Exhibit 10.2

 

LIMITED COVENANT NOT TO SUE AND RELEASE OF LIMITED GUARANTY

 

This Limited Covenant Not to Sue and Release of Limited Guaranty (“Agreement”)
is made and entered into as of October 19, 2008 by and among Southwest Casino
Corporation, a Nevada corporation (“SCC”), Southwest Casino and Hotel Corp., a
Minnesota corporation (“SCH”) (SCC and SCH are referred to herein each
individually as a “Guarantor” and collectively, as the “Southwest Guarantors”),
and Black Diamond Commercial Finance, L.L.C., a Delaware limited liability
company, as Agent (“Agent”). Unless otherwise specified herein, capitalized
terms used in this Agreement shall have the meanings ascribed to them in the
Credit Agreement (as hereinafter defined).

 

WITNESSETH:

 

WHEREAS, pursuant to that certain Credit Agreement, dated as of April 20, 2007
(as heretofore amended, amended and restated, supplemented or otherwise
modified, the “Credit Agreement”), by and among Borrower, North Metro Hotel,
LLC, a Minnesota limited liability company, as a guarantor and a Loan Party
(“Hotel LLC”), the financial institutions party thereto from time to time as
lenders (collectively, the “Lenders”), and Agent, Lenders have made certain
loans and financial accommodations to Borrower;

 

WHEREAS, SCC, SCH and Agent are parties to that certain Limited Guaranty dated
as of July 1, 2008 (the “Southwest Guaranty”), pursuant to which the Southwest
Guarantors unconditionally guaranteed the Obligations on a limited basis as set
forth therein, and SCH and Agent are parties to that certain Pledge Agreement,
dated as of April 20, 2007 (as amended, restated, supplemented or otherwise
modified from time to time, the “Southwest Pledge Agreement”), pursuant to which
SCH pledged to Agent, for the benefit of itself and the benefit of Lenders, a
first priority security interest in the Pledged Collateral (as defined in the
Southwest Pledge Agreement);

 

WHEREAS, MTR-Harness, Inc., a Minnesota corporation (“MTR Harness”), MTR Gaming
Group, Inc., a Delaware corporation (“MTR Gaming”) (MTR Harness and MTR Gaming
are referred to herein each individually as an “MTR Guarantor” and collectively,
as the “MTR Guarantors”) and Agent are parties to that certain Limited Guaranty
dated as of July 1, 2008 (the “MTR Guaranty”), and MTR Harness and Agent are
parties to that certain Pledge Agreement, dated as of April 20, 2007 (as
amended, restated, supplemented or otherwise modified from time to time, the
“MTR Pledge Agreement”);

 

WHEREAS, certain Events of Default have occurred and are continuing under the
Credit Agreement as of the date hereof (the “Existing Defaults”), and as a
result of the Existing Defaults, Agent and the Lenders have terminated their
obligation to make further extensions of credit to or for the benefit of
Borrower and are entitled to exercise any and all default-related rights and
remedies under the Credit Agreement, other Loan Documents (which term, for
purposes of this Agreement, does not include the MTR Pledge Agreement or the MTR
Guaranty) and/or applicable law;

 

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WHEREAS, the parties hereto are also party to that certain Settlement Agreement
of even date herewith, which contemplates the execution of this Agreement in
conjunction with certain other Agreements to be executed concurrently herewith;
and

 

WHEREAS, in consideration of SCH’s entry into the Settlement Agreement, Agent
has agreed that, subject to the terms and conditions hereof, it would not sue to
enforce the Southwest Guaranty.

 

NOW THEREFORE, in consideration of one dollar and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

 

1.                                      Conditions Precedent. The obligations of
Agent under this Agreement are subject to the satisfaction of all of the
applicable conditions set forth below:

 

(a) Agent shall have received a fully executed copy of that certain Settlement
Agreement among SCH, SCC and Agent, dated as of the date hereof (the “Settlement
Agreement”);

 

(b) Agent shall have received a fully executed copy of that certain Limited
Liability Company Interest Purchase Agreement between SCH and Agent, dated as of
the date hereof (the “Purchase Agreement”);

 

(c) Agent shall have received a fully executed Consulting Agreement between SCH
and Agent, dated as of the date hereof (the “Consulting Agreement,” and,
collectively with this Agreement, the Settlement Agreement and the Purchase
Agreement, the “Transaction Documents”); and

 

(d) The transactions contemplated by the Purchase Agreement shall have closed
and been consummated by no later than October 19, 2008.

 

2.                                      Covenant Not To Sue. Agent, on behalf of
itself and its affiliates, successors and assigns, hereby agrees not to initiate
against the Southwest Guarantors or any of their respective successors, assigns,
insurers, administrators, heirs, and beneficiaries (the “Southwest Parties”),
any proceeding of any nature based on any claim seeking to enforce the Southwest
Guaranty or otherwise recover any amounts due thereunder from any of the
Southwest Parties during the period from the date hereof until the earliest to
occur of any of the following:

 

(a) the occurrence of any default or event of default under any of the
Transaction Documents (other than a default or event of default arising as a
result of the action or inaction of Agent), or the breach (by any party other
than Agent) of any term or condition of any of the Transaction Documents; and

 

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(b) the date on which any court or any federal, state or local agency, or any
other tribunal or body of competent jurisdiction determines, or the date on
which one or more of the Southwest Guarantors asserts or alleges (whether in a
claim or cause of action commenced by any party in any court or before any
federal, state or local agency, or any other tribunal or body, or otherwise in
any writing to Agent) that any of the Transaction Documents or any of the
transactions contemplated thereby are invalid or unenforceable in whole or in
part.

 

3.                                      Release and Termination of Southwest
Guaranty. Any and all rights and obligations of SCC, SCH, Agent and Lenders
under the Southwest Guaranty will be released on, and the Southwest Guaranty
will be of no further force and effect as of, the later to occur of:

 

(a) the earlier to occur of the following:

 

(1)             a final determination by a court of competent jurisdiction that
Agent: (i) has duly and properly acquired all right, title and interest in and
to the Acquired Interest (as such term is defined in the Purchase Agreement, the
“Acquired Interest”) formerly owned by SCH, (ii) has properly succeeded to SCH’s
Membership Interest (as such term is defined in the Purchase Agreement, the
“Membership Interest”) in North Metro Harness Initiative, LLC, a Minnesota
limited liability company (“North Metro”), except that portion of the Membership
Interest comprising the Retained Interest (as such term is defined in the
Purchase Agreement, the “Retained Interest”), and (iii) is a “Member,”
“Substitute Member” and “Managing Member” (as such terms are defined in the
Member Control Agreement) for all purposes and in all respects under the Member
Control Agreement (as such term is defined in the Purchase Agreement, the
“Member Control Agreement”); and

 

(2)             the receipt by Agent of documentation, in form and substance
reasonably acceptable to Agent, executed and delivered by all of the Members (as
such term is defined in the Member Control Agreement) of North Metro:
(i) acknowledging and consenting to Agent’s acquisition of the Acquired
Interest; (ii) admitting Agent as a “Member,” “Substitute Member” and “Managing
Member” (as such terms are defined in the Member Control Agreement) under the
Member Control Agreement for all purposes and in all respects; and
(iii) acknowledging and consenting to Agent’s succession to SCH’s Membership
Interest in North Metro, except that portion of the Membership Interest
comprising the Retained Interest; and

 

(b) the satisfaction of all obligations of SCH under the Consulting Agreement.

 

4.                                      Reservation of Rights; No Effect on
Obligations or Liens of Agent. Except to the extent explicitly set forth herein
and in the Transaction Documents, Agent expressly reserves all of its rights,
powers, privileges and remedies under the Credit Agreement,

 

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the Southwest Guaranty, the MTR Guaranty, the Southwest Pledge Agreement, the
MTR Pledge Agreement and all other Loan Documents and/or applicable law,
including, without limitation, its right at any time, as applicable, (i) to
accelerate the Obligations, (ii) to commence any legal or other action to
collect any or all of the Obligations from any or all of the Borrower and the
other Loan Parties and/or any Collateral or any property pledged by any other
person or entity as security for the Obligations (the “Other Collateral”),
(iii) to foreclose or otherwise realize on any or all of the Collateral or Other
Collateral and/or as appropriate (including to foreclose on the Pledged
Collateral under the Southwest Pledge Agreement and/or the MTR Pledge
Agreement), set-off or apply to the payment of any or all of the Obligations,
any or all of the Collateral or Other Collateral, (iv) to take any other
enforcement action or otherwise exercise any or all rights and remedies provided
for by any or all of the Credit Agreement, the Southwest Guaranty, the MTR
Guaranty, the Southwest Pledge Agreement, the MTR Pledge Agreement and all other
Loan Documents and/or applicable law, and (v) to reject any forbearance,
financial restructuring or other proposal, other than the transactions
contemplated in this Agreement and the Transaction Documents, made by or on
behalf of the Borrower, any other Loan Party or any creditor or equity holder.
No oral representations or course of dealing on the part of Agent, any Lender or
any of its officers, employees or agents, and no failure or delay by Agent or
any Lender with respect to the exercise of any right, power, privilege or remedy
under any of the Credit Agreement, the Southwest Guaranty, the MTR Guaranty, the
Southwest Pledge Agreement, the MTR Pledge Agreement or any of the other Loan
Documents or applicable law shall operate as a waiver thereof, and the single or
partial exercise of any such right, power, privilege or remedy shall not
preclude any later exercise of any other right, power, privilege or remedy.
Nothing herein or in the Settlement Agreement, the Purchase Agreement or the
Consulting Agreement shall have any effect on the validity or enforceability of
the Obligations or the liens and security interests of Agent securing the
Obligations.

 

5.                                      Severability. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed and enforced to the extent
possible or modified in such a way as to make it enforceable, and the
invalidity, illegality or unenforceability thereof shall not affect the
validity, legality or enforceability of the remaining provisions of this
Agreement.

 

6.                                      Governing Law. THIS AGREEMENT AND EACH
OF THE OTHER TRANSACTION DOCUMENTS WHICH DOES NOT EXPRESSLY SET FORTH APPLICABLE
LAW SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK.

 

7.                                      Consent to Jurisdiction. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY
AGREES THAT, SUBJECT TO AGENT’S ELECTION,

 

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ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER TRANSACTION DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE
PARTIES TO THIS AGREEMENT EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH OF THE
SOUTHWEST GUARANTORS HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON THE SOUTHWEST
GUARANTORS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED
TO THE SOUTHWEST GUARANTORS, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

8.                                      Waiver of Jury Trial. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS. EACH OF THE PARTIES TO THIS AGREEMENT ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. EACH OF THE PARTIES TO THIS AGREEMENT WARRANTS AND
REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.

 

9.                                      Notices. Any notice or other
communication required shall be in writing addressed to the respective party as
set forth below and may be personally served, sent by e-mail, telecopied, sent
by overnight courier service or U.S. mail and shall be deemed to have been
given:  (a) if delivered in person, when delivered; (b) if delivered by fax, on
the date of transmission if transmitted on a Business Day before 4:00 p.m. New
York time; (c) if sent by e-mail, by the sender’s receipt of an e-mail
acknowledgment confirming delivery thereof, (d) if delivered by overnight
courier, one (1) Business Day after delivery to the courier properly addressed;
or (e) if delivered by U.S. mail, four (4) Business Days after deposit with
postage prepaid and properly addressed

 

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Notices shall be addressed as follows:

 

If to the Southwest Guarantors:

Southwest Casino Corporation and Southwest

 

Casino and Hotel Corp

 

2001 Killebrew Drive, Suite 350

 

Minneapolis, MN 55425

 

ATTN: President

 

Fax: 952-853-9991

 

 

With a copy to:

Oppenheimer Wolff & Donnelly, LLP

 

Plaza VII, Suite 3200

 

35 South 7th Street

 

Minneapolis, MN 55402

 

ATTN: D. William Kaufman

 

Fax: 612-607-7100

 

 

If to Agent:

Black Diamond Commercial Finance, L.L.C.

 

100 Field Drive

 

Lake Forest, IL  60045-2580

 

ATTN: Hugo H. Gravenhorst

 

Fax: 847-615-9064

 

 

With a copy to:

Black Diamond Capital Management, L.L.C.

 

One Sound Shore Drive

 

Suite 200

 

Greenwich, Connecticut 06830

 

ATTN: Bob Rosenbloom

 

Fax: 203-552-1014

 

 

And to:

Latham & Watkins LLP

 

233 South Wacker Drive

 

Suite 5800, Sears Tower

 

Chicago, Illinois 60606

 

ATTN: Jeff Moran

 

Fax: 312-993-9767

 

10.                                References, Pronouns And Headings. Except as
otherwise specifically indicated, all references to Section or Subsection
numbers refer to Sections and Subsections of this Agreement and all references
to Exhibits refer to the Exhibits attached hereto. The words “hereby,” “hereof,”
“herein,” “hereto,” “hereunder,” and words of similar import refer to this
Agreement as a whole and not to any particular Section or Subsection hereof. The
word “hereafter” shall mean after, and the term “heretofore” shall mean before,
the date of this Agreement. The word “or” means “and/or” and the words “include”
and “including” shall not be construed as terms of limitation. As used herein,
all pronouns shall include the masculine, feminine, neuter, singular and

 

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plural thereof wherever the context and facts require such construction. The
headings, titles and subtitles herein are inserted for convenience of reference
only and are to be ignored in any construction of the provisions hereof.

 

11.                                Assignment. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto, and
their respective heirs, personal representatives, successors and permitted
assigns. Notwithstanding the foregoing, no party hereto may assign any of its
rights or obligations under this Agreement without the prior written consent of
Agent, in the case of an assignment by SCC or SCH, or of SCC and SCH, in the
case of an assignment by Agent, and any purported assignment without such
consent shall be null and void; provided, however, that (a) SCC, SCH and Agent
may make such an assignment without consent to (i) its affiliates or (ii) a
successor to all or a material portion of its assets or business, whether in a
merger, sale of stock, sale of assets or other transaction, the definitive
written agreement for which shall contain an express assumption by the successor
or assignee of the obligations of SCC, SCH or Agent, as the case may be,
hereunder and (b) Agent may make such assignment without consent to any Lender
under the Credit Agreement.

 

12.                                No Waiver. Any extension or waiver of the
obligations herein of either party shall be valid only if set forth in an
instrument in writing referring to this section and signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.

 

13.                                No Oral Modification. Neither this Agreement
nor any of its terms or provisions may be amended, modified, waived, discharged
or terminated, except by a written instrument signed by the parties hereto.

 

14.                                Expenses. Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement shall be paid by the party incurring such cost
and expenses.

 

15.                                Entire Agreement. This Agreement, including
the other documents referred to herein which form a part hereof (including the
Transaction Documents), contains the full agreement between the parties hereto
on its subject matters, and supersedes and renders null and void all prior
agreements or understandings, whether written or oral, which exist or may have
existed between the parties with respect to its subject matters.

 

16.                                Construction. Each of the parties hereto
acknowledges that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other
Transaction Documents and that this Agreement and the

 

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other Transaction Documents shall be construed as if jointly drafted by the
parties hereto and thereto.

 

17.                                Additional Documents. The parties hereto
will, without additional consideration, execute and deliver such further
instruments and take such other action as may be reasonably requested by any
other party hereto in order to carry out the purposes of this Agreement and the
other Transaction Documents.

 

18.                                No Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended to confer upon any person or entity
other than the parties hereto any rights or remedies of any nature whatsoever
under or by reason of this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their respective
successors and permitted assigns.

 

19.                                Counterparts. This Agreement may be executed
in counterparts, each of which shall be an original, and all of which, taken
together, shall constitute one and the same instrument. The parties agree that
telecopied copies of signatures will be sufficient, with original signature
pages to be supplied and exchanged at a later date.

 

Signature page follows.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

 

 

SOUTHWEST CASINO CORPORATION

 

 

 

 

 

By:

  /s/ Thomas E. Fox

 

Name:

Thomas E. Fox

 

Its:

President

 

 

 

 

 

SOUTHWEST CASINO AND HOTEL CORP.

 

 

 

 

 

By:

  /s/ Thomas E. Fox

 

Name:

Thomas E. Fox

 

Its:

President

 

 

 

 

 

BLACK DIAMOND COMMERCIAL FINANCE,
L.L.C., as Agent

 

 

 

 

 

By:

  /s/ Hugo H. Gravenhorst

 

Name:

Hugo H. Gravenhorst

 

Its:

Managing Director

 

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