EXHIBIT 99.3
SECURITY AGREEMENT
1. GRANT OF SECURITY INTEREST. For valuable consideration, BounceBack
Xxxxxxxxxxxx.xxx, Inc., a Minnesota corporation, f/k/a Casino Resource
Corporation ("Debtor"), hereby grants and transfers to Xxxxx Xxxxx ("Secured
Party") a security interest in all of the property of Debtor described as
follows, whether now owned or hereafter acquired, described as follows
(collectively, the "Collateral"):
(a) All of the Debtor's right, title and interest in that
certain Conditional Release and Termination Agreement between the
Debtor and Lakes Entertainment, Inc., a Minnesota corporation, f/k/a
Lakes Gaming, Inc. ("Lakes") dated May 20, 1999, as amended by that
certain Amendment to Conditional Release and Termination Agreement
dated July 1, 1999, including without limitation any payments to be
made by Lakes pursuant to the terms of such agreement (the "Lakes
Agreement"); and
(b) All of the Debtor's right, title and interest in that
certain civil suit initiated by the Debtor against Xxxxxx'x
Entertainment, Inc. on September 4, 1998 in United States District
Court for District of Minnesota, court file number 98-2058(JEL/JGL),
styled as Casino Resource Corporation x. Xxxxxx'x Entertainment, Inc.,
and Xxxxxx'x Operating Company, Inc., d/b/a Xxxxxx'x Southwest Michigan
Casino Corporation, Xxxxxx'x Southwest Michigan Casino Corporation,
Xxxxxx X. Xxxxx, Xxxxx X. Xxxx, and Xxxx Does 1-10, and related claims
including without limitation any and all choses in action, claims,
settlements, judgments or other recoveries related to or based on such
suit (the "Xxxxxx'x Lawsuit");
together with whatever is receivable or received when any of the
foregoing or the proceeds thereof are sold, leased, collected,
exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary, including without limitation, all rights to
payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with
respect to any claim or cause of action affecting or relating to any
of the foregoing (collectively, "Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment
and performance of (collectively, the "Indebtedness"): (a) all present and
future Indebtedness of Debtor to Secured Party, including, but not limited to,
the Secured Promissory Note dated of even date herewith payable to Secured Party
by Debtor in the original principal amount of $500,000 (such note and any
replacements, renewals, substitutions or modifications thereof shall be
collectively referred to as the "Note"); (b) all obligations of Debtor and
rights of Secured Party under this Agreement, the Loan Agreement between Debtor
and Secured Party dated of even date herewith (the "Loan Agreement"), and the
other Loan Documents (as defined in the Loan Agreement); and (c) all present and
future obligations of Debtor to Secured Party of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and further
includes any and all advances, debts, obligations and liabilities of Debtor,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or
undetermined, and whether Debtor may be liable individually or jointly with
others, or whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.
3. TERMINATION. This Agreement will terminate upon the performance of
all obligations of Debtor to Secured Party, including without limitation, the
payment of all Indebtedness of Debtor to Secured Party, and the termination of
all commitments of Secured Party to extend credit to Debtor, existing at the
time Secured Party receives written notice from Debtor of the termination of
this Agreement.
4. OBLIGATIONS OF SECURED PARTY. Secured Party has no obligation to
make any loans hereunder except as set forth in the Loan Agreement between the
parties.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Secured Party that: (a) Debtor's legal name is exactly as set forth on the first
page of this Agreement, and all of Debtor's organizational documents or
agreements delivered to Secured Party are complete and accurate in every
respect; (b) Debtor is the owner and has possession or control of the Collateral
and Proceeds; (c) Debtor has the exclusive right to grant a security interest in
the Collateral and Proceeds; (d) all Collateral and Proceeds are genuine, free
from liens, adverse claims, setoffs, default, prepayment, defenses and
conditions precedent of any kind or character, except the lien created hereby or
as otherwise agreed to by Secured Party, or as heretofore disclosed by Debtor to
Secured Party, in writing; (e) all statements contained herein and, where
applicable, in the Collateral are true and complete in all material respects;
(f) no financing statement covering any of the Collateral or Proceeds, and
naming any secured party other than Secured Party, except the financing
statement of SouthTrust Bank, is on file in any public office; and (g) where
Collateral consists of rights to payment, all persons appearing to be obligated
on the Collateral and Proceeds have authority and capacity to contract and are
bound as they appear to be, all property subject to chattel paper has been
properly registered and filed in compliance with law and to perfect the interest
of Debtor in such property, and all such Collateral and Proceeds comply with all
applicable laws concerning form, content and manner of preparation and
execution.
6. COVENANTS OF DEBTOR.
(a) Debtor agrees in general: (i) to pay Indebtedness secured hereby
when due; (ii) to indemnify Secured Party against all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto; (iii)
to pay all costs and expenses, including reasonable attorneys' fees, incurred by
Secured Party in the perfection and preservation of the Collateral or Secured
Party's interest therein and/or the realization, enforcement and exercise of
Secured Party's rights, powers and remedies hereunder; (iv) to permit Secured
Party to exercise his powers; (v) to execute and deliver such documents as
Secured Party deems necessary to create, perfect and continue the security
interests contemplated hereby; (vi) not to change its name, and as applicable,
its chief executive office, its principal residence or the jurisdiction in which
it is organized and/or registered without giving Secured Party prior written
notice thereof; (vii) not to change the places where Debtor keeps any Collateral
or Debtor's records concerning the Collateral and Proceeds without giving
Secured Party prior written notice of the address to which Debtor is moving
same; (viii) to cooperate with Secured Party in perfecting all security
interests
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granted herein and in obtaining such agreements from third parties as Secured
Party deems necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of its rights hereunder, (ix) to act diligently
to maintain the Lakes Agreement in full force and effect and enforce all its
rights and remedies under the Lakes Agreement, (x) to diligently pursue the
Xxxxxx'x Lawsuit through final judgment and to collect any judgment, and to
cooperate with Secured Party in his efforts to prosecute Xxxxxx'x Lawsuit and
collect any judgment or settlement arising from Xxxxxx'x Lawsuit following an
Event of Default, (xi) to provide written notice to Secured Party immediately
upon the occurrence of a Mandatory Prepayment Event (as defined in the Loan
Agreement), or, if earlier, upon Debtor possessing knowledge that a Mandatory
Prepayment Event will likely occur within the next thirty (30) days, (xii) to
provide written notice to Secured Party immediately upon the opening of the
Casino (as defined in the Loan Agreement), and (xiii) to provide written notice
to Secured Party immediately upon the entry or any order or judgment in the
Xxxxxx'x Lawsuit.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless
Secured Party agrees otherwise in writing: (i) that Secured Party is authorized
to file financing statements or any other documents or agreements in the name of
Debtor necessary to perfect Secured Party's security interest in Collateral and
Proceeds; (ii) where applicable, to insure the Collateral with Secured Party as
loss payee, in form, substance and amounts, under agreements, against risks and
liabilities, and with insurance companies satisfactory to Secured Party; (iii)
to pay when due all license fees, registration fees and other charges in
connection with any Collateral; (iv) not to permit any lien on the Collateral or
Proceeds, except in favor of Secured Party; (v) not to sell, hypothecate or
dispose of, nor permit the transfer by operation of law of, any of the
Collateral or Proceeds or any interest therein; (vi) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Secured Party to inspect
the same and make copies thereof at any reasonable time; (vii) if requested by
Secured Party, to receive and use reasonable diligence to collect Collateral
consisting of accounts and other rights to payment and Proceeds, in trust and as
the property of Secured Party, and to immediately endorse as appropriate and
deliver such Collateral and Proceeds to Secured Party daily in the exact form in
which they are received together with a collection report in form satisfactory
to Secured Party; (viii) not to commingle Collateral or Proceeds, or collections
thereunder, with other property; (ix) from time to time, when requested by
Secured Party, to prepare and deliver a schedule of all Collateral and Proceeds
subject to this Agreement and to assign in writing and deliver to Secured Party
all accounts, contracts, leases and other chattel paper, instruments, documents
and other evidences thereof; (x) in the event Secured Party elects to receive
payments of rights to payment or Proceeds hereunder, to pay all expenses
incurred by Secured Party in connection therewith, including expenses of
accounting, correspondence, collection efforts, reporting to account or contract
debtors, filing, recording, record keeping and expenses incidental thereto; and
(xi) to provide any service and do any other acts which may be necessary to
maintain, preserve and protect all Collateral, to keep all Collateral and
Proceeds free and clear of all defenses, rights of offset and counterclaims, and
to perfect the Secured Party's security interest therein.
7. POWERS OF SECURED PARTY. Debtor appoints Secured Party its true
attorney in fact to perform any of the following powers, which are coupled with
an interest, are irrevocable until termination of this Agreement and may be
exercised from time to time by
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Secured Party's officers and employees, or any of them, if an Event of Default
has occurred hereunder: (a) to perform any obligation of Debtor hereunder in
Debtor's name or otherwise; (b) to give notice to account debtors or others of
Secured Party's rights in the Collateral and Proceeds, to enforce or forebear
from enforcing the same and make extension and modification agreements with
respect thereto; (c) to release persons liable on Collateral or Proceeds and to
give receipts and acquittances and compromise disputes in connection therewith;
(d) to release or substitute security; (e) to resort to security in any order;
(f) to prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release Secured Party's interest in the
Collateral and Proceeds; (g) to receive, open and read mail addressed to Debtor;
(h) to take cash, instruments for the payment of money and other property to
which Secured Party is entitled; (i) to verify facts concerning the Collateral
and Proceeds by inquiry of obligors thereon, or otherwise, in its own name or a
fictitious name; (j) to endorse, collect, deliver and receive payment under
instruments for the payment of money constituting or relating to Proceeds; (k)
to prepare, adjust, execute, deliver and receive payment under insurance claims,
and to collect and receive payment of and endorse any instrument in payment of
loss or returned premiums or any other insurance refund or return, and to apply
such amounts received by Secured Party, at Secured Party's sole option, toward
repayment of the Indebtedness or, where appropriate, replacement of the
Collateral; (l) to exercise all rights, powers and remedies which Debtor would
have, but for this Agreement, with respect to all Collateral and Proceeds
subject hereto; (m) to make withdrawals from and to close deposit accounts or
other accounts with any financial institution, wherever located, into which
Proceeds may have been deposited, and to apply funds so withdrawn to payment of
the Indebtedness; (n) to preserve or release the interest evidenced by chattel
paper to which Secured Party is entitled hereunder and to endorse and deliver
any evidence of title incidental thereto; and (o) to do all acts and things and
execute all documents in the name of Debtor or otherwise, deemed by Secured
Party as necessary, proper and convenient in connection with the preservation,
perfection or enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Secured Party at his option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Any such payments made by Secured Party shall be obligations
of Debtor to Secured Party, due and payable immediately upon demand, together
with interest at a rate determined in accordance with the provisions of Section
15 hereof, and shall be secured by the Collateral and Proceeds, subject to all
terms and conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) the Note, or any other contract or instrument evidencing any Indebtedness,
(ii) the Loan Agreement, or (iii) any other agreement between Debtor and Secured
Party relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by Debtor herein shall prove to be incorrect,
false or misleading in any material respect when made; (c) Debtor shall fail to
observe or perform any
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obligation or agreement contained herein; (d) any impairment of the rights of
Secured Party in any Collateral or Proceeds, or any attachment or like levy on
any property of Debtor; and (e) Secured Party, in good faith, believes any or
all of the Collateral and/or Proceeds to be in danger of misuse, dissipation,
commingling, loss, theft, damage or destruction.
10. REMEDIES. Upon the occurrence of any Event of Default, Secured
Party shall have the right to declare immediately due and payable all or any
Indebtedness secured hereby and to terminate any commitments to make loans or
otherwise extend credit to Debtor. Secured Party shall have all other rights,
powers, privileges and remedies granted to a secured party upon default under
the Minnesota Uniform Commercial Code or otherwise provided by law, including
without limitation, the right (a) to contact all persons obligated to Debtor on
any Collateral or Proceeds and to instruct such persons to deliver all
Collateral and/or Proceeds directly to Secured Party, and (b) to sell, lease,
license or otherwise dispose of any or all Collateral. Debtor hereby appoints
Secured Party as its attorney-in-fact, effective upon any Event of Default, to
enforce any of its rights under the Lakes Agreement and to file pleadings, bring
motions and otherwise act to prosecute the Xxxxxx'x Lawsuit, to enter into any
settlement of the Xxxxxx'x Lawsuit, and to collect any judgment or the proceeds
of any settlement by any legal means. These powers are coupled with an interest
and are irrevocable.
All rights, powers, privileges and remedies of Secured Party hereunder
or under any other Loan Document shall be cumulative. No delay, failure or
discontinuance of Secured Party in exercising any right, power, privilege or
remedy hereunder shall affect or operate as a waiver of such right, power,
privilege or remedy; nor shall any single or partial exercise of any such right,
power, privilege or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power, privilege or
remedy. Any waiver, permit, consent or approval of any kind by Secured Party of
any default hereunder, or any such waiver of any provisions or conditions
hereof, must be in writing and shall be effective only to the extent set forth
in writing. It is agreed that public or private sales or other disposition, for
cash or on credit, to a wholesaler or retailer or investor, or user of property
of the types subject to this Agreement, or public auctions, are all commercially
reasonable since differences in the prices generally realized in the different
kinds of dispositions are ordinarily offset by the differences in the costs and
credit risks of such dispositions. While an Event of Default exists: (a) Debtor
will deliver to Secured Party from time to time, as requested by Secured Party,
current lists of all Collateral and Proceeds; (b) Debtor will not dispose of any
Collateral or Proceeds except on terms approved by Secured Party; (c) at Secured
Party's request, Debtor will assemble and deliver all books and records
pertaining to Collateral and Proceeds to Secured Party at a reasonably
convenient place designated by Secured Party; and (d) Secured Party may, without
notice to Debtor, enter onto Debtor's premises and take possession of the
Collateral.
11. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS.
In disposing of Collateral hereunder, Secured Party may disclaim all warranties
of title, possession, quiet enjoyment and the like. Any proceeds of any
disposition of any Collateral or Proceeds, or any part thereof, may be applied
by Secured Party to the payment of expenses incurred by Secured Party in
connection with the foregoing, including reasonable attorneys' fees, and the
balance of such proceeds may be applied by Secured Party toward the payment of
the Indebtedness in such order of application as Secured Party may from time to
time
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elect. Upon the transfer of all or any part of the Indebtedness, Secured Party
may transfer all or any part of the Collateral or Proceeds and shall be fully
discharged thereafter from all liability and responsibility with respect to any
of the foregoing so transferred, and the transferee shall be vested with all
rights and powers of Secured Party hereunder with respect to any of the
foregoing so transferred; but with respect to any Collateral or Proceeds not so
transferred, Secured Party shall retain all rights, powers, privileges and
remedies herein given.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid
in full and all commitments by Secured Party to extend credit to Debtor have
been terminated, the power of sale or other disposition and all other rights,
powers, privileges and remedies granted to Secured Party hereunder shall
continue to exist and may be exercised by Secured Party at any time and from
time to time irrespective of the fact that the Indebtedness or any part thereof
may have become barred by any statute of limitations, or that the personal
liability of Debtor may have ceased, unless such liability shall have ceased due
to the payment in full of all Indebtedness secured hereunder.
13. MISCELLANEOUS. Debtor hereby waives any right to require Secured
Party to (i) proceed against Debtor or any other person, (ii) proceed against or
exhaust any security from Debtor or any other person, (iii) perform any
obligation of Debtor with respect to any Collateral or Proceeds, and (iv) make
any presentment or demand, or give any notice of nonpayment or nonperformance,
protest, notice of protest or notice of dishonor hereunder or in connection with
any Collateral or Proceeds. Debtor further waives any right to direct the
application of payments or security for any Indebtedness of Debtor or
indebtedness of customers of Debtor.
14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Secured Party at the address
specified in any other loan documents entered into between Debtor and Secured
Party and to Debtor at the address of its chief executive office specified below
or to such other address as any party may designate by written notice to each
other party, and shall be deemed to have been given or made as follows: (a) if
personally delivered, upon delivery; (b) if sent by mail, upon the earlier of
the date of receipt or three (3) days after deposit in the U.S. mail, first
class and postage prepaid; and (c) if sent by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Secured
Party immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees, expended or
incurred by Secured Party in exercising any right, power, privilege or remedy
conferred by this Agreement or in the enforcement thereof, whether incurred at
the trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Secured Party or any other person) relating to
Debtor or in any way affecting any of the Collateral or Secured Party's ability
to exercise any of his rights or remedies with respect thereto. All of the
foregoing shall be paid by Debtor with interest from the date of demand until
paid in full at a rate per annum equal to the rate accruing under the Note, but
not in excess of the maximum rate permitted under applicable Minnesota law.
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16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Secured Party and Debtor.
17. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
Debtor warrants that Debtor is an organization registered under the
laws of the State of Minnesota.
Debtor warrants that its chief executive office is located at the
following address: 000 Xxxxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxxx 00000.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of January 2,
2003.
BOUNCEBACK XXXXXXXXXXXX.XXX, INC.
By /s/ Xxxx Xxxxxx
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Its CEO
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Address: 000 Xxxxxxxxx Xxxxxxxxx
--------------------------
Xxxxx Xxxxxxx, Xxxxxxxxxxx 00000
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[Signature page to Security Agreement between BounceBack
Xxxxxxxxxxxx.xxx, Inc. and Xxxxx Xxxxx.]
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