate

 

The undersigned,
in the undersigned’s capacity as duly appointed
[                        ]
of [each of] [PDS Gaming Corporation][PDS Gaming Corporation – Nevada][PDS
Gaming Corporation – Colorado][PDS Gaming Corporation – Mississippi], hereby
certifies in connection with that certain Loan Agreement, dated as of March 11,
2004 (as amended from time to time, the “Agreement”), and for the benefit of
Cochran Road, LLC, in its capacity as Agent under the Agreement, and for the
benefit of each other member of the Lender Group, as follows:

 

1.               Capitalized terms
used in this certificate without definition have the meanings given to such
terms in the Agreement.

 

2.               On [INSERT DATE],
Borrower will withdraw
$[                         ]
from the Blocked Account (“Withdrawal
Amount”), which Excess Cash will be used for [LIST EACH PURPOSE
FOR WHICH EXCESS CASH WILL BE USED].

 

3.               [INSERT BRIEF
DESCRIPTION OF THE NATURE OF THE ORDINARY COURSE INVESTMENT]

 

4.               Each of the
purposes listed in Section 2 of this certificate is a permitted use under
Section 7.2 of the Agreement.

 

5.               The Investment for
which such Excess Cash will be used is in the ordinary course of a Borrowers’
Business, consistent with past practices.

 

6.               After giving effect
to the Withdrawal Amount, no less than the Minimum Excess Cash Balance shall be
on deposit in the Blocked Account.

 

7.               After giving effect
to the Withdrawal Amount, no Default or Event of Default shall have occurred or
be continuing under the Agreement.

 

 

	
  Date:

  	
  [

  	
                              

  	
  ]

  	
  [INSERT BORROWER NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:<PAGE>

                                                                    EXHIBIT 10.9

                      NOTE PURCHASE AND SECURITY AGREEMENT

             This Note Purchase and Security Agreement, dated as of December 31,
2003 (this "AGREEMENT"), is entered into by and between WIRELESS AGE
COMMUNICATIONS, INC., a Nevada corporation (the "COMPANY"), and Stacey
Minichiello (the "PURCHASER").

                                    RECITALS

WHEREAS, On December 17, 2003, Wireless Age entered into an agreement to
purchase $1,700,000 in outstanding principal amount of the 8% Convertible
Subordinated Promissory Notes (the "Special Situations Debenture") issued by
RELM WIRELESS CORPORATION (the "Issuer") for $1,870,000 (the "Purchase Price");

WHEREAS, The Special Situations Debenture is currently convertible into 904,255
shares of Common Stock of the Issuer (the "Conversion Shares");

WHEREAS, The Special Situations Debenture is one of a series issued by the
Issuer (collectively, the "Debentures");

WHEREAS, on December 31, 2003 the Company borrowed $1,930,000 (the "Initial
Loan") from the Purchaser, a private investor, in order to consummate the
acquisition of the Special Situations Debenture, which amount included various
fees, costs and expenses of the Purchaser incurred in excess of the Purchaser
Price with respect to the Purchaser providing for immediate liquidity of the
Initial Loan to the Company;

WHEREAS, the Company may from time-to-time acquire one or more other Debentures
of the Issuer in addition to the Special Situations Debenture, as to which the
Purchaser has indicated a willingness to provide further funds for such
acquisitions by the Company (collectively, "Subsequent Debenture Acquisition
Loans");

WHEREAS, the Company and the Purchaser desire to memorialize the terms and
conditions of the Initial Loan by the Purchaser to the Company with respect to
the acquisition of the Special Situations Debenture and the terms and conditions
which shall apply to any and all Subsequent Debenture Acquisition Loans;

NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:

         1.   The Note.

        (a) Issuance of the Note. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company hereby
issues, sells and delivers to the Purchaser, and the Purchaser accepts delivery
from the Company, of the Note in the form attached hereto as Exhibit A, with
respect to the aggregate consideration delivered by the Purchaser to the Company
in the amount set forth upon the face of such Note.

        (b) Terms of the Note. The terms and conditions of the Note are set
forth in the form of Note attached as Exhibit A hereto. Capitalized terms not
otherwise defined herein shall have the meaning set forth in the Note.

        (c) Delivery of Initial Note. The Company shall upon execution hereof
simultaneously deliver to the Purchaser an executed version of the Note.

        (d) Subsequent Debenture Acquisition Loans. Upon written notice by the
Company to the Purchaser of the Company's intent to acquire one or more
Debentures in addition to the Special Situations

                                     Page 1

<PAGE>

Debenture, and upon written notice of acceptance by the Purchaser to make such
Subsequent Debenture Acquisition Loans, the Company agrees to issue, sell and
deliver to the Purchaser one or more supplemental notes which shall be in form
and substance the same as the Note, except to the extent such Note is conformed
to the respective date and amount of each such Subsequent Debenture Acquisition
Loan. Nothing herein shall be construed as an obligation or commitment by the
Company to offer the Purchaser any security instrument in connection with the
purchase of any supplemental Debentures and any determination in such regard
shall be at the sole discretion of the Company. Nothing herein shall be
construed as an obligation or commitment by the Purchaser to make any Subsequent
Debenture Acquisition Loans to the Company and any determination in such regard
shall be at the sole discretion of the Purchaser.

         2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser that the statements contained in the
following paragraphs of this Section 2 are all true and correct as of the time
of issuance of the Note and shall be true and correct as of the date of each
Subsequent Debenture Acquisition Loan:

        (a) Organization and Standing: Articles and Bylaws. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as now conducted and proposed to be conducted.

        (b) Corporate Power. The Company has all requisite legal and corporate
power to enter into, execute and deliver this Agreement and the Note. This
Agreement is, and upon issuance the Note will be, a valid and binding obligation
of the Company, each of the Agreement and the Note (upon its issuance) being
enforceable against the Company in accordance with its respective terms.

        (c) Authorization.

               (i) Corporate Action. All corporate and legal action on the part
of the Company and its officers, directors and stockholders necessary for the
execution and delivery of this Agreement and the Note, the sale and issuance of
the Note and the performance of the Company's obligations hereunder and
thereunder have been taken.

               (ii) Valid Issuance. The Note, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances; provided, however,
that the Note may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein, and as may be required by future
changes in such laws.

        (d) Financial Statements. The Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 2003 or (ii) liabilities which
have been disclosed as actual or contingent liabilities in the Company's
financial statements and reports (collectively, "Commission Reports") as filed
with the U.S. Securities and Exchange Commission (the "Commission"); and (iii)
obligations under contracts or commitments incurred in the ordinary course of
business which are not material to the financial condition or operating results
of the Company.

        (e) No Materially Adverse Change. Since September 30, 2003, no
transaction, arrangement, event or other circumstance has occurred or existed
which (i) has had a material adverse effect on the business, assets, properties,
operations or condition (financial or otherwise) of the Company or (ii) is, as
of the date hereof, reasonably expected to result in any such effect, except to
the extent such event or transaction has been disclosed in Commission Reports.

        (f) Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with, any
federal, state, local or provincial or other governmental authority on the part
of the Company is required in connection with the valid execution, delivery and
performance of this Agreement or the Note, or the offer, sale or issuance of the
Note, other than, if required, filings or qualifications under applicable blue
sky laws.

                                     Page 2

<PAGE>

         3. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to the Company as of the time of issuance of the Note
and as of the date of each Subsequent Debenture Acquisition Loans as follows:

        (a) Investment Intent: Authority. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company, as
evidenced by Purchaser's execution of this Agreement, that Purchaser is
acquiring the Note for the Purchaser's own account, not as nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"). The Purchaser has the full right,
power, authority and capacity to enter into and perform this Agreement, and this
Agreement will constitute a valid and binding obligation upon the Purchaser,
except as the same may be limited by bankruptcy, insolvency, moratorium and
other laws of general application affecting the enforcement of creditors'
rights.

              (b) Not Registered. The Purchaser understands and acknowledges
that the offering and sale of the Note pursuant to this Agreement will not be
registered under the Securities Act on the grounds that the offering and sale of
the Note are exempt from registration under the Securities Act, and that the
Company's reliance upon such exemption is predicated upon the Purchaser's
representations set forth in this Agreement. The Purchaser acknowledges and
understands that resale of the Note may be restricted indefinitely unless the
Note is subsequently registered under the Securities Act or an exemption from
such registration is available.

              (c) No Transfer. Purchaser covenants that in no event will it
dispose of the Note other than in conjunction with an effective registration
statement under the Securities Act or pursuant to an exemption therefrom (e.g.,
Rule 144 promulgated under the Securities Act) or to an entity affiliated with
the Purchaser.

              (d) Knowledge and Experience. Purchaser (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the Purchaser's prospective investment in the Note; (ii) has
the ability to bear the economic risks of the Purchaser's prospective
investment; (iii) has had all questions which have been asked by the Purchaser
satisfactorily answered by the Company; and (iv) has not been offered the Note
by any form of advertisement, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any such
media.

         4.   Security Interest.

            (a) Security Interest. As security for the full, prompt and complete
payment and performance of the Company's obligations hereunder, the Company
hereby grants to the Purchaser and any subsequent transferee, assignee, or other
holder of the Note (the Purchaser and each such other transferee, assignee or
holder, a "Holder"), a security interest in and to the collateral as defined
with specificity on the signature page of the Note (the "Collateral"), and as to
which this Agreement shall constitute a security agreement. The definition of
security interest in the Collateral shall include and apply to the Conversion
Shares and any and all other shares of common stock and/or other equity or debt
instrument of the Issuer into which the Collateral is converted. The security
interest granted in the Collateral shall terminate upon payment in full of the
Company's obligations under the Note. The Company undertakes not to cause or
permit the conversion of the Collateral without the express written consent of
the Holder of the Note.

             (b) Exclusivity of First Priority Security Interest. As inducement
to the Holder to purchase this Note from the Company, the Holder expressly
covenants and agrees that the Holder shall have a first priority security
interest in the Collateral, as such term is defined in the Note and the Company
shall not grant or permit to exist any other obligations or liens or any other
type of encumbrance which may result, directly or indirectly, contingent or
otherwise, in the existence or establishment of a security interest in the
Collateral which is senior to the Holder of the Note.

                                     Page 3

<PAGE>

            (c) Further Action. Company agrees that from time to time, at its
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that the Holder may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Holder to exercise and enforce their rights and remedies hereunder with respect
to any Collateral. Without limiting the generality of the foregoing, Company
will: execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Holder may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.

            (d) Financing And Continuation Statements. The Company hereby
authorizes the Holder to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Collateral without
the signature of Company where permitted by law. A carbon, photographic, or
other reproduction of this Agreement or any part thereof shall be sufficient as
a financing statement where permitted by law.

            (e) Escrow of Collateral. The Collateral shall be held in escrow
pursuant to the Escrow Agreement in the form attached hereto. The Company will
furnish to the Holder from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Holder may request, all in reasonable detail.

            (f) Termination Filings: Upon payment in full of the Note
Obligations, the Holder shall take any and all reasonable actions and cause the
execution and delivery to Company for filing of any financing statements
necessary in the Company's reasonable discretion to terminate any liens the
Holder may have on such Collateral.

            (g) Holder's Rights And Remedies. Upon the occurrence and during the
continuance of any Event of Default, as defined in the Note, the Holder may
proceed to exercise (i) any one or more of the rights or remedies afforded by
the Uniform Commercial Code of any applicable jurisdiction, including, without
limitation, the right to sell any or all of the Collateral at one or more public
or private sales in accordance with the rules of the Uniform Commercial Code,
and of the date on which the Collateral will first be offered for sale in the
case of any private sale, and to bid thereat or purchase any part or all thereof
in their own or a nominee's name, free and clear of any equity of redemption;
and to apply the net proceeds of the sale, after deduction for any costs and
expenses of sale (including any liabilities incurred in connection therewith),
including reasonable attorneys fees, to the payment of Company's Obligations in
any manner or order which the Holder, in their sole discretion, may elect, to
the payment of any other amount required by law and to the payment of any
remaining net proceeds to whomsoever may lawfully be entitled to receive the
same or as a court of competent jurisdiction may direct, without further notice
and without regard to any equitable principles of marshaling or other like
equitable doctrines; (ii) any rights or remedies upon any judgment entered upon
the Note; in each case simultaneously or consecutively, against or in respect of
Company, all of which rights and remedies shall, to the full extent permitted by
law, be cumulative. The choice of one or more rights or remedies shall not be
construed as a waiver or election barring other rights and remedies. Company
hereby acknowledges and agrees that the Holder are not required to exercise all
remedies and rights available to them equally with respect to all of the
Collateral and that the Holder may select less than all of the Collateral with
respect to which the remedies as determined by the Holder may be exercised.

            (h) Direct Interest Payments. Upon the occurrence of any Event of
Default, or at any time thereafter if any Event of Default shall then be
continuing, the Holder shall notify the Issuer of the Debenture and instruct
such Issuer to make interest payments directly to the Holder.

            (i) Additional Remedies. In addition to or in conjunction with the
rights and remedies referred to in Section 6.1 hereof, after the occurrence and
during the continuance of an Event of Default:

                                     Page 4

<PAGE>

                 i. Written notice mailed to Company at the address designated
herein ten (10) business days or more prior to the date of public or private
sale of any of the Collateral shall constitute reasonable notice. For purposes
of this agreement and the Note, a business day shall be deemed to be any day on
which the New York Stock Exchange is open for business.

                 ii. The Holder may require Company to assemble any of the
Collateral and to make it available to the Holder at a place the Holder
designate and reasonably convenient to Company and the Holder.

                 iii. The Holder may require Company to use its best efforts to
obtain any approvals that are required by any governmental or regulatory body in
order to permit the sale of the Collateral pursuant to this Agreement.

         5.   Miscellaneous.

              (a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified upon the written consent of the Company and the
Purchaser.

              (b) Governing Law. This Agreement and all actions arising out of
or in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without regard to the conflicts
of law provisions of the State of Nevada or of any other state.

              (c) Entire Agreement. This Agreement, together with the form of
the Note attached hereto, constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.

              (d) Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent via overnight courier
service or mailed by certified or registered mail, postage prepaid, return
receipt requested, addressed or sent (a) if to the Purchaser, at the address of
the Purchaser set forth below such party's name on the signature page hereto, or
at such other address or number as the Purchaser shall have furnished to the
Company in writing, or (b) if to the Company, at 13980 Jane Street, King City,
Ontario, L7B 1A3 or at such other address or number as the Company shall have
furnished to the Purchaser in writing.

              (e) Validity. If any provision of this Agreement or the Note shall
be judicially determined to be invalid, unlawful or unenforceable, the validity,
lawfulness and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.

              (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.

              (g) Disclosure. The Company may issue any and all press releases
and/or make any and all other announcements or filings with such persons and
authorities regarding this Agreement and/or any of the terms hereof, or any
amendment hereto, as may be required to satisfy the disclosure obligations of
the Company which determinations shall be made at the sole and reasonable
discretion of the Company.

                            [Signature Page Follows]

                                     Page 5

<PAGE>

          IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.

WIRELESS AGE COMMUNICATIONS, INC.

By:
        --------------------------------
        Name
        Title

THE PURCHASER:

--------------------------------
Stacey Minichiello
Address for Notices:

                                     Page 6

<PAGE>

                                    EXHIBIT A

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

                                 PROMISSORY NOTE

$1,930,000.00                                               December 31, 2003

              FOR VALUE RECEIVED, WIRELESS AGE COMMUNICATIONS, INC., a Nevada
corporation (the "Company"), promises to pay to Stacey Minichiello (the
"HOLDER"), or her registered assigns, the principal sum of $1,930,000.00 (one
million nine hundred thirty thousand U.S. Dollars), or such lesser amount as
shall then equal the outstanding principal amount hereof, together with interest
from the date of this Note on the unpaid principal balance at a rate equal to
eight percent (8%) per annum. All accrued and unpaid interest hereunder shall be
payable in arrears in calendar quarterly installments commencing on the date
which is the first day after the end of the earliest calendar quarter after the
date hereof and continuing every three (3) months thereafter until payment in
full of this Note. The interest rate shall be computed on the basis of the
actual number of days elapsed and a year of 365 days. For purposes of clarity, a
calendar quarter shall be deemed to end on March 31, June 30, September 30 and
December 31 of each calendar year. All unpaid principal, together with the
balance of accrued and unpaid interest and any other amounts payable hereunder,
shall be due and payable on demand at any time after the earlier of six months
from the date first set forth above; or (ii) an Event of Default (defined
below). Moreover, promptly upon the Company's receipt of interest paid upon the
Collateral (as defined on the Signature Page hereto), the Company shall pay to
the Holder any and all such Collateral interest received as interest due upon
this Note and to the extent of any surplus thereof, the Company shall prepay all
unpaid principal, together with the balance of accrued and unpaid interest and
any other amounts payable hereunder, to the extent of the net proceeds received
by the Company from such Collateral. As used in this Note, the term
"Obligations" shall mean all principal and accrued interest due hereunder. This
Note is issued pursuant to that certain Note Purchase and Security Agreement
between the Company and the Holder dated December 31, 2003 (the "Note Purchase
and Security Agreement"). All terms not otherwise defined herein shall have the
meaning set forth in the Note Purchase and Security Agreement. This Note shall
be governed by and interpreted in accordance with the terms and conditions set
forth in the Note Purchase and Security Agreement.

         The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:

          1. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:

              (a) Failure to Pay. The Company shall fail to pay when due any
amount of principal or interest hereunder or any other amount payable by the
Company hereunder;

              (b) Breach of Representation. Any representation or warranty of
the Company made in this Note or with respect to or in connection with the
issuance of this Note (including, without limitation, any representation or
warranty of the Company set forth in that certain Note Purchase and Security
Agreement) shall have been false and shall have materially and adversely
affected the operations of the Company.

              (c) Breach of Covenant. Without limiting the foregoing, the
Company shall fail in any respect to perform or observe when required any
covenant, condition or agreement for performance or observance by the Company
where the same (i) is either set forth in this Note or in any document or
instrument entered into or delivered by the Company with respect to or in
connection with the issuance of this Note (including, without limitation, any
covenant, condition or agreement set forth in the Note Purchase and Security
Agreement) and, (ii) if capable of being remedied in twenty (20) or fewer
business days, has not been remedied within twenty (20) business days after the
Company's receipt of written notice with respect thereto.

              (d) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its

                                     Page 7

<PAGE>

or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or

              (e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the assets thereof, or an involuntary
case or other proceedings seeking liquidation, reorganization or other relief
with respect to the Company or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced,
and such proceedings shall not have been stayed or dismissed within sixty (60)
days after commencement of the same.

         2. Rights of Holder Upon Default. Without limiting any other rights set
forth herein, upon the occurrence or existence of any Event of Default and at
any time thereafter during the continuance of such Event of Default, the Holder
may declare all outstanding Obligations payable by the Company hereunder to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
the Holder may exercise any other right, power or remedy granted to it or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both. Without limiting the foregoing, effective upon an Event of Default, the
Company hereby irrevocably designates and appoints the Holder as its agent and
attorney-in-fact to act for, and in the Company's behalf, to execute and file
any document with respect to enforcement of all of Holder's rights with respect
to the Collateral and to do all other lawfully permitted acts hereunder with the
same legal force and effect as if executed by a duly authorized officer of the
Company, which power-of-attorney is coupled with an interest and shall be
irrevocable.

         4. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 6 and 7 below, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties. Any and all
rights with respect to the continuing security interest in the Collateral as set
forth in the Note Purchase and Security Agreement shall inure to the benefit of
any and all assigns, heirs, administrators and transferees of the Holder.

         5. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and the Holder.

         6. Transfer of this Note. This Note may not be transferred or assigned
in violation of any restrictive legend set forth hereon; provided, however, that
the Company acknowledges and agrees that any transfer or assignment by the
Holder of this Note to any family member of the Holder shall not be deemed to be
a violation of such legend and, notwithstanding any other provision of this Note
to the contrary, any such transfer or assignment shall be permitted without the
performance or observance of any requirements by the Holder (except for notice
to the Company). Each new Note issued upon transfer or assignment of this Note
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with the Securities Act, unless in the opinion of
counsel for the Company such legend is not required in order to ensure
compliance with the Securities Act. Prior to presentation of this Note for
registration of transfer or assignment, the Company shall treat the registered
holder hereof as the owner and holder of this Note for the purpose of receiving
all payments of principal and interest hereon and for all other purposes
whatsoever, whether or not this Note shall be overdue, and the Company shall not
be affected by notice to the contrary.

         7. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company without the prior written consent
of the Holder, provided, however, the Company may assign and transfer the
obligation upon this Note to a subsidiary of the Company so long as a continuing
security interest in the Collateral is maintained by the Holder to the same
extent as provided herein.

         8. Treatment of Notes To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.

         9. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by

                                     Page 8

<PAGE>

recognized overnight courier or personal delivery at the principal executive
offices of the Company, in the instance of the Company, or the address of the
Holder as set forth in the records maintained by the Company, in the instance of
the Holder. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when received.

         10. Payment. Payment shall be made in lawful tender of the United
States at such reasonable place and time and in such reasonable manner as
specified by the Holder.

         11. Expenses; Waivers. If any action or other proceeding is instituted
to collect this Note, the Company shall pay all costs and expenses, including,
without limitation, reasonable attorneys' fees and costs, incurred by the Holder
or its transferees or assigns in connection with such action or other
proceeding. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.

         12. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of Nevada, without regard to the conflicts of law
provisions of the State of Nevada or of any other state.

         13. Validity. If any provision of this Note shall be judicially
determined to be invalid, unlawful or unenforceable, the validity, lawfulness
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

         14. Excessive Interest. Notwithstanding any other provision herein to
the contrary, this Note is hereby expressly limited so that the interest rate
charged hereunder shall at no time exceed the maximum rate permitted by
applicable law. If, for any circumstance whatsoever, the interest rate charged
exceeds the maximum rate permitted by applicable law, the interest rate shall be
reduced to the maximum rate permitted, and if the Holder shall have received an
amount that would cause the interest rate charged to be in excess of the maximum
rate permitted, such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing hereunder (without charge for
prepayment) and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal, such excess shall be refunded to the
Company.

                            [Signature Page Follows]

                                     Page 9

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.

WIRELESS AGE COMMUNICATIONS, INC.

By:
        ---------------------------
        Name
        Title

Description of the Collateral: 8% Convertible Subordinated Promissory Note
issued by Relm Wireless Corporation for $1,700,000, Number 21, issued March 13,
2000 and due December 31, 2004.

                                     Page 10

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