GUARANTY AND SECURITY AGREEMENT

 

This GUARANTY AND SECURITY AGREEMENT (this “Agreement”), dated as of June 27,
2012, among Parent, the Persons listed on the signature pages hereof as
“Grantors” and those additional entities that hereafter become parties hereto by
executing the form of Joinder attached hereto as Annex 1 (each, a “Grantor” and
collectively, the “Grantors”), the Persons listed on the signature pages hereof
as “Guarantors” and those additional entities that hereafter become parties
hereto by executing the form of Joinder attached hereto as Annex 1 (each, a
“Guarantor” and collectively, the “Guarantors”), and WELLS FARGO GAMING CAPITAL,
LLC, a Delaware limited liability company, in its capacity as agent for the
Lender Group and the Bank Product Providers (in such capacity, together with its
successors and assigns in such capacity, “Agent”).

 

WITNESSETH:

 

WHEREAS, pursuant to that certain Credit Agreement of even date herewith (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Credit Agreement”) by and among NEVADA GOLD & CASINOS, INC., a Nevada
corporation (“Parent”), A.G. TRUCANO, SON & GRANDSONS, INC., a South Dakota
corporation ( “Borrower”), the lenders party thereto as “Lenders” (each of such
Lenders, together with its successors and permitted assigns, is referred to
hereinafter as a “Lender”), and Agent, the Lender Group has agreed to make
certain financial accommodations available to Borrower from time to time
pursuant to the terms and conditions thereof;

 

WHEREAS, Agent has agreed to act as agent for the benefit of the Lender Group
and the Bank Product Providers in connection with the transactions contemplated
by the Credit Agreement and this Agreement;

 

WHEREAS, in order to induce the Lender Group to enter into the Credit Agreement
and the other Loan Documents, to induce the Bank Product Providers to enter into
the Bank Product Agreements, and to induce the Lender Group and the Bank Product
Providers to make financial accommodations to Borrower as provided for in the
Credit Agreement, the other Loan Documents and the Bank Product Agreements, (a)
each Guarantor has agreed to guaranty the Guarantied Obligations, (b) each
Grantor has agreed to grant to Agent, for the benefit of the Lender Group and
the Bank Product Providers, a continuing security interest in and to the Grantor
Collateral in order to secure the prompt and complete payment, observance and
performance of, among other things, the Secured Obligations, and (c) Parent has
agreed to grant to Agent, for the benefit of the Lender Group and the Bank
Product Providers, a continuing security interest in and to the Parent
Collateral in order to secure the prompt and complete payment, observance and
performance of, among other things, the Secured Obligations; and

 

WHEREAS, each of the Grantors and Guarantors (other than Borrower) is an
Affiliate of Borrower and, as such, will benefit by virtue of the financial
accommodations extended to Borrower by the Lender Group.

 

NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:

 

 

 

  

1.           Definitions; Construction.

 

(a)          All initially capitalized terms used herein (including in the
preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Credit Agreement (including Schedule 1.1 thereto). Any
terms (whether capitalized or lower case) used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein or in the Credit Agreement; provided that to the
extent that the Code is used to define any term used herein and if such term is
defined differently in different Articles of the Code, the definition of such
term contained in Article 9 of the Code shall govern. In addition to those terms
defined elsewhere in this Agreement, as used in this Agreement, the following
terms shall have the following meanings:

 

(i)          “Account” means an account (as that term is defined in Article 9 of
the Code).

 

(ii)         “Account Debtor” means an account debtor (as that term is defined
in the Code).

 

(iii)        “Activation Instruction” has the meaning specified therefor in
Section 7(k)(ii).

 

(iv)        “Agent” has the meaning specified therefor in the preamble to this
Agreement.

 

(v)         “Agent’s Lien” has the meaning specified therefor in the Credit
Agreement.

 

(vi)        “Agreement” has the meaning specified therefor in the preamble to
this Agreement.

 

(vii)       “Bank Product Obligations” has the meaning specified therefor in the
Credit Agreement.

 

(viii)      “Bank Product Provider” has the meaning specified therefor in the
Credit Agreement.

 

(ix)         “Books” means books and records (including Parent’s or each
Grantor’s Records indicating, summarizing, or evidencing Parent’s or such
Grantor’s assets (including Collateral) or liabilities, Parent’s and each
Grantor’s Records relating to Parent’s or such Grantor’s business operations or
financial condition, and Parent’s or each Grantor’s goods or General Intangibles
related to such information).

 

(x)          “Borrower” has the meaning specified therefor in the recitals to
this Agreement.

 

(xi)         “Cash Equivalents” has the meaning specified therefor in the Credit
Agreement.

 

(xii)        “Chattel Paper” means chattel paper (as that term is defined in the
Code), and includes tangible chattel paper and electronic chattel paper.

 

 

 

(xiii)       “Code” means the California Uniform Commercial Code, as in effect
from time to time; provided, however, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, priority,
or remedies with respect to Agent’s Lien on any Grantor Collateral is governed
by the Uniform Commercial Code as enacted and in effect in a jurisdiction other
than the State of California, the term “Code” shall mean 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.

 

(xiv)      “Collateral” means the Grantor Collateral and the Parent Collateral.

 

(xv)       “Commercial Tort Claims” means commercial tort claims (as that term
is defined in the Code), and includes those commercial tort claims listed on
Schedule 1.

 

(xvi)      “Control Agreement” has the meaning specified therefor in the Credit
Agreement.

 

(xvii)     “Controlled Account” has the meaning specified therefor in Section
7(k).

 

(xviii)    “Controlled Account Agreements” means those certain cash management
agreements, in form and substance reasonably satisfactory to Agent, each of
which is executed and delivered by a Grantor, Agent, and one of the Controlled
Account Banks.

 

(xix)       “Controlled Account Bank” has the meaning specified therefor in
Section 7(k).

 

(xx)        “Copyrights” means any and all rights in any works of authorship,
including (A) copyrights and moral rights, (B) copyright registrations and
recordings thereof and all applications in connection therewith including those
listed on Schedule 2, (C) income, license fees, royalties, damages, and payments
now and hereafter due or payable under and with respect thereto, including
payments under all licenses entered into in connection therewith and damages and
payments for past, present, or future infringements thereof, (D) the right to
sue for past, present, and future infringements thereof, and (E) all of each
Grantor’s rights corresponding thereto throughout the world.

 

(xxi)       “Copyright Security Agreement” means each Copyright Security
Agreement executed and delivered by Grantors, or any of them, and Agent, in
substantially the form of Exhibit A.

 

(xxii)      “Credit Agreement” has the meaning specified therefor in the
recitals to this Agreement.

 

(xxiii)     “Deposit Account” means a deposit account (as that term is defined
in the Code).

 

(xxiv)    “Equipment” means equipment (as that term is defined in the Code).

 

(xxv)     “Equity Interests” has the meaning specified therefor in the Credit
Agreement.

 

(xxvi)    “Event of Default” has the meaning specified therefor in the Credit
Agreement.

 

(xxvii)   “Excluded Accounts” means Deposit Accounts or Securities Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments, or for player supported jackpots.

 

 

 

 

(xxviii)    “Excluded Subsidiaries” has the meaning specified therefor in the
Credit Agreement.

 

(xxix)      “Farm Products” means farm products (as that term is defined in the
Code)

 

(xxx)        “Fixtures” means fixtures (as that term is defined in the Code).

 

(xxxi)      “Foreclosed Grantor” has the meaning specified therefor in Section
2(i)(iii).

 

(xxxii)     “Gaming Authority” has the meaning specified therefor in the Credit
Agreement.

 

(xxxiii)    “Gaming Laws” has the meaning specified therefor in the Credit
Agreement.

 

(xxxiv)     “Gaming Licenses” has the meaning specified therefor in the Credit
Agreement.

 

(xxxv)      “General Intangibles” means general intangibles (as that term is
defined in the Code), and includes payment intangibles, software, contract
rights, rights to payment, rights under Hedge Agreements (including the right to
receive payment on account of the termination (voluntarily or involuntarily) of
such Hedge Agreements), rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, Intellectual Property,
licenses (including Gaming Licenses and Liquor Licenses) Intellectual Property
Licenses, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, including Intellectual Property Licenses, infringement
claims, pension plan refunds, pension plan refund claims, insurance premium
rebates, tax refunds, and tax refund claims, interests in a partnership or
limited liability company which do not constitute a security under Article 8 of
the Code, and any other personal property other than Commercial Tort Claims,
money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Property,
Negotiable Collateral, and oil, gas, or other minerals before extraction.

 

(xxxvi)     “Grantor” and “Grantors” have the respective meanings specified
therefor in the preamble to this Agreement.

 

(xxxvii)    “Grantor Collateral” has the meaning specified therefor in Section
3(a).

 

(xxxviii)    “Grantor Security Interest” has the meaning specified therefor in
Section 3(a).

 

(xxxix)     “Guarantied Obligations” means all of the Obligations (including any
Bank Product Obligations) now or hereafter existing, whether for principal,
interest (including any interest that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in any such Insolvency Proceeding), fees (including the fees
provided for in the Fee Letter), Lender Group Expenses (including any fees or
expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), or otherwise, and any and all expenses (including
reasonable counsel fees and expenses) incurred by Agent, any other member of the
Lender Group, or any Bank Product Provider (or any of them) in enforcing any
rights under the any of the Loan Documents. Without limiting the generality of
the foregoing, Guarantied Obligations shall include all amounts that constitute
part of the Guarantied Obligations and would be owed by Borrower to Agent, any
other member of the Lender Group, or any Bank Product Provider but for the fact
that they are unenforceable or not allowable, including due to the existence of
a bankruptcy, reorganization, other Insolvency Proceeding or similar proceeding
involving Borrower or any guarantor.

 

 

 

 

(xl)         “Guarantor” and “Guarantors” have the respective meanings specified
therefor in the preamble to this Agreement.

 

(xli)        “Guaranty” means the guaranty set forth in Section 2 hereof.

 

(xlii)      “Insolvency Proceeding” has the meaning specified therefor in the
Credit Agreement.

 

(xliii)     “Intellectual Property” means any and all Patents, Copyrights,
Trademarks, trade secrets, know-how, inventions (whether or not patentable),
algorithms, software programs (including source code and object code),
processes, product designs, industrial designs, blueprints, drawings, data,
customer lists, URLs and domain names, specifications, documentations, reports,
catalogs, literature, and any other forms of technology or proprietary
information of any kind, including all rights therein and all applications for
registration or registrations thereof.

 

(xliv)      “Intellectual Property Licenses” means, with respect to any Person
(the “Specified Party”), (A) any licenses or other similar rights provided to
the Specified Party in or with respect to Intellectual Property owned or
controlled by any other Person, and (B) any licenses or other similar rights
provided to any other Person in or with respect to Intellectual Property owned
or controlled by the Specified Party, in each case, including (x) any software
license agreements (other than license agreements for commercially available
off-the-shelf software that is generally available to the public which have been
licensed to a Grantor pursuant to end-user licenses), (y) the license agreements
listed on Schedule 3, and (z) the right to use any of the licenses or other
similar rights described in this definition in connection with the enforcement
of the Lender Group’s rights under the Loan Documents.

 

(xlv)        “Inventory” means inventory (as that term is defined in the Code).

 

(xlvi)      “Investment Property” means (A) any and all investment property (as
that term is defined in the Code), and (B) any and all of the following
(regardless of whether classified as investment property under the Code): all
Pledged Interests, Pledged Operating Agreements, and Pledged Partnership
Agreements.

 

(xlvii)     “Joinder” means each Joinder to this Agreement executed and
delivered by Agent and each of the other parties listed on the signature pages
thereto, in substantially the form of Annex 1.

 

(xlviii)    “Lender Group” has the meaning specified therefor in the Credit
Agreement.

 

(xlix)      “Lender” and “Lenders” have the respective meanings specified
therefor in the recitals to this Agreement.

 

(l)          “Liquor Authority” has the meaning specified therefor in the Credit
Agreement.

 

 

 

 

(li)         “Liquor Laws” has the meaning specified therefor in the Credit
Agreement.

 

(lii)        “Loan Document” has the meaning specified therefor in the Credit
Agreement.

 

(liii)      “Negotiable Collateral” means letters of credit, letter-of-credit
rights, instruments, promissory notes, drafts and documents (as each such term
is defined in the Code).

 

(liv)        “Obligations” has the meaning specified therefor in the Credit
Agreement.

 

(lv)         “Parent” has the meaning specified therefor in the recitals to this
Agreement.

 

(lvi)        “Parent Collateral” has the meaning specified therefor in Section
3(b).

 

(lvii)      “Parent Security Interest” has the meaning specified therefor in
Section 3(b).

 

(lviii)     “Patents” means patents and patent applications, including (A) the
patents and patent applications listed on Schedule 4, (B) all continuations,
divisionals, continuations-in-part, re-examinations, reissues, and renewals
thereof and improvements thereon, (C) all income, royalties, damages and
payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and
damages and payments for past, present, or future infringements thereof, (D) the
right to sue for past, present, and future infringements thereof, and (E) all of
each Grantor’s rights corresponding thereto throughout the world.

 

(lix)        “Patent Security Agreement” means each Patent Security Agreement
executed and delivered by Grantors, or any of them, and Agent, in substantially
the form of Exhibit B.

 

(lx)         “Permitted Investments” has the meaning specified therefor in the
Credit Agreement.

 

(lxi)        “Permitted Liens” has the meaning specified therefor in the Credit
Agreement.

 

(lxii)      “Person” has the meaning specified therefor in the Credit Agreement.

 

(lxiii)     “Pledged Companies” means each Person listed on Schedule 5 as a
“Pledged Company”, together with each other Person, all or a portion of whose
Equity Interests are acquired or otherwise owned by Parent or a Grantor after
the Closing Date (excluding the Equity Interests of Parent or such Grantor in
the Excluded Subsidiaries).

 

(lxiv)      “Pledged Interests” means all of Parent’s and each Grantor’s right,
title and interest in and to all of the Equity Interests now owned or hereafter
acquired by Parent or such Grantor (excluding the Equity Interests of Parent in
the Immaterial Subsidiaries and the Excluded Subsidiaries), regardless of class
or designation, including in each of the Pledged Companies, and all
substitutions therefor and replacements thereof, all proceeds thereof and all
rights relating thereto, also including any certificates representing the Equity
Interests, the right to receive any certificates representing any of the Equity
Interests, all warrants, options, share appreciation rights and other rights,
contractual or otherwise, in respect thereof and the right to receive all
dividends, distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and all cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

 

 

 

 

 

(lxv)        “Pledged Interests Addendum” means a Pledged Interests Addendum
substantially in the form of Exhibit C.

 

(lxvi)       “Pledged Operating Agreements” means all of Parent’s and each
Grantor’s rights, powers, and remedies under the limited liability company
operating agreements of each of the Pledged Companies that are limited liability
companies.

 

(lxvii)     “Pledged Partnership Agreements” means all of Parent’s and each
Grantor’s rights, powers, and remedies under the partnership agreements of each
of the Pledged Companies that are partnerships.

 

(lxviii)    “Proceeds” has the meaning specified therefor in Section 3.

 

(lxix)      “PTO” means the United States Patent and Trademark Office.

 

(lxx)        “Real Property” means any estates or interests in real property now
owned or hereafter acquired by any Grantor and the improvements thereto.

 

(lxxi)      “Record” means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.

 

(lxxii)     “Rescission” has the meaning specified therefor in Section 7(k)(ii).

 

(lxxiii)    “Secured Obligations” means each and all of the following: (A) all
of the present and future obligations of Parent and each of the Grantors arising
from, or owing under or pursuant to, this Agreement (including the Guaranty),
the Credit Agreement, or any of the other Loan Documents, (B) all Bank Product
Obligations, and (C) all Obligations of Borrower and all Guarantied Obligations
of each Guarantor (including, in the case of each of clauses (A), (B) and (C),
reasonable attorneys fees and expenses and any interest, fees, or expenses that
accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding).

 

(lxxiv)     “Securities Account” means a securities account (as that term is
defined in the Code).

 

(lxxv)      “Security Interests” means the Grantor Security Interest and the
Parent Security Interest.

 

(lxxvi)     “Supporting Obligations” means supporting obligations (as such term
is defined in the Code), and includes letters of credit and guaranties issued in
support of Accounts, Chattel Paper, documents, General Intangibles, instruments
or Investment Property.

 

 

 

 

(lxxvii)    “Trademarks” means any and all trademarks, trade names, registered
trademarks, trademark applications, service marks, registered service marks and
service mark applications, including (A) the trade names, registered trademarks,
trademark applications, registered service marks and service mark applications
listed on Schedule 6, (B) all renewals thereof, (C) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (D) the right to sue for past, present and future infringements and
dilutions thereof, (E) the goodwill of each Grantor’s business symbolized by the
foregoing or connected therewith, and (F) all of each Grantor’s rights
corresponding thereto throughout the world.

 

(lxxviii)    “Trademark Security Agreement” means each Trademark Security
Agreement executed and delivered by Grantors, or any of them, and Agent, in
substantially the form of Exhibit D.

 

(lxxix)     “Triggering Event” means, as of any date of determination, that an
Event of Default has occurred as of such date.

 

(lxxx)      “URL” means “uniform resource locator,” an internet web address.

 

(b)             Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, the terms “includes” and “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein or in the Credit Agreement). The words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties. Any reference herein to the
satisfaction, repayment, or payment in full of the Secured Obligations or the
Guarantied Obligations shall mean (i) the payment or repayment in full in
immediately available funds of (A) the principal amount of, and interest accrued
with respect to, the Revolving Loans, together with the payment of any premium
applicable to the repayment of the Loans, (B) all Lender Group Expenses that
have accrued regardless of whether demand has been made therefor, (C) all fees
or charges that have accrued hereunder or under any other Loan Document, (ii) in
the case of obligations with respect to Bank Products (other than Hedge
Obligations), providing Bank Product Grantor Collateralization, (iii) the
receipt by Agent of cash collateral in order to secure any other contingent
Secured Obligations or Guarantied Obligations for which a claim or demand for
payment has been made at such time or in respect of matters or circumstances
known to Agent or a Lender at the time that are reasonably expected to result in
any loss, cost, damage or expense (including reasonable attorneys fees and legal
expenses), such cash collateral to be in such amount as Agent reasonably
determines is appropriate to secure such contingent Secured Obligations or
Guarantied Obligations, (iv) the payment or repayment in full in immediately
available funds of all other Secured Obligations or Guarantied Obligations (as
the case may be) (including the payment of any termination amount then
applicable (or which would or could become applicable as a result of the
repayment of the other Obligations) under Hedge Agreements provided by Hedge
Providers) other than (A) unasserted contingent indemnification Obligations, (B)
any Bank Product Obligations (other than Hedge Obligations) that, at such time,
are allowed by the applicable Bank Product Provider to remain outstanding
without being required to be repaid or cash collateralized, and (C) any Hedge
Obligations that, at such time, are allowed by the applicable Hedge Provider to
remain outstanding without being required to be repaid, and (v) the termination
of all of the Commitments of the Lenders. Any reference herein to any Person
shall be construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein shall be satisfied by the transmission
of a Record.

 

 

 

 

(c)          All of the schedules and exhibits attached to this Agreement shall
be deemed incorporated herein by reference.

 

2.            Guaranty.

 

(a)          In recognition of the direct and indirect benefits to be received
by Guarantors from the proceeds of the Revolving Loans and the entering into of
the Bank Product Agreements and by virtue of the financial accommodations to be
made to Borrower, each of the Guarantors, jointly and severally, hereby
unconditionally and irrevocably guarantees as a primary obligor and not merely
as a surety the full and prompt payment when due, whether upon maturity,
acceleration, or otherwise, of all of the Guarantied Obligations. If any or all
of the Obligations becomes due and payable, each of the Guarantors,
unconditionally and irrevocably, and without the need for demand, protest, or
any other notice or formality, promises to pay such indebtedness to Agent, for
the benefit of the Lender Group and the Bank Product Providers, together with
any and all expenses (including Lender Group Expenses) that may be incurred by
Agent or any other member of the Lender Group or any Bank Product Provider in
demanding, enforcing, or collecting any of the Guarantied Obligations (including
the enforcement of any collateral for such Obligations or any collateral for the
obligations of the Guarantors under this Guaranty). If claim is ever made upon
Agent or any other member of the Lender Group or any Bank Product Provider for
repayment or recovery of any amount or amounts received in payment of or on
account of any or all of the Obligations and any of Agent or any other member of
the Lender Group or any Bank Product Provider repays all or part of said amount
by reason of (i) any judgment, decree, or order of any court or administrative
body having jurisdiction over such payee or any of its property, or (ii) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including Borrower or any Guarantor), then and in each such event,
each of the Guarantors agrees that any such judgment, decree, order, settlement,
or compromise shall be binding upon the Guarantors, notwithstanding any
revocation (or purported revocation) of this Guaranty or other instrument
evidencing any liability of Borrower or any Guarantor, and the Guarantors shall
be and remain liable to the aforesaid payees hereunder for the amount so repaid
or recovered to the same extent as if such amount had never originally been
received by any such payee.

 

(b)          Additionally, each of the Guarantors unconditionally and
irrevocably guarantees the payment of any and all of the Obligations to Agent,
for the benefit of the Lender Group and the Bank Product Providers, whether or
not due or payable by Borrower upon the occurrence of any of the events
specified in Section 8.4 or 8.5 of the Credit Agreement, and irrevocably and
unconditionally promises to pay such indebtedness to Agent, for the benefit of
the Lender Group and the Bank Product Providers, without the requirement of
demand, protest, or any other notice or other formality, in lawful money of the
United States.

 

(c)          The liability of each of the Guarantors hereunder is primary,
absolute, and unconditional, and is independent of any security for or other
guaranty of the Obligations, whether executed by any other Guarantor or by any
other Person, and the liability of each of the Guarantors hereunder shall not be
affected or impaired by (i) any payment on, or in reduction of, any such other
guaranty or undertaking, (ii) any dissolution, termination, or increase,
decrease, or change in personnel by any Grantor, (iii) any payment made to
Agent, any other member of the Lender Group, or any Bank Product Provider on
account of the Obligations which Agent, such other member of the Lender Group,
or such Bank Product Provider repays to any Grantor pursuant to court order in
any bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding (or any settlement or compromise of any claim made in such a
proceeding relating to such payment), and each of the Guarantors waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding, or (iv) any action or inaction by Agent, any other member
of the Lender Group, or any Bank Product Provider, or (v) any invalidity,
irregularity, avoidability, or unenforceability of all or any part of the
Obligations or of any security therefor.

 

 

 

 

(d)          This Guaranty includes all present and future Guarantied
Obligations including any under transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guarantied
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guarantied Obligations after
prior Guarantied Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, each Guarantor hereby waives any right to
revoke this Guaranty as to future Guarantied Obligations. If such a revocation
is effective notwithstanding the foregoing waiver, each Guarantor acknowledges
and agrees that (i) no such revocation shall be effective until written notice
thereof has been received by Agent, (ii) no such revocation shall apply to any
Guarantied Obligations in existence on the date of receipt by Agent of such
written notice (including any subsequent continuation, extension, or renewal
thereof, or change in the interest rate, payment terms, or other terms and
conditions thereof), (iii) no such revocation shall apply to any Guarantied
Obligations made or created after such date to the extent made or created
pursuant to a legally binding commitment of any member of the Lender Group or
any Bank Product Provider in existence on the date of such revocation, (iv) no
payment by any Guarantor, Borrower, or from any other source, prior to the date
of Agent’s receipt of written notice of such revocation shall reduce the maximum
obligation of such Guarantor hereunder, and (v) any payment by Borrower or from
any source other than such Guarantor subsequent to the date of such revocation
shall first be applied to that portion of the Guarantied Obligations as to which
the revocation is effective and which are not, therefore, guarantied hereunder,
and to the extent so applied shall not reduce the maximum obligation of such
Guarantor hereunder. This Guaranty shall be binding upon each Guarantor, its
successors and assigns and inure to the benefit of and be enforceable by Agent
(for the benefit of the Lender Group and the Bank Product Providers) and its
successors, transferees, or assigns.

 

(e)          The guaranty by each of the Guarantors hereunder is a guaranty of
payment and not of collection. The obligations of each of the Guarantors
hereunder are independent of the obligations of any other Guarantor or Grantor
or any other Person and a separate action or actions may be brought and
prosecuted against one or more of the Guarantors whether or not action is
brought against any other Guarantor, Grantor or any other Person and whether or
not any other Guarantor, Grantor or any other Person be joined in any such
action or actions. Each of the Guarantors waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement hereof. Any payment by any Grantor or
other circumstance which operates to toll any statute of limitations as to any
Grantor shall operate to toll the statute of limitations as to each of the
Guarantors.

 

(f)          Each of the Guarantors authorizes Agent, the other members of the
Lender Group, and the Bank Product Providers without notice or demand, and
without affecting or impairing its liability hereunder, from time to time to:

 

(i)          change the manner, place, or terms of payment of, or change or
extend the time of payment of, renew, increase, accelerate, or alter: (A) any of
the Obligations (including any increase or decrease in the principal amount
thereof or the rate of interest or fees thereon); or (B) any security therefor
or any liability incurred directly or indirectly in respect thereof, and this
Guaranty shall apply to the Obligations as so changed, extended, renewed, or
altered;

 

 

 

 

(ii)         take and hold security for the payment of the Obligations and sell,
exchange, release, impair, surrender, realize upon, collect, settle, or
otherwise deal with in any manner and in any order any property at any time
pledged or mortgaged to secure the Obligations or any of the Guarantied
Obligations (including any of the obligations of all or any of the Guarantors
under this Guaranty) incurred directly or indirectly in respect thereof or
hereof, or any offset on account thereof;

 

(iii)        exercise or refrain from exercising any rights against any Grantor;

 

(iv)        release or substitute any one or more endorsers, guarantors, any
Grantor, or other obligors;

 

(v)         settle or compromise any of the Obligations, any security therefor,
or any liability (including any of those of any of the Guarantors under this
Guaranty) incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of any Grantor to its creditors;

 

(vi)        apply any sums by whomever paid or however realized to any liability
or liabilities of Borrower or any Guarantor to Agent, any other member of the
Lender Group, or any Bank Product Provider regardless of what liability or
liabilities of Borrower or such Guarantor remain unpaid;

 

(vii)       consent to or waive any breach of, or any act, omission, or default
under, this Agreement, any other Loan Document, any Bank Product Agreement, or
any of the instruments or agreements referred to herein or therein, or otherwise
amend, modify, or supplement this Agreement, any other Loan Document, any Bank
Product Agreement, or any of such other instruments or agreements; or

 

(viii)      take any other action that could, under otherwise applicable
principles of law, give rise to a legal or equitable discharge of one or more of
the Guarantors from all or part of its liabilities under this Guaranty.

 

(g)          It is not necessary for Agent, any other member of the Lender
Group, or any Bank Product Provider to inquire into the capacity or powers of
any of the Guarantors or the officers, directors, partners or agents acting or
purporting to act on their behalf, and any Obligations made or created in
reliance upon the professed exercise of such powers shall be Guarantied
hereunder.

 

(h)          Each Guarantor jointly and severally guarantees that the Guarantied
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of any
member of the Lender Group or any Bank Product Provider with respect thereto.
The obligations of each Guarantor under this Guaranty are independent of the
Guarantied Obligations, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce such obligations, irrespective of
whether any action is brought against any other Guarantor or whether any other
Guarantor is joined in any such action or actions. The liability of each
Guarantor under this Guaranty shall be absolute and unconditional irrespective
of, and each Guarantor hereby irrevocably waives any defense it may now or
hereafter have in any way relating to, any or all of the following:

 

(i)          any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto;

  

 

 

 

(ii)         any change in the time, manner, or place of payment of, or in any
other term of, all or any of the Guarantied Obligations, or any other amendment
or waiver of or any consent to departure from any Loan Document, including any
increase in the Guarantied Obligations resulting from the extension of
additional credit;

 

(iii)        any taking, exchange, release, or non-perfection of any Lien in and
to any Collateral, or any taking, release, amendment, waiver of, or consent to
departure from any other guaranty, for all or any of the Guarantied Obligations;

 

(iv)        the existence of any claim, set-off, defense, or other right that
any Guarantor may have at any time against any Person, including Agent, any
other member of the Lender Group, or any Bank Product Provider;

 

(v)         any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guarantied Obligations or any
security therefor;

 

(vi)        any right or defense arising by reason of any claim or defense based
upon an election of remedies by any member of the Lender Group or any Bank
Product Provider including any defense based upon an impairment or elimination
of such Guarantor’s rights of subrogation, reimbursement, contribution, or
indemnity of such Guarantor against any other Grantor or any guarantors or
sureties;

 

(vii)       any change, restructuring, or termination of the corporate, limited
liability company, or partnership structure or existence of any Grantor; or

 

(viii)      any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Grantor or any other guarantor or surety.

 

(i)             Waivers

 

(i)          Each of the Guarantors waives any right (except as shall be
required by applicable statute and cannot be waived) to require Agent, any other
member of the Lender Group, or any Bank Product Provider to (i) proceed against
any other Grantor or any other Person, (ii) proceed against or exhaust any
security held from any other Grantor or any other Person, or (iii) protect,
secure, perfect, or insure any security interest or Lien on any property subject
thereto or exhaust any right to take any action against any other Grantor, any
other Person, or any collateral, or (iv) pursue any other remedy in any member
of the Lender Group’s or any Bank Product Provider’s power whatsoever. Each of
the Guarantors waives any defense based on or arising out of any defense of
Borrower or any other Person, other than payment of the Obligations to the
extent of such payment, based on or arising out of the disability of any Grantor
or any other Person, or the validity, legality, or unenforceability of the
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of Borrower other than payment of the Obligations to the extent
of such payment. Agent may, at the election of the Required Lenders, foreclose
upon any Collateral held by Agent by one or more judicial or nonjudicial sales
or other dispositions, whether or not every aspect of any such sale is
commercially reasonable or otherwise fails to comply with applicable law or may
exercise any other right or remedy Agent, any other member of the Lender Group,
or any Bank Product Provider may have against any Grantor or any other Person,
or any security, in each case, without affecting or impairing in any way the
liability of any of the Guarantors hereunder except to the extent the
Obligations have been paid.

 

 

 

(ii)         Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including notices of nonperformance, notices
of protest, notices of dishonor, notices of acceptance of this Guaranty, and
notices of the existence, creation, or incurring of new or additional
Obligations or other financial accommodations. Each of the Guarantors waives
notice of any Default or Event of Default under any of the Loan Documents. Each
of the Guarantors assumes all responsibility for being and keeping itself
informed of Borrower’s financial condition and assets and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and the
nature, scope, and extent of the risks which each of the Guarantors assumes and
incurs hereunder, and agrees that neither Agent nor any of the other members of
the Lender Group nor any Bank Product Provider shall have any duty to advise any
of the Guarantors of information known to them regarding such circumstances or
risks.

 

(iii)        To the fullest extent permitted by applicable law, each Guarantor
hereby waives: (A) any right to assert against any member of the Lender Group or
any Bank Product Provider, any defense (legal or equitable), set-off,
counterclaim, or claim which each Guarantor may now or at any time hereafter
have against Borrower or any other party liable to any member of the Lender
Group or any Bank Product Provider; (B) any defense, set-off, counterclaim, or
claim, of any kind or nature, arising directly or indirectly from the present or
future lack of perfection, sufficiency, validity, or enforceability of the
Guarantied Obligations or any security therefor; (C) any right or defense
arising by reason of any claim or defense based upon an election of remedies by
any member of the Lender Group or any Bank Product Provider including any
defense based upon an impairment or elimination of such Guarantor’s rights of
subrogation, reimbursement, contribution, or indemnity of such Guarantor against
Borrower or other guarantors or sureties; and (D) the benefit of any statute of
limitations affecting such Guarantor’s liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Guarantied Obligations shall similarly operate to
defer or delay the operation of such statute of limitations applicable to such
Guarantor’s liability hereunder

 

(iv)        No Guarantor will exercise any rights that it may now or hereafter
acquire against any Grantor or any other guarantor that arise from the
existence, payment, performance or enforcement of such Guarantor’s obligations
under this Guaranty, including any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of Agent, any other member of the Lender Group, or any Bank
Product Provider against any Grantor or any other guarantor or any Collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including the right to take or receive from any Grantor
or any other guarantor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security solely on account of such
claim, remedy or right, unless and until all of the Guarantied Obligations and
all other amounts payable under this Guaranty shall have been paid in full. If
any amount shall be paid to any Guarantor in violation of the immediately
preceding sentence, such amount shall be held in trust for the benefit of Agent,
for the benefit of the Lender Group and the Bank Product Providers, and shall
forthwith be paid to Agent to be credited and applied to the Guarantied
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of the Credit Agreement, or to be
held as Collateral for any Guarantied Obligations or other amounts payable under
this Guaranty thereafter arising. Notwithstanding anything to the contrary
contained in this Guaranty, no Guarantor may exercise any rights of subrogation,
contribution, indemnity, reimbursement or other similar rights against, and may
not proceed or seek recourse against or with respect to any property or asset
of, any other Grantor (the “Foreclosed Grantor”), including after payment in
full of the Obligations, if all or any portion of the Obligations have been
satisfied in connection with an exercise of remedies in respect of the Equity
Interests of such Foreclosed Grantor whether pursuant to this Agreement or
otherwise.

 

(v)         Each of the Guarantors hereby acknowledges and affirms that it
understands that to the extent the Obligations are secured by Real Property
located in California, Guarantors shall be liable for the full amount of the
liability hereunder notwithstanding the foreclosure on such Real Property by
trustee sale or any other reason impairing such Guarantor’s right to proceed
against any Loan Party. In accordance with Section 2856 of the California Code
of Civil Procedure or any similar laws of any other applicable jurisdiction,
each of the Guarantors hereby waives until such time as the Obligations have
been paid in full:

 

 

 

 

 

(1)         all rights of subrogation, reimbursement, indemnification, and
contribution and any other rights and defenses that are or may become available
to the Guarantors by reason of Sections 2787 to 2855, inclusive, 2899, and 3433
of the California Code of Civil Procedure or any similar laws of any other
applicable jurisdiction;

 

(2)         all rights and defenses that the Guarantors may have because the
Obligations are secured by Real Property located in California, meaning, among
other things, that: (A) Agent, the other members of the Lender Group, and the
Bank Product Providers may collect from the Guarantors without first foreclosing
on any real or personal property collateral pledged by Borrower or any other
Grantor, and (B) if Agent, on behalf of the Lender Group, forecloses on any Real
Property collateral pledged by Borrower or any other Grantor, (1) the amount of
the Obligations may be reduced only by the price for which that collateral is
sold at the foreclosure sale, even if the collateral is worth more than the sale
price, and (2) the Lender Group may collect from the Guarantors even if, by
foreclosing on the Real Property collateral, Agent or the other members of the
Lender Group have destroyed or impaired any right the Guarantors may have to
collect from any other Grantor, it being understood that this is an
unconditional and irrevocable waiver of any rights and defenses the Guarantors
may have because the Obligations are secured by Real Property (including,
without limitation, any rights or defenses based upon Sections 580a, 580d, or
726 of the California Code of Civil Procedure or any similar laws of any other
applicable jurisdiction); and

 

(3)         all rights and defenses arising out of an election of remedies by
Agent, the other members of the Lender Group, and the Bank Product Providers,
even though that election of remedies, such as a nonjudicial foreclosure with
respect to security for the Obligations, has destroyed Guarantors’ rights of
subrogation and reimbursement against any Grantor by the operation of Section
580d of the California Code of Civil Procedure or any similar laws of any other
applicable jurisdiction or otherwise.

 

(vi)        Each of the Guarantors represents, warrants, and agrees that each of
the waivers set forth above is made with full knowledge of its significance and
consequences and that if any of such waivers are determined to be contrary to
any applicable law or public policy, such waivers shall be effective to the
maximum extent permitted by law.

 

3.            Grants of Security.

 

(a)          Each Grantor hereby unconditionally grants, assigns, and pledges to
Agent, for the benefit of each member of the Lender Group and each of the Bank
Product Providers, to secure the Secured Obligations, a continuing security
interest (hereinafter referred to as the “Grantor Security Interest”) in all of
such Grantor’s right, title, and interest in and to the following, whether now
owned or hereafter acquired or arising and wherever located (the “Grantor
Collateral”):

 

(i)          all of such Grantor’s Accounts;

 

(ii)         all of such Grantor’s Books;

 

(iii)        all of such Grantor’s Chattel Paper;

 

(iv)        all of such Grantor’s Commercial Tort Claims;

 

 

 

 

(v)         all of such Grantor’s Deposit Accounts;

 

(vi)        all of such Grantor’s Equipment;

 

(vii)       all of such Grantor’s Farm Products;

 

(viii)      all of such Grantor’s Fixtures;

 

(ix)         all of such Grantor’s General Intangibles;

 

(x)          all of such Grantor’s Inventory;

 

(xi)         all of such Grantor’s Investment Property;

 

(xii)        all of such Grantor’s Intellectual Property and Intellectual
Property Licenses;

 

(xiii)       all of such Grantor’s Negotiable Collateral;

 

(xiv)      all of such Grantor’s Pledged Interests (including all of such
Grantor’s Pledged Operating Agreements and Pledged Partnership Agreements);

 

(xv)       all of such Grantor’s Securities Accounts;

 

(xvi)      all of such Grantor’s Supporting Obligations;

 

(xvii)     all of such Grantor’s money, Cash Equivalents, or other assets of
such Grantor that now or hereafter come into the possession, custody, or control
of Agent (or its agent or designee) or any other member of the Lender Group; and

 

(xviii)    all of the proceeds (as such term is defined in the Code) and
products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance or Commercial Tort Claims covering or relating to any or
all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit
Accounts, Equipment, Fixtures, General Intangibles, Inventory, Investment
Property, Intellectual Property, Negotiable Collateral, Pledged Interests,
Securities Accounts, Supporting Obligations, money, or other tangible or
intangible property resulting from the sale, lease, license, exchange,
collection, or other disposition of any of the foregoing, the proceeds of any
award in condemnation with respect to any of the foregoing, any rebates or
refunds, whether for taxes or otherwise, and all proceeds of any such proceeds,
or any portion thereof or interest therein, and the proceeds thereof, and all
proceeds of any loss of, damage to, or destruction of the above, whether insured
or not insured, and, to the extent not otherwise included, any indemnity,
warranty, or guaranty payable by reason of loss or damage to, or otherwise with
respect to any of the foregoing (the “Proceeds”). Without limiting the
generality of the foregoing, the term “Proceeds” includes whatever is receivable
or received when Investment Property or proceeds are sold, exchanged, collected,
or otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes proceeds of any indemnity or guaranty payable to any Grantor or
Agent from time to time with respect to any of the Investment Property.

 

 

 

 

Notwithstanding anything contained in this Agreement to the contrary, the term
“Grantor Collateral” shall not include: (i) voting Equity Interests of any CFC,
solely to the extent that (y) such Equity Interests represent more than 65% of
the outstanding voting Equity Interests of such CFC, and (z) pledging or
hypothecating more than 65% of the total outstanding voting Equity Interests of
such CFC would result in adverse tax consequences or the costs to the Grantors
of providing such pledge are unreasonably excessive (as determined by Agent in
consultation with Grantors) in relation to the benefits to Agent, the other
members of the Lender Group, and the Bank Product Providers of the security
afforded thereby (which pledge, if reasonably requested by Agent, shall be
governed by the laws of the jurisdiction of such Subsidiary); or (ii) any rights
or interest in any contract, lease, permit, license, or license agreement
covering real or personal property of any Grantor if under the terms of such
contract, lease, permit, license, or license agreement, or applicable law with
respect thereto, the grant of a security interest or lien therein is prohibited
as a matter of law or under the terms of such contract, lease, permit, license,
or license agreement and such prohibition or restriction has not been waived or
the consent of the other party to such contract, lease, permit, license, or
license agreement has not been obtained (provided, that, (A) the foregoing
exclusions of this clause (ii) shall in no way be construed (1) to apply to the
extent that any described prohibition or restriction is ineffective under
Section 9-406, 9-407, 9-408, or 9-409 of the Code or other applicable law, or
(2) to apply to the extent that any consent or waiver has been obtained that
would permit Agent’s security interest or lien to attach notwithstanding the
prohibition or restriction on the pledge of such contract, lease, permit,
license, or license agreement and (B) the foregoing exclusions of clauses (i)
and (ii) shall in no way be construed to limit, impair, or otherwise affect any
of Agent’s, any other member of the Lender Group’s or any Bank Product
Provider’s continuing security interests in and liens upon any rights or
interests of any Grantor in or to (1) monies due or to become due under or in
connection with any described contract, lease, permit, license, license
agreement, or Equity Interests (including any Accounts or Equity Interests), or
(2) any proceeds from the sale, license, lease, or other dispositions of any
such contract, lease, permit, license, license agreement, or Equity Interests);
or (iii) any United States intent-to-use trademark applications to the extent
that, and solely during the period in which, the grant of a security interest
therein would impair the validity or enforceability of such intent-to-use
trademark applications under applicable federal law, provided that upon
submission and acceptance by the PTO of an amendment to allege use pursuant to
15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use
trademark application shall be considered Grantor Collateral.

 

(b)          Parent hereby unconditionally grants, assigns, and pledges to
Agent, for the benefit of each member of the Lender Group and each of the Bank
Product Providers, to secure the Secured Obligations, a continuing security
interest (hereinafter referred to as the “Parent Security Interest”) in all of
Parent’s right, title, and interest in and to the following, whether now owned
or hereafter acquired or arising and wherever located (the “Parent Collateral”):

 

(i)          all of Parent’s Investment Property;

 

(ii)         all of Parent’s Pledged Interests (including all of such Grantor’s
Pledged Operating Agreements and Pledged Partnership Agreements);

 

(iii)        all of Parent’s Books related to any or all of the foregoing; and

 

(iv)        all of the Proceeds covering or relating to any or all of the
foregoing. Without limiting the generality of the foregoing, the term “Proceeds”
includes whatever is receivable or received when Investment Property or proceeds
are sold, exchanged, collected, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes proceeds of any indemnity
or guaranty payable to any Grantor or Agent from time to time with respect to
any of the Investment Property.

 

 

 

 

Notwithstanding anything contained in this Agreement to the contrary, the term
“Parent Collateral” shall not include: (i) voting Equity Interests of any CFC,
solely to the extent that (y) such Equity Interests represent more than 65% of
the outstanding voting Equity Interests of such CFC, and (z) pledging or
hypothecating more than 65% of the total outstanding voting Equity Interests of
such CFC would result in adverse tax consequences or the costs to the Grantors
of providing such pledge are unreasonably excessive (as determined by Agent in
consultation with Parent) in relation to the benefits to Agent, the other
members of the Lender Group, and the Bank Product Providers of the security
afforded thereby (which pledge, if reasonably requested by Agent, shall be
governed by the laws of the jurisdiction of such Subsidiary); or (ii) any Equity
Interests in any Excluded Subsidiaries.

 

4.          Security for Secured Obligations. The Security Interests created
hereby secure the payment and performance of the Secured Obligations, whether
now existing or arising hereafter. Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Parent or Grantors, or any
of them, to Agent, the Lender Group, the Bank Product Providers or any of them,
but for the fact that they are unenforceable or not allowable (in whole or in
part) as a claim in an Insolvency Proceeding involving Parent or any Grantor due
to the existence of such Insolvency Proceeding.

 

5.          Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) Parent and each of the Grantors shall remain liable under
each of their respective contracts and agreements included in Collateral,
including the Pledged Operating Agreements and the Pledged Partnership
Agreements, to perform all of the duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Agent or
any other member of the Lender Group of any of the rights hereunder shall not
release Parent or any Grantor from any of its duties or obligations under such
contracts and agreements included in the Collateral, and (c) none of the members
of the Lender Group shall have any obligation or liability under such contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
any of the members of the Lender Group be obligated to perform any of the
obligations or duties of Parent or any Grantors thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder. Until an Event
of Default shall occur and be continuing, except as otherwise provided in this
Agreement, the Credit Agreement, or any other Loan Document, Parent and Grantors
shall have the right to possession and enjoyment of the Collateral for the
purpose of conducting the ordinary course of their respective businesses,
subject to and upon the terms hereof and of the Credit Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, it is the
intention of the parties hereto that record and beneficial ownership of the
Pledged Interests, including all voting, consensual, dividend, and distribution
rights, shall remain in Parent or the applicable Grantor (as applicable) until
(i) the occurrence and continuance of an Event of Default and (ii) Agent has
notified Parent or the applicable Grantor of Agent’s election to exercise such
rights with respect to the Pledged Interests pursuant to Section 16.

 

6.          Representations and Warranties. In order to induce Agent to enter
into this Agreement for the benefit of the Lender Group and the Bank Product
Providers, Parent and each Grantor makes the following representations and
warranties to the Lender Group which shall be true, correct, and complete, in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof), as of the Closing Date, and shall
be true, correct, and complete, in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof), as of the date of the making of each advance (or other extension of
credit) made thereafter, as though made on and as of the date of such advance
(or other extension of credit) (except to the extent that such representations
and warranties relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) as of such earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:

 

 

 

 

(a)          The name (within the meaning of Section 9-503 of the Code) and
jurisdiction of organization of Parent and each of its Subsidiaries (other than
Excluded Subsidiaries) is set forth on Schedule 7 (as such Schedule may be
updated from time to time to reflect changes resulting from transactions
permitted under the Loan Documents).

 

(b)          The chief executive office of Parent and each of its Subsidiaries
(other than Excluded Subsidiaries) is located at the address indicated on
Schedule 7 (as such Schedule may be updated from time to time to reflect changes
resulting from transactions permitted under the Loan Documents).

 

(c)          The tax identification numbers and organizational identification
numbers, if any, of Parent and each of its Subsidiaries (other than Excluded
Subsidiaries) are identified on Schedule 7 (as such Schedule may be updated from
time to time to reflect changes resulting from transactions permitted under the
Loan Documents).

 

(d)          As of the Closing Date, neither Parent nor any of its Subsidiaries
(other than Excluded Subsidiaries) holds any commercial tort claims that exceed
$100,000 in amount, except as set forth on Schedule 1.

 

(e)          Set forth on Schedule 9 (as such Schedule may be updated from time
to time subject to Section 7(k)(iii) with respect to Controlled Accounts and
provided that Grantors comply with Section 7(c) hereof) is a listing of Parent’s
and each Grantor’s Deposit Accounts and Securities Accounts, including, with
respect to each bank or securities intermediary (a) the name and address of such
Person, and (b) the account numbers of the Deposit Accounts or Securities
Accounts maintained with such Person.

 

(f)          Schedule 8 sets forth all Real Property owned in fee by any Grantor
as of the Closing Date.

 

(g)          As of the Closing Date: (i) Schedule 2 provides a complete and
correct list of all registered Copyrights owned by any Grantor, all applications
for registration of Copyrights owned by any Grantor, and all other Copyrights
owned by any Grantor and material to the conduct of the business of any Grantor;
(ii) Schedule 3 provides a complete and correct list of all Intellectual
Property Licenses entered into by any Grantor pursuant to which (A) any Grantor
has provided any license or other rights in Intellectual Property owned or
controlled by such Grantor to any other Person (other than non-exclusive
software licenses granted in the ordinary course of business) or (B) any Person
has granted to any Grantor any license or other rights in Intellectual Property
owned or controlled by such Person that is material to the business of such
Grantor, including any Intellectual Property that is incorporated in any
Inventory, software, or other product marketed, sold, licensed, or distributed
by such Grantor; (iii) Schedule 4 provides a complete and correct list of all
Patents owned by any Grantor and all applications for Patents owned by any
Grantor; and (iv) Schedule 6 provides a complete and correct list of all
registered Trademarks owned by any Grantor, all applications for registration of
Trademarks owned by any Grantor, and all other Trademarks owned by any Grantor
and material to the conduct of the business of any Grantor.

 

(h)          (i) to each Grantor’s knowledge after reasonable inquiry (A) each
Grantor owns exclusively or holds licenses in all Intellectual Property that is
necessary in or material to the conduct of its business, and (B) all employees
and contractors of each Grantor who were involved in the creation or development
of any Intellectual Property for such Grantor that is necessary in or material
to the business of such Grantor have signed agreements containing assignment of
Intellectual Property rights to such Grantor and obligations of confidentiality;

 

 

 

 

(ii)         to each Grantor’s knowledge after reasonable inquiry, no Person has
infringed or misappropriated or is currently infringing or misappropriating any
Intellectual Property rights owned by such Grantor, in each case, that either
individually or in the aggregate could reasonably be expected to result in a
Material Adverse Effect; and

 

(iii)        to each Grantor’s knowledge after reasonable inquiry, all
registered Copyrights, registered Trademarks, and issued Patents that are owned
by such Grantor and necessary in or material to the conduct of its business are
valid, subsisting and enforceable and in compliance with all legal requirements,
filings, and payments and other actions that are required to maintain such
Intellectual Property in full force and effect.

 

(i)          This Agreement creates valid security interests in the Parent
Collateral of Parent and the Grantor Collateral of each Grantor, to the extent a
security interest therein can be created under the Code, securing the payment of
the Secured Obligations. Except to the extent a security interest in any
Collateral cannot be perfected by the filing of a financing statement under the
Code, all filings and other actions necessary or desirable to perfect and
protect such security interest have been duly taken or will have been taken upon
the filing of financing statements listing Parent and each applicable Grantor,
as a debtor, and Agent, as secured party, in the jurisdictions listed next to
Parent’s and such Grantor’s name on Schedule 11. Upon the making of such
filings, Agent shall have first priority perfected security interests in the
Parent Collateral of Parent and the Grantor Collateral of each Grantor to the
extent such security interests can be perfected by the filing of a financing
statement. Upon filing of any Copyright Security Agreement with the United
States Copyright Office, filing of any Patent Security Agreement and any
Trademark Security Agreement with the PTO, and the filing of appropriate
financing statements in the jurisdictions listed on Schedule 11, all action
necessary or desirable to protect and perfect the Grantor Security Interest in
and on each Grantor’s Patents, Trademarks, or Copyrights has been taken and such
perfected Grantor Security Interest is enforceable as such as against any and
all creditors of and purchasers from any Grantor. All action by Parent or any
Grantor necessary to protect and perfect the security interests on each item of
Collateral has been duly taken.

 

(j)          (i) Except for the Security Interests created hereby, each of
Parent and each Grantor is and will at all times be the sole holder of record
and the legal and beneficial owner, free and clear of all Liens other than
Permitted Liens, of the Pledged Interests indicated on Schedule 5 as being owned
by Parent or such Grantor and, when acquired by Parent or such Grantor, any
Pledged Interests acquired after the Closing Date; (ii) all of the Pledged
Interests are duly authorized, validly issued, fully paid and nonassessable and
the Pledged Interests constitute or will constitute the percentage of the issued
and outstanding Equity Interests of the Pledged Companies of Parent or such
Grantor identified on Schedule 5 as supplemented or modified by any Pledged
Interests Addendum or any Joinder to this Agreement; (iii) Parent or such
Grantor has the right and requisite authority to pledge, the Investment Property
pledged by Parent or such Grantor to Agent as provided herein; (iv) all actions
necessary or desirable to perfect and establish the first priority of, or
otherwise protect, Agent’s Liens in the Investment Property, and the proceeds
thereof, have been duly taken, upon (A) the execution and delivery of this
Agreement; (B) the taking of possession by Agent (or its agent or designee) of
any certificates representing the Pledged Interests, together with undated
powers (or other documents of transfer acceptable to Agent) endorsed in blank by
Parent or the applicable Grantor; (C) the filing of financing statements in the
applicable jurisdiction set forth on Schedule 11 for Parent or such Grantor with
respect to the Pledged Interests of Parent or such Grantor that are not
represented by certificates, and (D) with respect to any Securities Accounts,
the delivery of Control Agreements with respect thereto; and (v) Parent and each
Grantor has delivered to and deposited with Agent all certificates representing
the Pledged Interests owned by Parent or such Grantor to the extent such Pledged
Interests are represented by certificates, and undated powers (or other
documents of transfer acceptable to Agent) endorsed in blank with respect to
such certificates. None of the Pledged Interests owned or held by Parent or such
Grantor has been issued or transferred in violation of any securities
registration, securities disclosure, or similar laws of any jurisdiction to
which such issuance or transfer may be subject.

 

 

 

 

(k)          No consent, approval, authorization, or other order or other action
by, and no notice to or filing with, any Governmental Authority or any other
Person is required (i) for the grant of the Parent Security Interest by Parent
in and to the Parent Collateral or for the grant of the Grantor Security
Interest by such Grantor in and to the Grantor Collateral, in each case,
pursuant to this Agreement or for the execution, delivery, or performance of
this Agreement by Parent or such Grantor, or (ii) for the exercise by Agent of
the voting or other rights provided for in this Agreement with respect to the
Investment Property or the remedies in respect of the Collateral pursuant to
this Agreement, except as may be required by any Gaming Authority or Liquor
Authority or as may be required in connection with such disposition of
Investment Property by laws affecting the offering and sale of securities
generally and except for consents, approvals, authorizations, or other orders or
actions that have been obtained or given (as applicable) and that are still in
force. No Intellectual Property License of any Grantor that is necessary in or
material to the conduct of such Grantor’s business requires any consent of any
other Person that has not been obtained in order for such Grantor to grant the
security interest granted hereunder in such Grantor’s right, title or interest
in or to such Intellectual Property License.

 

(l)          As to all limited liability company or partnership interests,
issued under any Pledged Operating Agreement or Pledged Partnership Agreement,
Parent and each Grantor hereby represents and warrants that the Pledged
Interests issued pursuant to such agreement (A) are not dealt in or traded on
securities exchanges or in securities markets, (B) do not constitute investment
company securities, and (C) are not held by Parent or such Grantor in a
Securities Account. In addition, other than the operating agreements of NG
Washington II Holdings, LLC, a Delaware limited liability company, and NGII,
none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or
any other agreements governing any of the Pledged Interests issued under any
Pledged Operating Agreement or Pledged Partnership Agreement, provide that such
Pledged Interests are securities governed by Article 8 of the Uniform Commercial
Code as in effect in any relevant jurisdiction.

 

7.            Covenants. Parent and each Grantor, jointly and severally,
covenants and agrees with Agent that from and after the date of this Agreement
and until the date of termination of this Agreement in accordance with Section
23:

 

(a)          Possession of Collateral. In the event that any Collateral,
including Proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Property, or Chattel Paper having an aggregate value or face amount
of $100,000 or more for all such Negotiable Collateral, Investment Property, or
Chattel Paper, Parent or the Grantors (as applicable) shall promptly (and in any
event within five (5) Business Days after acquisition thereof), notify Agent
thereof, and if and to the extent that perfection or priority of Agent’s
security interest is dependent on or enhanced by possession, Parent or the
applicable Grantor, promptly (and in any event within five (5) Business Days)
after request by Agent, shall execute such other documents and instruments as
shall be requested by Agent or, if applicable, endorse and deliver physical
possession of such Negotiable Collateral, Investment Property, or Chattel Paper
to Agent, together with such undated powers (or other relevant document of
transfer acceptable to Agent) endorsed in blank as shall be requested by Agent,
and shall do such other acts or things deemed necessary or desirable by Agent to
protect Agent’s security interest therein;

 

 

 

  

(b)          Chattel Paper.

 

(i)          Promptly (and in any event within five (5) Business Days) after
request by Agent, each Grantor shall take all steps reasonably necessary to
grant Agent control of all electronic Chattel Paper in accordance with the Code
and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Transaction Act and Section 201 of the federal Electronic
Signatures in Global and National Commerce Act as in effect in any relevant
jurisdiction, to the extent that the aggregate value or face amount of such
electronic Chattel Paper equals or exceeds $100,000;

 

(ii)         If any Grantor retains possession of any Chattel Paper or
instruments (which retention of possession shall be subject to the extent
permitted hereby and by the Credit Agreement), promptly upon the request of
Agent, such Chattel Paper and instruments shall be marked with the following
legend: “This writing and the obligations evidenced or secured hereby are
subject to the Security Interest of Wells Fargo Gaming Capital, LLC, as Agent
for the benefit of the Lender Group and the Bank Product Providers”;

 

(c)          Control Agreements.

 

(i)          Except to the extent otherwise excused by Section 7(k)(iv), each
Grantor shall obtain an authenticated Control Agreement (which may include a
Controlled Account Agreement), from each bank maintaining a Deposit Account or
Securities Account for Parent or such Grantor other than Excluded Accounts;

 

(ii)         Except to the extent otherwise excused by Section 7(k)(iv), each
Grantor shall obtain an authenticated Control Agreement, from each issuer of
uncertificated securities, securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for Parent or any
Grantor, or maintaining a Securities Account for Parent or such Grantor other
than Excluded Accounts;

 

(iii)        Except to the extent otherwise excused by Section 7(k)(iv), Parent
and each Grantor shall obtain an authenticated Control Agreement with respect to
all of Parent’s and such Grantor’s investment property;

 

(d)          Letter-of-Credit Rights. If the Grantors (or any of them) are or
become the beneficiary of letters of credit having a face amount or value of
$100,000 or more in the aggregate, then the applicable Grantor or Grantors shall
promptly (and in any event within five (5) Business Days after becoming a
beneficiary), notify Agent thereof and, promptly (and in any event within five
(5) Business Days) after request by Agent, enter into a tri-party agreement with
Agent and the issuer or confirming bank with respect to letter-of-credit rights
assigning such letter-of-credit rights to Agent and directing all payments
thereunder to Agent’s Account, all in form and substance reasonably satisfactory
to Agent;

 

(e)          Commercial Tort Claims. If the Grantors (or any of them) obtain
Commercial Tort Claims having a value, or involving an asserted claim, in the
amount of $100,000 or more in the aggregate for all Commercial Tort Claims, then
the applicable Grantor or Grantors shall promptly (and in any event within five
(5) Business Days of obtaining such Commercial Tort Claim), notify Agent upon
incurring or otherwise obtaining such Commercial Tort Claims and, promptly (and
in any event within five (5) Business Days) after request by Agent, amend
Schedule 1 to describe such Commercial Tort Claims in a manner that reasonably
identifies such Commercial Tort Claims and which is otherwise reasonably
satisfactory to Agent, and hereby authorizes the filing of additional financing
statements or amendments to existing financing statements describing such
Commercial Tort Claims, and agrees to do such other acts or things deemed
necessary or desirable by Agent to give Agent a first priority, perfected
security interest in any such Commercial Tort Claim;

 

 

 

 

(f)          Government Contracts. Other than Accounts and Chattel Paper the
aggregate value of which does not at any one time exceed $100,000, if any
Account or Chattel Paper arises out of a contract or contracts with the United
States of America or any department, agency, or instrumentality thereof,
Grantors shall promptly (and in any event within five (5) Business Days of the
creation thereof) notify Agent thereof and, promptly (and in any event within
five (5) Business Days) after request by Agent, execute any instruments or take
any steps reasonably required by Agent in order that all moneys due or to become
due under such contract or contracts shall be assigned to Agent, for the benefit
of the Lender Group and the Bank Product Providers, and shall provide written
notice thereof under the Assignment of Claims Act or other applicable law;

 

(g)          Intellectual Property.

 

(i)          Upon the request of Agent, in order to facilitate filings with the
PTO and the United States Copyright Office, each Grantor shall execute and
deliver to Agent one or more Copyright Security Agreements, Trademark Security
Agreements, or Patent Security Agreements to further evidence Agent’s Lien on
such Grantor’s Patents, Trademarks, or Copyrights, and the General Intangibles
of such Grantor relating thereto or represented thereby;

 

(ii)         Each Grantor shall have the duty, with respect to Intellectual
Property that is necessary in or material to the conduct of such Grantor’s
business, to protect and diligently enforce and defend at such Grantor’s expense
its Intellectual Property, including (A) to diligently enforce and defend,
including promptly suing for infringement, misappropriation, or dilution and to
recover any and all damages for such infringement, misappropriation, or
dilution, and filing for opposition, interference, and cancellation against
conflicting Intellectual Property rights of any Person, (B) to prosecute
diligently any trademark application or service mark application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, (C) to prosecute diligently any patent application that is
part of the Patents pending as of the date hereof or hereafter until the
termination of this Agreement, (D) to take all reasonable and necessary action
to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights,
Intellectual Property Licenses, and its rights therein, including paying all
maintenance fees and filing of applications for renewal, affidavits of use, and
affidavits of noncontestability, and (E) to require all employees, consultants,
and contractors of each Grantor who were involved in the creation or development
of such Intellectual Property to sign agreements containing assignment of
Intellectual Property rights and obligations of confidentiality. Each Grantor
further agrees not to abandon any Intellectual Property or Intellectual Property
License that is necessary in or material to the conduct of such Grantor’s
business. Each Grantor hereby agrees to take the steps described in this Section
7(g)(ii) with respect to all new or acquired Intellectual Property to which it
or any of its Subsidiaries is now or later becomes entitled that is necessary in
or material to the conduct of such Grantor’s business;

 

(iii)        Grantors acknowledge and agree that the Lender Group shall have no
duties with respect to any Intellectual Property or Intellectual Property
Licenses of any Grantor. Without limiting the generality of this Section
7(g)(iii), Grantors acknowledge and agree that no member of the Lender Group
shall be under any obligation to take any steps necessary to preserve rights in
the Grantor Collateral consisting of Intellectual Property or Intellectual
Property Licenses against any other Person, but any member of the Lender Group
may do so at its option from and after the occurrence and during the continuance
of an Event of Default, and all reasonable expenses incurred in connection
therewith (including reasonable fees and expenses of attorneys and other
professionals) shall be for the sole account of Borrower and shall be chargeable
to the Loan Account in accordance with the Credit Agreement;

 

 

 

 

(iv)        On each date on which quarterly financial statements are to be
delivered pursuant to Section 5.1 of the Credit Agreement (or, if an Event of
Default has occurred and is continuing, more frequently if requested by Agent),
each Grantor shall provide Agent with a written report of all new Patents,
Trademarks or Copyrights that are registered or the subject of pending
applications for registrations, and of all Intellectual Property Licenses that
are material to the conduct of such Grantor’s business, in each case, which were
acquired, registered, or for which applications for registration were filed by
any Grantor during the prior period and any statement of use or amendment to
allege use with respect to intent-to-use trademark applications. In the case of
such registrations or applications therefor, which were acquired by any Grantor,
each such Grantor shall file the necessary documents with the appropriate
Governmental Authority identifying the applicable Grantor as the owner (or as a
co-owner thereof, if such is the case) of such Intellectual Property. In each of
the foregoing cases, the applicable Grantor shall promptly cause to be prepared,
executed, and delivered to Agent supplemental schedules to the applicable Loan
Documents to identify such Patent, Trademark and Copyright registrations and
applications therefor (with the exception of Trademark applications filed on an
intent-to-use basis for which no statement of use or amendment to allege use has
been filed) and Intellectual Property Licenses as being subject to the security
interests created thereunder;

 

(v)         Anything to the contrary in this Agreement notwithstanding, in no
event shall any Grantor, either itself or through any agent, employee, licensee,
or designee, file an application for the registration of any Copyright with the
United States Copyright Office or any similar office or agency in another
country without giving Agent written notice thereof at least five (5) Business
Days prior to such filing and complying with Section 7(g)(i). Upon receipt from
the United States Copyright Office of notice of registration of any Copyright,
each Grantor shall promptly (but in no event later than five (5) Business Days
following such receipt) notify (but without duplication of any notice required
by Section 7(g)(iv) Agent of such registration by delivering, or causing to be
delivered, to Agent, documentation sufficient for Agent to perfect Agent’s Liens
on such Copyright. If any Grantor acquires from any Person any Copyright
registered with the United States Copyright Office or an application to register
any Copyright with the United States Copyright Office, such Grantor shall
promptly (but in no event later than five (5) Business Days following such
acquisition) notify Agent of such acquisition and deliver, or cause to be
delivered, to Agent, documentation sufficient for Agent to perfect Agent’s Liens
on such Copyright. In the case of such Copyright registrations or applications
therefor which were acquired by any Grantor, each such Grantor shall promptly
(but in no event later than five (5) Business Days following such acquisition)
file the necessary documents with the appropriate Governmental Authority
identifying the applicable Grantor as the owner (or as a co-owner thereof, if
such is the case) of such Copyrights;

 

(h)          Investment Property.

 

(i)          If Parent or any Grantor shall acquire, obtain, receive or become
entitled to receive any Pledged Interests after the Closing Date, it shall
promptly (and in any event within five (5) Business Days of acquiring or
obtaining such Pledged Interests) deliver to Agent a duly executed Pledged
Interests Addendum identifying such Pledged Interests;

 

(ii)         Upon the occurrence and during the continuance of an Event of
Default, following the request of Agent, all sums of money and property paid or
distributed in respect of the Investment Property that are received by Parent or
any Grantor shall be held by Parent or such Grantor in trust for the benefit of
Agent segregated from Parent or such Grantor’s other property, and Parent or
such Grantor shall deliver it forthwith to Agent in the exact form received;

 

 

 

 

(iii)        Parent and each Grantor shall promptly deliver to Agent a copy of
each material notice or other material communication received by it in respect
of any Pledged Interests;

 

(iv)        Neither Parent nor any Grantor shall make or consent to any
amendment or other modification or waiver with respect to any Pledged Interests,
Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any
agreement or permit to exist any restriction with respect to any Pledged
Interests if the same is prohibited pursuant to the Loan Documents;

 

(v)         Parent and each Grantor agrees that it will cooperate with Agent in
obtaining all necessary approvals and making all necessary filings under
federal, state, local, or foreign law to effect the perfection of the Security
Interests on the Investment Property or to effect any sale or transfer thereof;

 

(vi)        As to all limited liability company or partnership interests, issued
under any Pledged Operating Agreement or Pledged Partnership Agreement, Parent
each Grantor hereby covenants that the Pledged Interests issued pursuant to such
agreement (A) are not and shall not be dealt in or traded on securities
exchanges or in securities markets, (B) do not and will not constitute
investment company securities, and (C) are not and will not be held by Parent or
such Grantor in a securities account. In addition, other than the operating
agreements of NG Washington II Holdings, LLC, a Delaware limited liability
company, and NGII, none of the Pledged Operating Agreements, the Pledged
Partnership Agreements, or any other agreements governing any of the Pledged
Interests issued under any Pledged Operating Agreement or Pledged Partnership
Agreement, provide or shall provide that such Pledged Interests are securities
governed by Article 8 of the Uniform Commercial Code as in effect in any
relevant jurisdiction;

 

(i)          Real Property; Fixtures. Each Grantor covenants and agrees that
upon the acquisition of any fee interest in Real Property having a fair market
value in excess of $500,000 it will promptly (and in any event within two (2)
Business Days of acquisition) notify Agent of the acquisition of such Real
Property and will grant to Agent, for the benefit of the Lender Group and the
Bank Product Providers, a first priority Mortgage on each fee interest in Real
Property now or hereafter owned by such Grantor and shall deliver such other
documentation and opinions, in form and substance satisfactory to Agent, in
connection with the grant of such Mortgage as Agent shall request in its
Permitted Discretion, including title insurance policies, financing statements,
fixture filings and environmental audits and such Grantor shall pay all
recording costs, intangible taxes and other fees and costs (including reasonable
attorneys fees and expenses) incurred in connection therewith. Parent and each
Grantor acknowledges and agrees that, to the extent permitted by applicable law,
all of the Collateral shall remain personal property regardless of the manner of
its attachment or affixation to real property;

 

(j)          Transfers and Other Liens. Parent and Grantors shall not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except as expressly permitted by
the Credit Agreement, or (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral of Parent or any Grantor, except for Permitted
Liens. The inclusion of Proceeds in the Collateral shall not be deemed to
constitute Agent’s consent to any sale or other disposition of any of the
Collateral except as expressly permitted in this Agreement or the other Loan
Documents;

 

 

 

 

(k)          Controlled Accounts; Controlled Investments.

 

(i)          Each Grantor shall establish and maintain cash management services
of a type and on terms reasonably satisfactory to Agent at one or more of the
banks set forth on Schedule 11 (each a “Controlled Account Bank”), and shall
take reasonable steps to ensure that all of its and its Subsidiaries’ Account
Debtors forward payment of the amounts owed by them directly to such Controlled
Account Bank. Each Grantor shall deposit or cause to be deposited promptly, but
in any event within three (3) Business Days after receipt thereof by such
Grantor, all of its collections (including those sent directly by its Account
Debtors to such Grantor) into a bank account of such Grantor at one of the
Controlled Account Banks (each bank account at a Controlled Account Bank, a
“Controlled Account”).

 

(ii)          Each Grantor shall establish and maintain Controlled Account
Agreements with Agent and the applicable Controlled Account Bank, in form and
substance reasonably acceptable to Agent. Each such Controlled Account Agreement
shall provide, among other things, that (A) the Controlled Account Bank will
comply with any instructions originated by Agent directing the disposition of
the funds in such Controlled Account without further consent by the applicable
Grantor, (B) the Controlled Account Bank waives, subordinates, or agrees not to
exercise any rights of setoff or recoupment or any other claim against the
applicable Controlled Account other than for payment of its service fees and
other charges directly related to the administration of such Controlled Account
and for returned checks or other items of payment, and (C) upon the instruction
of Agent (an “Activation Instruction”), the Controlled Account Bank will forward
by daily sweep all amounts in the applicable Controlled Account to the Agent’s
Account. Agent agrees not to issue an Activation Instruction with respect to the
Controlled Accounts unless a Triggering Event has occurred and is continuing at
the time such Activation Instruction is issued. Agent agrees to use commercially
reasonable efforts to rescind an Activation Instruction (the “Rescission”) if:
(1) the Triggering Event upon which such Activation Instruction was issued has
been waived in writing in accordance with the terms of the Credit Agreement, and
(2) no additional Triggering Event has occurred and is continuing prior to the
date of the Rescission or is reasonably expected to occur on or immediately
after the date of the Rescission.

 

(iii)        So long as no Event of Default has occurred and is continuing,
Grantors may amend Schedule 11 to add or replace a Controlled Account Bank or
Controlled Account and shall upon such addition or replacement provide to Agent
an amended Schedule 11; provided, however, that (A) such prospective Controlled
Account Bank shall be reasonably satisfactory to Agent, and (B) prior to the
time of the opening of such Controlled Account, the applicable Grantor and such
prospective Controlled Account Bank shall have executed and delivered to Agent a
Controlled Account Agreement. Each Grantor shall close any of its Controlled
Accounts (and establish replacement Controlled Account accounts in accordance
with the foregoing sentence) as promptly as practicable and in any event within
forty-five (45) days after notice from Agent that the operating performance,
funds transfer, or availability procedures or performance of the Controlled
Account Bank with respect to Controlled Account Accounts or Agent’s liability
under any Controlled Account Agreement with such Controlled Account Bank is no
longer acceptable in Agent’s reasonable judgment.

 

(iv)        Other than (i) an aggregate amount of not more than $50,000 at any
one time, in the case of Grantors and their Subsidiaries, and (ii) amounts
deposited into Excluded Accounts, no Grantor will make, acquire, or permit to
exist Permitted Investments consisting of cash, Cash Equivalents, or amounts
credited to Deposit Accounts or Securities Accounts unless such Grantor and the
applicable bank or securities intermediary have entered into Control Agreements
with Agent governing such Permitted Investments in order to perfect (and further
establish) Agent’s Liens in such Permitted Investments.

 

 

 

 

(l)          Name, Etc. Neither Parent nor any Grantor will change its name,
organizational identification number, jurisdiction of organization or
organizational identity; provided, that Parent and Grantors may change their
names upon at least ten (10) days prior written notice to Agent of such change.

 

8.          Relation to Other Security Documents. The provisions of this
Agreement shall be read and construed with the other Loan Documents referred to
below in the manner so indicated.

 

(a)          Credit Agreement. In the event of any conflict between any
provision in this Agreement and a provision in the Credit Agreement, such
provision of the Credit Agreement shall control.

 

(b)          Patent, Trademark, Copyright Security Agreements. The provisions of
the Copyright Security Agreements, Trademark Security Agreements, and Patent
Security Agreements are supplemental to the provisions of this Agreement, and
nothing contained in the Copyright Security Agreements, Trademark Security
Agreements, or the Patent Security Agreements shall limit any of the rights or
remedies of Agent hereunder. In the event of any conflict between any provision
in this Agreement and a provision in a Copyright Security Agreement, Trademark
Security Agreement or Patent Security Agreement, such provision of this
Agreement shall control.

 

9.          Further Assurances; Etc.

 

(a)          Parent and each Grantor agrees that from time to time, at its own
expense, Parent and such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that Agent may
reasonably request, in order to perfect and protect the Security Interests
granted hereby, to create, perfect or protect the Security Interests purported
to be granted hereby or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any of the Collateral.

 

(b)          Parent and each Grantor authorizes the filing by Agent of financing
or continuation statements, or amendments thereto, and Parent and such Grantor
will execute and deliver to Agent such other instruments or notices, as Agent
may reasonably request, in order to perfect and preserve the Security Interests
granted or purported to be granted hereby.

 

(c)          Each Grantor authorizes Agent at any time and from time to time to
file, transmit, or communicate, as applicable, financing statements and
amendments (i) describing the Grantor Collateral as “all personal property of
debtor” or “all assets of debtor” or words of similar effect, (ii) describing
the Grantor Collateral as being of equal or lesser scope or with greater detail,
or (iii) that contain any information required by part 5 of Article 9 of the
Code for the sufficiency or filing office acceptance. Parent authorizes Agent at
any time and from time to time to file, transmit, or communicate, as applicable,
financing statements and amendments (A) reasonably identify the Parent
Collateral (within the meaning of Section 9-108 of the Code), or (B) that
contain any information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance. Parent and each Grantor also hereby
ratifies any and all financing statements or amendments previously filed by
Agent in any jurisdiction.

 

(d)          Parent and each Grantor acknowledges that it is not authorized to
file any financing statement or amendment or termination statement with respect
to any financing statement filed in connection with this Agreement without the
prior written consent of Agent, subject to Parent’s or such Grantor’s rights
under Section 9-509(d)(2) of the Code.

 

 

 

 

(e)          Each of the parties hereto acknowledges and agrees that nothing in
this Agreement creates, either directly or by implication, any security interest
in, lien on, or rights to any the assets of or Parent’s Equity Interests in any
Excluded Subsidiaries.

 

10.         Agent’s Right to Perform Contracts, Exercise Rights, Etc. Upon the
occurrence and during the continuance of an Event of Default, Agent (or its
designee) (a) may proceed to perform any and all of the obligations of any
Grantor contained in any contract, lease, or other agreement and exercise any
and all rights of any Grantor therein contained as fully as such Grantor itself
could, (b) shall have the right to use any Grantor’s rights under Intellectual
Property Licenses in connection with the enforcement of Agent’s rights
hereunder, including the right to prepare for sale and sell any and all
Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses, and (c) shall have the right to request that
any Equity Interests that are pledged hereunder be registered in the name of
Agent or any of its nominees.

 

11.         Agent Appointed Attorney-in-Fact. Parent and each Grantor hereby
irrevocably appoints Agent as its attorney-in-fact, with full authority in the
place and stead of Parent or such Grantor and in the name of Parent or such
Grantor or otherwise, at such time as an Event of Default has occurred and is
continuing under the Credit Agreement, to take any action and to execute any
instrument which Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including:

 

(a)          to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Accounts or any other Collateral of any Grantor;

 

(b)          to receive and open all mail addressed to any Grantor and to notify
postal authorities to change the address for the delivery of mail to such
Grantor to that of Agent;

 

(c)          to receive, indorse, and collect any drafts or other instruments,
documents, Negotiable Collateral or Chattel Paper of any Grantor;

 

(d)          to file any claims or take any action or institute any proceedings
which Agent may deem necessary or desirable for the collection of any of the
Collateral of any Grantor or otherwise to enforce the rights of Agent with
respect to any of the Collateral;

 

(e)          to repair, alter, or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any Person obligated to any Grantor in
respect of any Account of any Grantor;

 

(f)          to use any Intellectual Property or Intellectual Property Licenses
of any Grantor, including but not limited to any labels, Patents, Trademarks,
trade names, URLs, domain names, industrial designs, Copyrights, or advertising
matter, in preparing for sale, advertising for sale, or selling Inventory or
other Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor; and

 

(g)          Agent, on behalf of the Lender Group or the Bank Product Providers,
shall have the right, but shall not be obligated, to bring suit in its own name
to enforce the Intellectual Property and Intellectual Property Licenses and, if
Agent shall commence any such suit, the appropriate Grantor shall, at the
request of Agent, do any and all lawful acts and execute any and all proper
documents reasonably required by Agent in aid of such enforcement.

 

 

 

 

To the extent permitted by law, Parent and each Grantor hereby ratifies all that
such attorney-in-fact shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable
until this Agreement is terminated.

 

12.         Agent May Perform. At any time upon the occurrence and during the
continuance of an Event of Default, if Parent or any Grantor fails to perform
any agreement contained herein, Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable, jointly and severally, by Parent and Grantors.

 

13.         Agent’s Duties. The powers conferred on Agent hereunder are solely
to protect Agent’s interest in the Collateral, for the benefit of the Lender
Group and the Bank Product Providers, and shall not impose any duty upon Agent
to exercise any such powers. Except for the safe custody of any Collateral in
its actual possession and the accounting for monies actually received by it
hereunder, Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its actual possession
if such Collateral is accorded treatment substantially equal to that which Agent
accords its own property.

 

14.         Collection of Accounts, General Intangibles and Negotiable
Collateral. At any time upon the occurrence and during the continuance of an
Event of Default, Agent or Agent’s designee may (a) notify Account Debtors of
any Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable
Collateral of such Grantor have been assigned to Agent, for the benefit of the
Lender Group and the Bank Product Providers, or that Agent has a security
interest therein, and (b) collect the Accounts, General Intangibles and
Negotiable Collateral of any Grantor directly, and any collection costs and
expenses shall constitute part of such Grantor’s Secured Obligations under the
Loan Documents.

 

15.         Disposition of Pledged Interests by Agent. None of the Pledged
Interests existing as of the date of this Agreement are, and none of the Pledged
Interests hereafter acquired on the date of acquisition thereof will be,
registered or qualified under the various federal or state securities laws of
the United States and disposition thereof after an Event of Default may be
restricted to one or more private (instead of public) sales in view of the lack
of such registration. Parent and each Grantor understands that in connection
with such disposition, Agent may approach only a restricted number of potential
purchasers and further understands that a sale under such circumstances may
yield a lower price for the Pledged Interests than if the Pledged Interests were
registered and qualified pursuant to federal and state securities laws and sold
on the open market. Parent and each Grantor, therefore, agrees that: (a) if
Agent shall, pursuant to the terms of this Agreement, sell or cause the Pledged
Interests or any portion thereof to be sold at a private sale, Agent shall have
the right to rely upon the advice and opinion of any nationally recognized
brokerage or investment firm (but shall not be obligated to seek such advice and
the failure to do so shall not be considered in determining the commercial
reasonableness of such action) as to the best manner in which to offer the
Pledged Interest or any portion thereof for sale and as to the best price
reasonably obtainable at the private sale thereof; and (b) such reliance shall
be conclusive evidence that Agent has handled the disposition in a commercially
reasonable manner.

 

 

 

 

16.         Voting and Other Rights in Respect of Pledged Interests.

 

(a)          Upon the occurrence and during the continuation of an Event of
Default, (i) Agent may, at its option, and with two (2) Business Days prior
notice to Parent or the applicable Grantor, and in addition to all rights and
remedies available to Agent under any other agreement, at law, in equity, or
otherwise, exercise all voting rights, or any other ownership or consensual
rights (including any dividend or distribution rights) in respect of the Pledged
Interests owned by Parent or such Grantor, but under no circumstances is Agent
obligated by the terms of this Agreement to exercise such rights, and (ii) if
Agent duly exercises its right to vote any of such Pledged Interests, Parent and
each Grantor hereby appoints Agent as Parent’s or such Grantor’s true and lawful
attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any
manner Agent deems advisable for or against all matters submitted or which may
be submitted to a vote of shareholders, partners or members, as the case may be.
The power-of-attorney and proxy granted hereby is coupled with an interest and
shall be irrevocable.

 

(b)          For so long as Parent or any Grantor shall have the right to vote
the Pledged Interests owned by it, each of Parent and such Grantor covenants and
agrees that it will not, without the prior written consent of Agent, vote or
take any consensual action with respect to such Pledged Interests which would
materially adversely affect the rights of Agent, the other members of the Lender
Group, or the Bank Product Providers, or the value of the Pledged Interests.

 

17.         Remedies. Upon the occurrence and during the continuance of an Event
of Default:

 

(a)          Agent may, and, at the instruction of the Required Lenders, shall
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein, in the other Loan Documents, or otherwise available to it,
all the rights and remedies of a secured party on default under the Code or any
other applicable law. Without limiting the generality of the foregoing, Parent
and each Grantor expressly agrees that, in any such event, Agent without demand
of performance or other demand, advertisement or notice of any kind (except a
notice specified below of time and place of public or private sale) to or upon
Parent or any Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code or any other applicable law), may take immediate
possession of all or any portion of the Collateral and (i) require Parent and
Grantors to, and each of Parent and each Grantor hereby agrees that it will at
its own expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at one or more
locations where Parent or such Grantor regularly maintains Inventory, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Agent’s
offices or elsewhere, for cash, on credit, and upon such other terms as Agent
may deem commercially reasonable. Parent and each Grantor agrees that, to the
extent notification of sale shall be required by law, at least ten (10) days
notification by mail to the Parent or the applicable Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification and specifically such notification
shall constitute a reasonable “authenticated notification of disposition” within
the meaning of Section 9-611 of the Code. Agent shall not be obligated to make
any sale of Collateral regardless of notification of sale having been given.
Agent may adjourn any public sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Parent and each Grantor agrees
that (A) the internet shall constitute a “place” for purposes of Section
9-610(b) of the Code and (B) to the extent notification of sale shall be
required by law, notification by mail of the URL where a sale will occur and the
time when a sale will commence at least ten (10) days prior to the sale shall
constitute a reasonable notification for purposes of Section 9-611(b) of the
Code. Parent and each Grantor agrees that any sale of Collateral to a licensor
pursuant to the terms of a license agreement between such licensor and a Grantor
is sufficient to constitute a commercially reasonable sale (including as to
method, terms, manner, and time) within the meaning of Section 9-610 of the
Code.

 

(b)          Agent is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor’s Intellectual
Property, including but not limited to, any labels, Patents, Trademarks, trade
names, URLs, domain names, industrial designs, Copyrights, and advertising
matter, whether owned by any Grantor or with respect to which any Grantor has
rights under license, sublicense, or other agreements (including any
Intellectual Property License), as it pertains to the Collateral, in preparing
for sale, advertising for sale and selling any Collateral, and each Grantor’s
rights under all licenses and all franchise agreements shall inure to the
benefit of Agent.

 

 

 

 

(c)          Agent may, in addition to other rights and remedies provided for
herein, in the other Loan Documents, or otherwise available to it under
applicable law and without the requirement of notice to or upon any Grantor or
any other Person (which notice is hereby expressly waived to the maximum extent
permitted by the Code or any other applicable law), (i) with respect to Parent’s
or any Grantor’s Deposit Accounts in which Agent’s Liens are perfected by
control under Section 9-104 of the Code, instruct the bank maintaining such
Deposit Account for Parent or the applicable Grantor to pay the balance of such
Deposit Account to or for the benefit of Agent, and (ii) with respect to
Parent’s or any Grantor’s Securities Accounts in which Agent’s Liens are
perfected by control under Section 9-106 of the Code, instruct the securities
intermediary maintaining such Securities Account for Parent or the applicable
Grantor to (A) transfer any cash in such Securities Account to or for the
benefit of Agent, or (B) liquidate any financial assets in such Securities
Account that are customarily sold on a recognized market and transfer the cash
proceeds thereof to or for the benefit of Agent.

 

(d)          Any cash held by Agent as Collateral and all cash proceeds received
by Agent in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral shall be applied against the Secured
Obligations in the order set forth in the Credit Agreement. In the event the
proceeds of Collateral are insufficient to satisfy all of the Secured
Obligations in full, Parent and each Grantor shall remain jointly and severally
liable for any such deficiency.

 

(e)          Parent and each Grantor hereby acknowledges that the Secured
Obligations arise out of a commercial transaction, and agrees that if an Event
of Default shall occur and be continuing Agent shall have the right to an
immediate writ of possession without notice of a hearing. Agent shall have the
right to the appointment of a receiver for the Collateral of Parent and each
Grantor, and Parent and each Grantor hereby consents to such rights and such
appointment and hereby waives any objection Parent or such Grantor may have
thereto or the right to have a bond or other security posted by Agent.

 

(f)          Each Grantor agrees that, upon the occurrence of and during the
continuance of an Event of Default and at Agent’s request, Grantor will
immediately file such applications for approval and shall take all other and
further actions required by Agent to obtain such approvals or consents of
regulatory authorities as are necessary to transfer ownership and control to
Agent, of the Gaming Licenses held by it, or its interest in any Person holding
any such Gaming License. To enforce the provisions of this Section 17(f), Agent
is empowered to request the appointment of a receiver from any court of
competent jurisdiction. Such receiver shall be instructed to seek from the
applicable Gaming Authority an involuntary transfer of control of any Gaming
License for the purpose of seeking a bona fide purchaser to whom control will
ultimately be transferred. Grantors hereby agree to authorize such an
involuntary transfer of control upon the request of the receiver so appointed
and, if any Grantor shall refuse to authorize the transfer, its approval may be
required by the court. Upon the occurrence and continuance of an Event of
Default, Grantors shall further use their reasonable best efforts to assist in
obtaining approval of the applicable Gaming Authority, if required, for any
action or transactions contemplated by this Agreement or the Loan Documents,
including, preparation, execution, and filing with the applicable Gaming
Authority of the assignor’s or transferor’s portion of any application or
applications for consent to the assignment of any Gaming License or transfer of
control necessary or appropriate under the applicable Gaming Authority’s rules
and regulations for approval of the transfer or assignment of any portion of the
Collateral, together with any Gaming License or other authorization. Grantors
acknowledge that the assignment or transfer of Gaming Licenses is integral to
Agent’s realization of the value of the Collateral, that there is no adequate
remedy at law for failure by Grantors to comply with the provisions of this
Section 17(f) and that such failure would not be adequately compensable in
damages, and therefore agree that the agreements contained in this Section 17(f)
may be specifically enforced.

 

 

 

 

All rights, remedies, and powers provided in this Agreement and the other Loan
Documents may be exercised only to the extent that the exercise thereof does not
violate any Gaming Laws or Liquor Laws and all provisions of this Agreement and
the other Loan Documents are intended to be subject to all applicable mandatory
provisions of the Gaming Laws and Liquor Laws and to be limited solely to the
extent necessary to not render the provisions of this Agreement invalid or
unenforceable, in whole or in part. Agent will timely apply for and receive all
required approvals of the applicable Gaming Authority for possession, sale, or
other disposition of gaming Equipment regulated by Gaming Laws (including any
such sale or disposition of gaming Equipment consisting of slot machines, gaming
tables, cards, dice, gaming chips, player tracking systems, and all other
“gaming devices” (as such term or words of like import referring thereto are
defined in the Gaming Laws), and “associated equipment” (as such term or words
of like import referring thereto are defined in the Gaming Laws)) and of the
Liquor Authorities under Liquor Laws for the sale of liquor and other alcoholic
beverages.

 

18.         Remedies Cumulative. Each right, power, and remedy of Agent, any
other member of the Lender Group, or any Bank Product Provider as provided for
in this Agreement, the other Loan Documents or any Bank Product Agreement now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement, the other Loan Documents and the Bank
Product Agreements or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the exercise by Agent,
any other member of the Lender Group, or any Bank Product Provider, of any one
or more of such rights, powers, or remedies shall not preclude the simultaneous
or later exercise by Agent, such other member of the Lender Group or such Bank
Product Provider of any or all such other rights, powers, or remedies.

 

19.         Marshaling. Agent shall not be required to marshal any present or
future collateral security (including but not limited to the Collateral) for, or
other assurances of payment of, the Secured Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of its rights and remedies hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights and remedies, however existing or arising. To
the extent that it lawfully may, Parent and each Grantor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of Agent’s rights and remedies under
this Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, Parent and each
Grantor hereby irrevocably waives the benefits of all such laws.

 

20.         Indemnity and Expenses.

 

(a)          Parent and each Grantor agrees to indemnify Agent and the other
members of the Lender Group from and against all claims, lawsuits and
liabilities (including reasonable attorneys fees) arising out of or resulting
from this Agreement (including enforcement of this Agreement) or any other Loan
Document to which such Grantor is a party, except claims, losses or liabilities
resulting from the gross negligence or willful misconduct of the party seeking
indemnification as determined by a final non-appealable order of a court of
competent jurisdiction. This provision shall survive the termination of this
Agreement and the Credit Agreement and the repayment of the Secured Obligations.

 

 

 

 

 

(b)          Parent and Grantors, jointly and severally, shall, upon demand, pay
to Agent (or Agent, may charge to the Loan Account) all the Lender Group
Expenses which Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or, upon an
Event of Default, the sale of, collection from, or other realization upon, any
of the Collateral in accordance with this Agreement and the other Loan
Documents, (iii) the exercise or enforcement of any of the rights of Agent
hereunder or (iv) the failure by Parent or any Grantor to perform or observe any
of the provisions hereof.

 

21.         Merger; Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER
LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any
provision of this Agreement, and no consent to any departure by Parent or any
Grantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
amendment of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by Agent, Parent, and each Grantor to which such
amendment applies.

 

22.         Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the form and manner and delivered to Agent at
its address specified in the Credit Agreement, and to any of the Grantors or
Guarantors at their respective addresses specified in the Credit Agreement or
this Agreement, as applicable, or, as to any party, at such other address as
shall be designated by such party in a written notice to the other party.

 

23.         Continuing Security Interest: Assignments under Credit Agreement.

 

(a)          This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the Obligations
have been paid in full in accordance with the provisions of the Credit
Agreement, (ii) be binding upon each Grantor, and their respective successors
and assigns, and (iii) inure to the benefit of, and be enforceable by, Agent,
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), any Lender may, in accordance with the provisions of
the Credit Agreement, assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise. Upon payment in full of the
Secured Obligations in accordance with the provisions of the Credit Agreement,
the Guaranty made and the Security Interests granted hereby shall terminate and
all rights to the Collateral shall revert to Parent and Grantors or any other
Person entitled thereto. At such time, upon Borrower’s request, Agent will
authorize the filing of appropriate termination statements to terminate such
Security Interests. No transfer or renewal, extension, assignment, or
termination of this Agreement or of the Credit Agreement, any other Loan
Document, or any other instrument or document executed and delivered by Parent
or any Grantor to Agent nor any additional loans made by any Lender to Borrower,
nor the taking of further security, nor the retaking or re-delivery of any
Collateral to Parent or Grantors, or any of them, by Agent, nor any other act of
the Lender Group or the Bank Product Providers, or any of them, shall release
Parent or any Grantor from any obligation, except a release or discharge
executed in writing by Agent in accordance with the provisions of the Credit
Agreement. Agent shall not by any act, delay, omission or otherwise, be deemed
to have waived any of its rights or remedies hereunder, unless such waiver is in
writing and signed by Agent and then only to the extent therein set forth. A
waiver by Agent of any right or remedy on any occasion shall not be construed as
a bar to the exercise of any such right or remedy which Agent would otherwise
have had on any other occasion.

 

 

 

 

(b)          Each Guarantor and each Grantor agrees that, if any payment made by
such Guarantor or Grantor or other Person and applied to the Secured Obligations
or Guarantied Obligations is at any time annulled, avoided, set, aside,
rescinded, invalidated, declared to be fraudulent or preferential or otherwise
required to be refunded or repaid, or the proceeds of any Collateral are
required to be returned by Agent or any other member of the Lender Group to any
Guarantor or Grantor, its estate, trustee, receiver or any other party,
including any Guarantor or Grantor, under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, any Lien or other Collateral securing such liability shall be and
remain in full force and effect, as fully as if such payment had never been
made. If, prior to any of the foregoing, (i) any Lien or other Collateral
securing any Guarantor’s or Grantor’s liability hereunder shall have been
released or terminated by virtue of the foregoing clause (a), or (ii) any
provision of the Guaranty hereunder shall have been terminated, cancelled or
surrendered, such Lien, other Collateral or provision shall be reinstated in
full force and effect and such prior release, termination, cancellation or
surrender shall not diminish, release, discharge, impair or otherwise affect the
obligations of any such Guarantor or Grantor in respect of any Lien or other
Collateral securing such obligation or the amount of such payment.

 

24.         Survival. All representations and warranties made by Parent and the
Grantors in this Agreement and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any loans, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that Agent or any Lender may have had notice or knowledge of any
Default or Event of Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any loan or any fee or any
other amount payable under the Credit Agreement is outstanding and unpaid and so
long as the Commitments have not expired or terminated.

 

25.         CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE
PROVISION.

 

(a)          THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT HEREOF, THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR RELATED HERETO, AND ANY CLAIMS, CONTROVERSIES OR
DISPUTES ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

 

(b)          THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA; PROVIDED, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY
HERETO WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 25(b).

 

 

 

(c)          TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO HEREBY WAIVES ITS RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM,
CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”). EACH PARTY HERETO REPRESENTS
THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

 

(d)          EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF LOS ANGELES AND THE STATE OF CALIFORNIA, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY GRANTOR
OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(e)          NO CLAIM MAY BE MADE BY ANY GUARANTOR OR ANY GRANTOR AGAINST THE
AGENT OR ANY LENDER, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL,
REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION, OR EVENT
OCCURRING IN CONNECTION HEREWITH, AND EACH OF EACH GUARANTOR AND EACH GRANTOR
HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES,
WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS
FAVOR.

 

(f)          IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE
OF CALIFORNIA (THE "COURT") BY OR AGAINST ANY PARTY HERETO IN CONNECTION WITH
ANY CLAIM AND THE WAIVER SET FORTH IN SECTION 25(c) ABOVE IS NOT ENFORCEABLE IN
SUCH PROCEEDING, THE PARTIES HERETO AGREE AS FOLLOWS:

 

(i)          WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN SUBCLAUSE (ii)
BELOW, ANY CLAIM SHALL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN
ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS
638 THROUGH 645.1. THE PARTIES INTEND THIS GENERAL REFERENCE AGREEMENT TO BE
SPECIFICALLY ENFORCEABLE. VENUE FOR THE REFERENCE PROCEEDING SHALL BE IN THE
COUNTY OF LOS ANGELES, CALIFORNIA.

 

(ii)         THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE
PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR
PERSONAL PROPERTY, (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING SET-OFF OR
RECOUPMENT), (C) APPOINTMENT OF A RECEIVER, AND (D) TEMPORARY, PROVISIONAL, OR
ANCILLARY REMEDIES (INCLUDING WRITS OF ATTACHMENT, WRITS OF POSSESSION,
TEMPORARY RESTRAINING ORDERS, OR PRELIMINARY INJUNCTIONS). THIS AGREEMENT DOES
NOT LIMIT THE RIGHT OF ANY PARTY TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND
REMEDIES DESCRIBED IN CLAUSES (A) - (D) AND ANY SUCH EXERCISE OR OPPOSITION DOES
NOT WAIVE THE RIGHT OF ANY PARTY TO PARTICIPATE IN A REFERENCE PROCEEDING
PURSUANT TO THIS AGREEMENT WITH RESPECT TO ANY OTHER MATTER.

 

 

 

 

(iii)        UPON THE WRITTEN REQUEST OF ANY PARTY, THE PARTIES SHALL SELECT A
SINGLE REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE. IF THE PARTIES DO NOT
AGREE UPON A REFEREE WITHIN 10 DAYS OF SUCH WRITTEN REQUEST, THEN, ANY PARTY
SHALL HAVE THE RIGHT TO REQUEST THE COURT TO APPOINT A REFEREE PURSUANT TO
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 640(B). THE REFEREE SHALL BE
APPOINTED TO SIT WITH ALL OF THE POWERS PROVIDED BY LAW. PENDING APPOINTMENT OF
THE REFEREE, THE COURT SHALL HAVE THE POWER TO ISSUE TEMPORARY OR PROVISIONAL
REMEDIES.

 

(iv)        EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REFEREE SHALL
DETERMINE THE MANNER IN WHICH THE REFERENCE PROCEEDING IS CONDUCTED INCLUDING
THE TIME AND PLACE OF HEARINGS, THE ORDER OF PRESENTATION OF EVIDENCE, AND ALL
OTHER QUESTIONS THAT ARISE WITH RESPECT TO THE COURSE OF THE REFERENCE
PROCEEDING. ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT
FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN ANY PARTY SO
REQUESTS A COURT REPORTER AND A TRANSCRIPT IS ORDERED, A COURT REPORTER SHALL BE
USED AND THE REFEREE SHALL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE
PARTY MAKING SUCH REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY THE
COSTS OF THE COURT REPORTER, PROVIDED THAT SUCH COSTS, ALONG WITH THE REFEREE'S
FEES, SHALL ULTIMATELY BE BORNE BY THE PARTY WHO DOES NOT PREVAIL, AS DETERMINED
BY THE REFEREE.

 

(v)         THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES. THE
PARTIES HERETO SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE
DISCOVERY IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND SHALL ENFORCE ALL
DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT
LAW IN THE STATE OF CALIFORNIA.

 

(vi)        THE REFEREE SHALL APPLY THE RULES OF EVIDENCE APPLICABLE TO
PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE ALL ISSUES IN
ACCORDANCE WITH CALIFORNIA SUBSTANTIVE AND PROCEDURAL LAW. THE REFEREE SHALL BE
EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY MOTION
WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING MOTIONS FOR DEFAULT JUDGMENT OR
SUMMARY JUDGMENT. THE REFEREE SHALL REPORT HIS OR HER DECISION, WHICH REPORT
SHALL ALSO INCLUDE FINDINGS OF FACT AND CONCLUSIONS OF LAW. THE REFEREE SHALL
ISSUE A DECISION AND PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION
644, THE REFEREE'S DECISION SHALL BE ENTERED BY THE COURT AS A JUDGMENT IN THE
SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE FINAL JUDGMENT OR
ORDER FROM ANY APPEALABLE DECISION OR ORDER ENTERED BY THE REFEREE SHALL BE
FULLY APPEALABLE AS IF IT HAS BEEN ENTERED BY THE COURT.

 

 

 

 

(vii)       THE PARTIES RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A
GENERAL REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND
NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR OWN CHOICE, EACH PARTY HERETO KNOWINGLY AND VOLUNTARILY AND FOR
THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION SHALL APPLY TO ANY
DISPUTE BETWEEN THEM THAT ARISES OUT OF OR IS RELATED TO THIS AGREEMENT.

 

26.         New Subsidiaries. Pursuant to Section 5.11 of the Credit Agreement,
certain Subsidiaries (whether by acquisition or creation) of Guarantors and
Grantors are required to enter into this Agreement by executing and delivering
in favor of Agent a Joinder to this Agreement in substantially the form of Annex
1. Upon the execution and delivery of Annex 1 by any such new Subsidiary, such
Subsidiary shall become a Guarantor or Grantor hereunder (determined in
accordance with Section 5.11 of the Credit Agreement) as with the same force and
effect as if originally named as a Guarantor or Grantor herein. The execution
and delivery of any instrument adding an additional Guarantor or Grantor as a
party to this Agreement shall not require the consent of any Guarantor or
Grantor hereunder. The rights and obligations of each Guarantor and Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor or Grantor hereunder.

 

27.         Agent. Each reference herein to any right granted to, benefit
conferred upon or power exercisable by the “Agent” shall be a reference to
Agent, for the benefit of each member of the Lender Group and each of the Bank
Product Providers.

 

28.         Miscellaneous.

 

(a)          This Agreement is a Loan Document. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.

 

(b)          Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

 

(c)          Headings and numbers have been set forth herein for convenience
only. Unless the contrary is compelled by the context, everything contained in
each Section applies equally to this entire Agreement.

 

(d)          Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed against any member of the Lender Group or any Guarantor or
Grantor, whether under any rule of construction or otherwise. This Agreement has
been reviewed by all parties and shall be construed and interpreted according to
the ordinary meaning of the words used so as to accomplish fairly the purposes
and intentions of all parties hereto.

 

[signature pages follow]

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.

 

PARENT: Nevada Gold & Casinos, Inc.,   a Nevada corporation       By: /s/ Robert
B. Sturges     Name: Robert B. Sturges     Title: CEO     GRANTORS: NG SOUTH
DAKOTA, LLC,   a South Dakota limited liability company       By: /s/ Robert B.
Sturges     Name: Robert B. Sturges     Title: Manager       A.G. TRUCANO, SON &
GRANDSONS, INC.,   a South Dakota corporation       By: /s/ Robert B. Sturges  
  Name: Robert B. Sturges     Title: President

 

[SIGNATURE PAGE TO SECURITY AGREEMENT] 

 

 

 

 

GUARANTORS: NEVADA GOLD & CASINOS, INC.,    a Nevada corporation       By: /s/
Robert B. Sturges   Name: Robert B. Sturges   Title: CEO       NG SOUTH DAKOTA,
LLC,   a South Dakota limited liability company       By: /s/ Robert B. Sturges
  Name: Robert B. Sturges   Title: Manager

 

 

 

 

AGENT: WELLS FARGO GAMING CAPITAL, LLC, a Delaware limited liability company    
  By: /s/ Everardo Gomez     Name: Everardo Gomez     Title: AVP