Exhibit 10.5


 


EXECUTION COPY





LOAN AGREEMENT


 


 


By and Among


 


 


ESQUIRE LTD., INC.,


as Borrower


 


 


WCW LANDCO, LLC,


NEVADA PALACE, INC.


NP LAND, LLC,


as Guarantors


 


 


and


 


 


OCM INVESTCO, LLC,


as Lender


 


 


Dated as of September 30, 2005


 

















 


THIS LOAN AGREEMENT (this “Agreement”),
dated as of September 30, 2005, is entered into by and among Esquire Ltd., Inc.,
a Nevada corporation (“Esquire” or the “Borrower”), WCW Landco,
LLC, a Nevada limited liability company (“WCW”), Nevada Palace, Inc.,
a Nevada corporation (“Nevada Palace”), NP Land, LLC, a limited
liability company (“NP Land” and collectively with WCW and Nevada
Palace, the “Guarantors”), and OCM InvestCo, LLC, a Nevada limited
liability company (“Oaktree” or the “Lender”).


 


W I T N E S S E T H


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein and herein, Oaktree has agreed to loan to Esquire,
on the 1A Closing Date, the principal amount of Seven Million Six Hundred Seven
Thousand Two Hundred Forty-Five Dollars ($7,607,245) (the “Loan”)
evidenced by a promissory note in the form attached hereto as Exhibit A (the “Note”), that will be used by
Esquire at the 1A Closing solely to fund the Back Rent Payment, the Nevada
Palace Intercompany Loan and the Schiff Esquire Redemption and Payoff.





 


WHEREAS, as an inducement to and in consideration of the making of the Loan
by Lender, the contribution of certain assets to NP Land, the other
Contemplated Transactions, and the benefits flowing therefrom (including from
the Nevada Palace Fixed Rent Lease and the Nevada Palace Lease), the Guarantors
are entering into the Guarantee Agreements and, as applicable, the Pledge
Agreements.


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Note, at the Second Closing but
immediately after the Schiff Lease Option Assignment, Millennium Gaming, Inc.,
a Nevada corporation (“Millennium”), shall purchase from Esquire the
Acquired Assets in exchange for Millennium assuming (i) the Assumed
Liabilities and (ii) the Note (such transaction, the “Esquire Purchase”).


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, at the Second Closing but immediately after the
Esquire Purchase, CCR shall purchase all of the Acquired Assets in exchange for
CCR (i) assuming all of the Assumed Liabilities and (ii) paying to
Millennium, subject to the refinancing of CCR on or prior to the Second Closing
or lender consent, cash in an amount equal to Seven Million Six Hundred Seven
Thousand Two Hundred Forty-Five Dollars ($7,607,245) (the “Company Esquire
Purchase Price”) plus the amount of accrued interest on the Note (the “Company
Esquire Interest Payment” and together with the Company Esquire Purchase
Price, the “Aggregate Company Esquire Cash Payment”) (such transaction,
the “Company Esquire Purchase”). If the refinancing of CCR does not
occur on or prior to the Second Closing or lender consent is not obtained, then
CCR shall make the Company Esquire Interest Payment on the Second Closing Date
but shall substitute the cash payment for the Company Esquire Purchase Price
with the Company Esquire Purchase Note, which Company Esquire Purchase Note CCR
shall deliver to Millennium on the Second Closing Date.


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Note, to the extent CCR pays
the Aggregate


 


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Company Esquire Cash Payment to Millennium at
the Second Closing, then at the Second Closing but after the Company Esquire
Purchase, Millennium shall pay to Oaktree cash in the amount of the Aggregate
Company Esquire Cash Payment as payment in full for all amounts outstanding
under the Loan (the “Esquire Second Closing Payoff”), at which time the
Note shall be canceled and this Agreement shall terminate. To the extent CCR
pays only the Company Esquire Interest Payment to Millennium at the Second
Closing, then Millennium shall pay to Oaktree cash in the amount of the Company
Esquire Interest Payment as payment of all accrued interest on the Loan as of
the Second Closing Date.


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Security Documents, if the
Second Closing occurs, then on the Second Closing Date the guarantees granted
by the Guarantors under the Guarantee Agreements and the security interests in
the Collateral granted by the Borrower and the Guarantors under the Pledge
Agreements and Deed of Trust shall be released.


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Note, if the Esquire Second
Closing Payoff does not occur at the Second Closing, then at any time after the
Second Closing but prior to the Eighteen Month Anniversary, subject to the
refinancing of CCR or lender consent, CCR shall make a cash payment to
Millennium in the amount of the principal and all accrued but unpaid interest
on the Company Esquire Purchase Note and pay all amounts outstanding under the
Company Esquire Purchase Note (the “Company Esquire Purchase Note Payoff”),
at which time the Company Esquire Purchase Note shall be canceled. Immediately
thereafter, Millennium shall pay to Oaktree cash in the amount of the Company
Esquire Purchase Note Payoff as payment in full for all amounts outstanding
under the Loan (the “Esquire Post-Closing Payoff”), at which time the
Note shall be canceled and this Agreement shall terminate.


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Note, if the Esquire
Post-Closing Payoff is not made prior to the Eighteen Month Anniversary, then
on the Eighteen Month Anniversary, Oaktree may designate OCM AcquisitionCo,
LLC, a Nevada limited liability company (“AcquisitionCo”), as a third
party beneficiary under the Note or may contribute the Note downstream to
AcquisitionCo and assign to AcquisitionCo all of its right, title and interest
in, to and under the Note, and AcquisitionCo shall become a party to this
Agreement, with all rights of Oaktree hereunder (including the right to declare
an Event of Default).


 


WHEREAS, pursuant to the CUP Agreement and subject to the terms and
conditions set forth therein, herein and in the Note, if the Esquire
Post-Closing Payoff is not made prior to the Eighteen Month Anniversary, then
on the Eighteen Month Anniversary, as payment in full for all amounts
outstanding under the Company Esquire Purchase Note, CCR shall exchange the
Company Esquire Purchase Note for such number of Preferred Units of CCR equal
to the Millennium Margin Number by transferring such Preferred Units to
Millennium (the “Company Unit Exchange”), at which time the Company
Esquire Note shall be canceled. Immediately thereafter, Millennium shall
transfer such Preferred Units to AcquisitionCo as payment in full for all
amounts outstanding under the Loan (the “Millennium Unit Exchange”), at
which time the Note shall be canceled and this Agreement shall terminate.


 


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


 


SECTION 1. DEFINITIONS


 


1.1.                              Defined
Terms


 


(a)                                  Capitalized
terms used herein and not otherwise defined have the meanings set forth in the
CUP Agreement, which meanings shall continue to apply herein without regard to
whether the CUP Agreement has been Terminated.


 


(b)                                 As
used in this Agreement, the following terms shall have the following meanings:


 


“AcquisitionCo”:  as defined in the eighth recital hereto.


 


“Aggregate Company Esquire Cash Payment”:  as defined in the fourth recital hereto.


 


“Agreement”:  as defined in the preamble hereto.


 


“Borrower”:  as defined in the preamble hereto.


 


“Business Tangible Property”:  all tangible assets, including furniture,
fixtures and equipment owned or leased by the Borrower or any Guarantor on the
date of this Agreement.


 


“Capital Stock”:  shares of capital stock, partnership
interests in a partnership or limited partnership, member’s interests in a
limited liability company, beneficial interests in a trust or other equity
ownership interests in a Person, and any warrants, options or other rights
entitling the holder thereof to purchase or acquire any such equity ownership
interest.


 


“CCR”: 
Cannery Casino Resorts, LLC, a Nevada limited liability company.


 


“Collateral”:  from the date hereof to the Second Closing Date,
the rights in and to the collateral of the Borrower and each Guarantor as
evidenced by the Pledge Agreements and the Deed of Trust and as generally
described in Section 5.


 


“Company Esquire Interest Payment”:  as defined in the fourth recital hereto.


 


“Company Esquire Purchase”:  as defined in the fourth recital hereto.


 


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“Company Esquire Purchase Note Payoff”:  as defined in the seventh recital hereto.


 


“Company Esquire Purchase Price”:  as defined in the fourth recital hereto.


 


“Company Unit Exchange”:  as defined in the ninth recital hereto.


 


“CUP Agreement”:  that certain First Amendment and Restatement
of Contribution and Unit Purchase Agreement, dated as of September 23,
2005, by and among Paulos, Wortman, MGIM, Millennium, CCR, WCW, Oaktree, AcquisitionCo,
and LandCo,  including all amendments
thereto or restatements thereof.


 


“Deed of Trust”:  as defined in Section 5.4.


 


“Default”:  any of the events specified in Section 7,
whether or not any requirement for the giving of notice, the lapse of time or
both, or any other condition, has been satisfied.


 


“Dollars” and “$”:  dollars in lawful currency of the United
States of America.


 


“Esquire”:  as defined in the preamble hereto.


 


“Esquire Pledge Agreement”:  as defined in Section 5.1.


 


“Esquire Post-Closing Payoff”:  as defined in the seventh recital hereto.


 


“Esquire Purchase”:  as defined in the seventh recital hereto.


 


“Esquire Second Closing Payoff”:  as defined in the fifth recital hereto.


 


“Event of Default”:  any of the events specified in Section 7,
provided that any requirement for the giving of notice, the lapse of
time or both, or any other condition, has been satisfied.


 


“Guarantee Agreements”:  the Nevada Palace Guarantee Agreement, the NP
Land Guarantee Agreement and the WCW Guarantee Agreement, individually or
collectively, as the case may be.


 


“Guarantors”:  as defined in the preamble hereto.


 


“Indemnified Liabilities”:  as defined in Section 8.6.


 


“Indemnified Person”:  as defined in Section 8.6.


 


“Knowledge”:  as defined in the CUP Agreement; provided,
however, that the Knowledge of the Borrower shall be limited to the
Knowledge of Wortman.


 


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“LandCo”: OCM LandCo, LLC, a Delaware
limited liability company.


 


“Lender”:  as defined in the preamble hereto.


 


“Loan”:  as defined in the first recital hereto.


 


“Loan Documents”:  this Agreement, the Notes, the Pledge
Agreements, the Guarantee Agreements, the Deed of Trust and any certificate or
other document made or delivered pursuant hereto or thereto.


 


“Material Adverse Effect”:  any event, circumstance, occurrence, state of
facts, condition, change or effect that, individually or in the aggregate, is
or would reasonably be expected to be materially adverse to (a) the
validity or enforceability of this Agreement or any of the other Loan Documents
or (b) the business, results of operations, condition (financial or
otherwise) or prospects of the Borrower or any Guarantor. Notwithstanding the
immediately preceding sentence, the following are not and shall not contribute
to or result in a Material Adverse Effect: (i) any condition or event
which adversely affects the gaming industry generally or the gaming industry in
Nevada, in either case which does not adversely affect the Borrower or any
Guarantor disproportionately relative to other entities operating in such
industry; (ii) any changes in general economic conditions in the United
States; (iii) any outbreak of hostilities or escalation thereof involving
the United States or the declaration by the United States of war; and (iv) the
performance or consummation of any of the transactions contemplated by this
Agreement or the other Loan Documents.


 


“Maturity Date”:  as defined in Section 2.4.


 


“MGIM”:  MGIM, LLC, a Nevada limited liability
company.


 


“Millennium”:  as defined in the third recital hereto.


 


“Millennium Unit Exchange”:  as defined in the ninth recital hereto.


 


“Nevada Gaming Authorities”:  the NGC and the NGCB.


 


“Nevada Palace”:  as defined in the preamble hereto.


 


“Nevada Palace Guarantee Agreement”:  as defined in Section 5.2.


 


“Nevada Palace Pledge Agreement”:  as defined in Section 5.2.


 


“NGC”: 
the Nevada Gaming Commission.


 


“NGCB”:  the Nevada State Gaming Control Board.


 


“Note”:  as defined in the first recital hereto.


 


“NP Land”:  as defined in the preamble hereto.


 


“NP Land Guarantee Agreement”:  as defined in Section 5.4.


 


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“NP Land Pledge Agreement”:  as defined in Section 5.4.


 


“Oaktree”:  as defined in the preamble hereto.


 


“Paulos”:  William J. Paulos, an individual.


 


“PBGC”:  the Pension Benefit Guaranty Corporation.


 


“Plan”:  at a particular time, any employee benefit
plan which is covered by ERISA and in respect of which the Borrower, any
Guarantor or any ERISA Affiliate of any of them is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an “employer” as defined in Section 3(5) of ERISA.


 


“Pledge Agreements”:  the Esquire Pledge Agreement, the Nevada
Palace Pledge Agreement, the NP Land Pledge Agreement and the WCW Pledge
Agreement, individually or collectively, as the case may be.


 


“Property”:  the property more specifically set forth on Exhibit A
to the Deed of Trust.


 


“Responsible Officer”:  with respect to the Borrower or any
Guarantor, Wortman (or any manager or member exercising similar authority), or
any employee designated by any of the foregoing.


 


“Taxes”:  as defined in Section 2.8(b).


 


“Terminated,” “Termination” (or
words of similar effect):  valid
termination of the CUP Agreement in accordance with Section 8.1 thereof.


 


“Title Insurance Policy”:  an ALTA mortgagee title insurance policy
in a form acceptable to Lender (or, if the Property is in a state which does
not permit the issuance of such ALTA policy, such form as shall be permitted in
such state and acceptable to Lender) issued with respect to the Property and
insuring the Deed of Trust.


 


“Transferee”:  as defined in Section 8.9.


 


“Voidable Transfer”:  as defined in Section 8.10.


 


“Voluntary Termination” as defined in Section 2.3(a).


 


“WCW”: 
as defined in the preamble hereto.


 


“WCW Guarantee Agreement”:  as defined in Section 5.3.


 


“WCW Pledge Agreement”:  as defined in Section 5.3.


 


“Wortman”:  William C. Wortman,  an individual.


 


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1.2.                              Other
Definitional Provisions.


 


(a)                                  Unless
otherwise specified therein, all terms defined in this Agreement shall have
their defined meanings when used in the other Loan Documents.


 


(b)                                 As
used herein and in any other Loan Document, accounting terms not defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP.


 


(c)                                  The
words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Agreement or any other Loan Document shall
refer to this Agreement or such other Loan Document as a whole and not to any
particular provision of this Agreement or such other Loan Document.


 


(d)                                 The
meanings given to terms defined in this Agreement or any other Loan Document
shall be equally applicable to both the singular and plural forms of such
terms.


 


(e)                                  Whenever
the context may require, any pronoun used in this Agreement or any other Loan
Document shall include the corresponding masculine, feminine and neuter forms.


 


(f)                                    All
references in this Agreement or any other Loan Document to Sections, Exhibits
and Schedules shall be deemed to be references to Sections of, and Exhibits and
Schedules to, this Agreement or such other Loan Document unless the context
shall otherwise require. All Exhibits and Schedules attached to this Agreement
or any other Loan Document shall be deemed incorporated herein or therein as if
set forth in full herein or therein.


 


(g)                                 The
words “include,” “includes” and “including” when used in
this Agreement or any other Loan Document shall be deemed to be followed by the
phrase “without limitation.”


 


(h)                                 The
word “or” as used in this Agreement or any other Loan Document is used
in the inclusive sense of “and/or.”


 


(i)                                     References
to a “party” in this Agreement or any other Loan Document are also to
its successors and permitted assigns.


 


(j)                                     Unless
otherwise expressly provided in this Agreement or any other Loan Document, any
agreement, instrument or statute defined or referred to herein or therein or in
any agreement, instrument or statute defined or referred to herein or therein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes.


 


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SECTION 2. AMOUNT AND TERMS
OF THE LOAN


 


2.1.                              Loan.
The Lender agrees, on the terms and conditions hereinafter set forth, to make
the Loan to the Borrower on the 1A Closing Date, subject to the satisfaction or
wavier, at or prior to the 1A Closing Date, of the conditions set forth in
Sections 5.1(a) and 5.2(a) of the CUP Agreement.


 


2.2.                              Repayment
of Loan; Evidence of Debt.


 


(a)                                  The
Borrower unconditionally promises to pay to Oaktree, or any successor or
permitted assignee or third party beneficiary thereof, on the applicable
Maturity Date (or such earlier date on which the Loan becomes due and payable
pursuant to Section 7), the then unpaid principal amount of the Loan due
and payable on such Maturity Date (or such earlier date on which the Loan
becomes due and payable pursuant to Section 7). The Borrower further
agrees to pay interest on the unpaid principal amount of the Loan as set forth
in Section 2.3.


 


(b)                                 The
Borrower’s unconditional promise to pay the Loan and any interest thereon shall
be evidenced by the Note, which shall be executed and delivered by the Borrower
on the 1A Closing Date in connection with the making of the Loan by the Lender.


 


2.3.                              Interest.
Interest shall accrue on the unpaid principal amount of
the Loan, as evidenced by the Note, as follows:


 


(a)                                  Interest Rate. Interest on the Loan shall accrue at a rate per
annum equal to twelve percent (12%); provided, however, that if
the CUP Agreement is Terminated (i) by the Oaktree Parties pursuant to Section 8.1(g) of
the CUP Agreement solely because the Oaktree Licenses will not or cannot be
obtained (other than as a result of the failure by any Selling Party
to perform in any material respect any of its obligations under the CUP
Agreement that causes, or results in, such Oaktree Licenses not being
obtained), (ii) by the Selling Parties pursuant to Section 8.1(c) or
8.1(f) of the CUP Agreement solely because of the failure by any Oaktree
Party to perform in any material respect any of its obligations under the CUP
Agreement or (iii) by either the Selling Parties or the Oaktree Parties
pursuant to Section 8.1(d) of the CUP Agreement and the Oaktree
Licenses have not been obtained (in each case of (i) through (iii), a “Voluntary
Termination”), then no interest on the Loan shall accrue from the date of
such Voluntary Termination of the CUP Agreement until the date that is six (6) months
after the date of such Voluntary Termination of the CUP Agreement, at which
time interest on the Loan shall accrue at a rate per annum equal to six percent
(6%); and provided, further, that Termination of the CUP
Agreement because of termination or expiration of the Mendenhall Purchase
Agreement or failure of the Mendenhall Purchase to close shall in no
circumstances be considered a Voluntary Termination.


 


(b)                                 Interest Payment Dates. Interest on
the Loan accrued in accordance with Section 2.3(a) shall be payable
as follows:


 


(i)                                     If
the Second Closing occurs, then all interest accrued on the Loan in accordance
with Section 2.3(a) from the 1A Closing Date to the Second Closing


 


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Date shall be immediately due
and payable in arrears on the Second Closing Date, and if the Aggregate Company
Esquire Cash Payment is not made on the Second Closing Date, then all interest
accrued in accordance with Section 2.3(a) on the Loan from the Second
Closing Date to the applicable Maturity Date of the Loan as set forth in Section 2.4
shall be immediately due and payable in arrears on such applicable Maturity
Date; provided, however, that for the Maturity Date of the Loan
set forth in Section 2.4(a)(ii), all interest accrued in accordance with Section 2.3(a) shall
be paid in Preferred Units and shall be included in the Millennium Margin
Number that is set forth in Section 2.4(a)(ii).


 


(ii)                                  If the CUP Agreement
is Terminated for any reason (including as a result of a Voluntary Termination),
then all interest accrued on the Loan in accordance with Section 2.3(a) from
the 1A Closing Date to the applicable Maturity Date of the Loan as set forth in
Section 2.4 shall be immediately due and payable in arrears on such
applicable Maturity Date.


 


(c)                                  Compounding.
Any interest not paid when due pursuant to Section 2.3(b) shall be
compounded with and added to the principal of the Loan and shall thereafter
constitute a part of the Loan hereunder and shall accrue interest at the rate
then applicable to the Loan.


 


(d)                                 Default
Interest. Upon an Event of Default, the interest rate applicable to the Loan as set forth
in Section 2.3(a) shall increase by 300 basis points per annum above
the rate otherwise applicable to the Loan on the ninetieth (90th)
day following the date of such Event of Default and on each ninetieth (90th)
day thereafter until the Loan is paid in full; provided, however,
that the interest rate shall not exceed the maximum rate permitted by
applicable Law.


 


(e)                                  Computation.
Interest shall be calculated on the basis of the
actual number of days elapsed over a 365- (or 366-, as the case may be) day
year.


 


2.4.                              Maturity
Dates. The then unpaid principal amount of the Loan shall be immediately
due and payable on the following dates (each, a “Maturity Date”) which,
if not falling on a Business Day, shall be extended to the immediately
following Business Day (with interest accruing thereon pursuant to Section 2.3):


 


(a)                                  If
the Second Closing occurs, the then unpaid principal amount of the Loan shall
be immediately due and payable on the earlier to occur of the following:


 


(i)                                     the date that the
Aggregate Company Esquire Cash Payment or the Company Esquire Purchase Note
Payoff is made, to the extent the Aggregate Company Esquire Cash Payment or the
Company Esquire Purchase Note Payoff is made on the Second Closing Date or at
anytime thereafter prior to the Eighteen Month Anniversary, respectively; and


 


(ii)                                  the Eighteen Month
Anniversary if the Aggregate Company Esquire Cash Payment or the Company Esquire
Purchase Note Payoff is not made prior to the Eighteen Month Anniversary, at
which time Millennium shall exchange the Note for


 


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such number of Preferred Units in CCR equal
to the Millennium Margin Number by transferring such Preferred Units to
AcquisitionCo as payment in full for the Loan.


 


(b)                                 If the CUP Agreement
is Terminated pursuant to Section 8.1(c), 8.1(d), 8.1(e), 8.1(f) or
8.1(g) of the CUP Agreement as a result of
the failure by any Selling Party to perform in any
material respect any of its obligations under the CUP Agreement, or if the CUP
Agreement is Terminated pursuant to any of the aforementioned Sections as a
result of the termination or expiration of the Mendenhall Purchase Agreement or
failure of the Mendenhall Purchase to close, the then unpaid principal amount
of the Loan shall be immediately due and payable on the date that is six (6) months
following the date of such Termination.


 


(c)                                  If the CUP Agreement
is Terminated pursuant to Section 8.1(c), 8.1(d), 8.1(e), 8.1(f) or
8.1(g) of the CUP Agreement as a result of a Voluntary Termination, the
then unpaid principal amount of the Loan shall be immediately due and payable
on the date that is eighteen (18) months following the date of such Voluntary
Termination.


 


(d)                                 If the CUP Agreement
is Terminated pursuant to Section 8.1(a) or 8.1(h) of the CUP
Agreement or the CUP Agreement is Terminated pursuant to Section 8.1(c),
8.1(d), 8.1(e), 8.1(f) or 8.1(g) of the CUP Agreement for any reason
other than a reason set forth in Section 2.4(b) or (c) hereof,
the then unpaid principal amount of the Loan shall be immediately due and
payable on the date that is twelve (12) months following the date of such
Termination.


 


2.5.                              Prepayments.
The Loan, along with all accrued but unpaid interest thereon, (a) may not
be prepaid prior to the earlier of the Second Closing or Termination of the CUP
Agreement; provided, however, that the Loan may be prepaid in
whole or in part at the option of the Borrower at any time prior to the Second
Closing so long as (i) all interest on all of the other loans made by
Oaktree at the 1A Closing pursuant to the CUP Agreement (other than the
Mendenhall A Tranche and the Wortman Loan) is paid prior to the prepayment of
principal on the Loan and (ii) if, after prepayment of the principal on
the Loan any loans made by Oaktree at the 1A Closing pursuant to the CUP
Agreement (other than the Mendenhall A Tranche and the Wortman Loan) remain
outstanding, such prepayment of the principal on the Loan will not result in a
situation in which the interest owing on such loans as of the Second Closing
cannot be paid at the Second Closing, and (b) may be prepaid in whole or
in part at the option of the Borrower at any time after any of the events set
forth in clause (a) upon at least five (5) Business Days’ prior
written notice to the Lender. Any such prepayment shall be in an amount of One
Million Dollars ($1,000,000) or any Five Hundred Thousand Dollar ($500,000)
increment thereof and shall be applied first to accrued but unpaid interest and
then to outstanding principal.


 


2.6.                              Method
of Payment. All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest or otherwise, shall be
made without offset or counterclaim except as permitted by Section 9.5 of
the CUP Agreement and shall be made prior to 11:00 A.M., Nevada time, on
the due date thereof to the Lender, at the Lender’s office set forth on the
signature page hereto, in Dollars and in immediately available funds. Any
payment made after such time shall be deemed to be made as of the opening of
business on the immediately following Business Day.


 


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2.7.                              Use
of Proceeds. The proceeds of the Loan shall be used by the Borrower
exclusively to fund the Back Rent Payment, the Nevada Palace Intercompany Loan
and the Schiff Esquire Redemption and Payoff and for no other purpose
whatsoever.


 


2.8.                              Expenses
and Withholding Taxes.


 


(a)                                  The
Borrower agrees to pay the Lender any and all expenses or other amounts
otherwise agreed to be paid by the Borrower in any provision of this Agreement
or in any other Loan Document.


 


(b)                                 All payments made by
the Borrower under this Agreement or the Note shall be made free and clear of,
and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
assessments, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority with respect to
this Agreement or any other Loan Document, and all interest, penalties or
similar liabilities with respect thereto (all such taxes, levies, imposts,
duties, charges, fees, assessments, deductions or withholdings being referred
to collectively as “Taxes”), unless the Borrower is compelled by Law to
make such deduction or withholding. If any such Taxes are required to be
withheld from any amounts payable to the Lender hereunder or under the Note,
the amounts so payable to the Lender shall be increased to the extent necessary
to yield to the Lender (after payment of all such Taxes) principal, interest or
any such other amounts payable hereunder in the amounts or at the rates the
Lender would have received had no such obligation been imposed on the Borrower.
In addition, the Borrower shall pay any Taxes to the relevant Governmental
Authority in accordance with applicable Law, and as promptly as possible
thereafter, the Borrower shall send to the Lender proof of payment thereof. If
the Borrower fails to pay any such Taxes when due to the appropriate
Governmental Authority or fails to remit to the Lender such proof, the Borrower
shall indemnify the Lender for any incremental Taxes that may become payable by
the Lender as a result of any failure to pay any such amounts.


 


SECTION 3. CONDITIONS
PRECEDENT


 


3.1.                              The
effectiveness of this Agreement and the Lender’s obligation to make the Loan
are subject to the satisfaction or wavier, at or prior to the 1A Closing Date,
of the conditions set forth in Sections 5.1(a) and 5.2(a) of the CUP
Agreement (which itself shall be in full force and effect, enforceable against
the parties thereto in accordance with the terms and conditions thereof).


 


3.2.                              A
title company acceptable to Lender and dated as of the Closing Date shall be
irrevocably committed to issue a Title Insurance Policy, in a form acceptable
to Lender in its sole discretion and dated as of the 1A Closing Date. Such
Title Insurance Policy shall include reinsurance and direct access agreements
as are acceptable to Lender and shall (i) provide coverage in amounts
satisfactory to Lender, (ii) insure Lender that the Mortgage creates a
valid lien on the Property encumbered thereby of the requisite priority, free
and clear of all exceptions from coverage other than Permitted Encumbrances and
standard exceptions and exclusions from coverage (as modified by the terms of
any endorsements), (iii) contain such endorsements and affirmative
coverages as Lender may reasonably request, and (iv) name


 


11

















 


Lender as the insured. The
Title Insurance Policy shall be assignable. Lender also shall have
received evidence that all costs and premiums in respect of such
Title Insurance Policy have been paid by Borrower.


 


SECTION 4. REPRESENTATIONS
AND WARRANTIES


 


To induce the Lender to make the Loan hereunder, the Borrower hereby
represents and warrants to the Lender as of the date hereof that the proceeds
of the Loan are to be used by the Borrower exclusively to fund the Back Rent
Payment, the Nevada Palace Intercompany Loan and the Schiff Esquire Redemption
and Payoff and for no other purpose whatsoever.


 


SECTION 5. SECURITY
INTERESTS AND COLLATERAL


 


5.1.                              Borrower
Collateral. As security for the timely
payment of all principal and accrued interest under this Agreement and the
Note, the Borrower agrees to grant to the Lender, for the benefit of the
Lender, a continuing security interest in all of the Borrower’s assets,
tangible or intangible, whether now owned or hereafter acquired, and any and
all additions, attachments, accessories and accessions to any such assets, any
and all substitutions, replacements or exchanges therefor and any and all
proceeds from the sale or transfer thereof and any and all other proceeds
(including insurance proceeds) thereon, and in connection therewith, shall
enter into a pledge and security agreement in the form attached hereto as Exhibit B (the “Esquire Pledge Agreement”)
simultaneously herewith for the benefit of the
Lender; provided, however, that the Esquire Pledge Agreement
shall provide that if the Second Closing occurs, the security granted pursuant
to the Esquire Pledge Agreement shall be released as of the Second Closing.


 


5.2.                              Nevada
Palace Collateral. Nevada Palace,
which as of the 1A Closing is owned 100% by Wortman (who is also the owner as
of the 1A Closing of 100% of the Borrower), agrees to guarantee the timely
payment by the Borrower of all principal and accrued interest under this
Agreement and the Note and, in connection therewith, shall enter into a
guarantee agreement in the form attached hereto as Exhibit C1
(the “Nevada Palace Guarantee Agreement”) simultaneously herewith for
the benefit of the Lender, and as security for such guarantee, agrees to grant
to the Lender, for the benefit of the Lender, a continuing security interest in
all of Nevada Palace’s assets, tangible or intangible, whether now owned or
hereafter acquired, including all right, title and interest in and to all of
the member’s units in NP Land held by Nevada Palace (including any and all
distributions thereon), and any and all additions, attachments, accessories and
accessions to any such assets, any and all substitutions, replacements or
exchanges therefor and any and all proceeds from the sale or transfer thereof
and any and all other proceeds (including insurance proceeds) thereon, and in
connection therewith, shall enter into a pledge and security agreement in the
form attached hereto as Exhibit C2
(the “Nevada Palace Pledge Agreement”) simultaneously herewith for the
benefit of the Lender; provided, however, that the Nevada Palace
Pledge Agreement shall provide that if the Second Closing occurs, the security
granted pursuant to the Nevada Palace Pledge Agreement shall be released as of
the Second Closing.


 


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5.3                                 WCW
Collateral. WCW,
which as of the 1A Closing is owned 100% by Wortman (who is also the owner as
of the 1A Closing of 100% of the Borrower), agrees to guarantee the timely
payment by the Borrower of all principal and accrued interest under this
Agreement and the Note and, in connection therewith, shall enter into a
guarantee agreement in the form attached hereto as Exhibit D1
(the “WCW Guarantee Agreement”) simultaneously herewith for the benefit
of the Lender, and as security for such guarantee, agrees to grant to the
Lender, for the benefit of the Lender, a continuing security interest in all of
WCW’s right, title and interest in and to the member’s units of NP Land held by
WCW (including the Wortman NP Land Units) and any and all hereafter acquired
member’s units of NP Land held by WCW, including in each case any and all
distributions thereon and the right to any and all proceeds from the sale or
transfer thereof, and in connection therewith, shall enter into a pledge and
security agreement in the form attached hereto as Exhibit D2
(the “WCW Pledge Agreement”) simultaneously herewith for the benefit of
the Lender; provided, however, that the WCW Pledge Agreement
shall provide that if the Second Closing occurs, the security granted pursuant
to the WCW Pledge Agreement shall be released as of the Second Closing.


 


5.4                                 NP
Land Collateral. NP Land,
which as of the 1A Closing is owned 100% by Nevada Palace and WCW and, together
with the Borrower, holds all of the assets required to run the Nevada Palace
Hotel and Casino as of the 1A Closing, agrees to guarantee the timely payment
by the Borrower of all principal and accrued interest under this Agreement and
the Note and, in connection therewith, shall enter into a guarantee agreement
in the form attached hereto as Exhibit E1
(the “NP Land Guarantee Agreement”) simultaneously herewith for the
benefit of the Lender, and as security for such guarantee, agrees to grant to the
Lender, for the benefit of the Lender, a continuing security interest in all of
NP Land’s assets, tangible or intangible, whether now owned or hereafter
acquired, and any and all additions, attachments, accessories and accessions to
any such assets, any and all substitutions, replacements or exchanges therefor
and any and all proceeds from the sale or transfer thereof and any and all
other proceeds (including insurance proceeds) thereon, and in connection
therewith, shall enter into a pledge and security agreement in the form
attached hereto as Exhibit E2
(the “NP Land Pledge Agreement”) a deed of trust in the form attached
hereto as Exhibit E3 (the “Deed of Trust”)
simultaneously herewith for the benefit of the Lender; provided, however,
that the NP Land Pledge Agreement and the Deed of Trust shall provide that if
the Second Closing occurs, the security granted pursuant to the NP Land Pledge
Agreement and the Deed of Trust shall be released as of the Second Closing.


 


SECTION 6. COVENANTS


 


The Borrower and each Guarantor hereby agree that, so long as the Loan
(including the payment of any and all accrued interest thereon) and all other
obligations shall remain unpaid in whole or in part:


 


6.1.                              Financial
Statements; Certificates. The Borrower and each Guarantor shall furnish to
the Lender, at the Borrower’s or such Guarantor’s sole expense:


 


(a)                                  so
long as the NP Business Loan Agreement remains in full force and effect, a copy
of any document, certificate or notice provided to the lenders or
administrative


 


13

















 


or other agent pursuant
thereto, delivered promptly after delivery of such document, certificate or
notice under the NP Business Loan Agreement;


 


(b)                                 without
duplication, as soon as practicable, but in any event not later than
one-hundred and twenty (120) days (or, after the Second Closing has occurred,
fifty (50) days) after the end of (i) each fiscal year of the Nevada
Palace Acquired Companies, a copy of the audited consolidated balance sheet of
the Nevada Palace Acquired Companies as at the end of such year, and the
related audited consolidated statements of operations and cash flows for such
year, and the report thereon of Piercy, Bowler, Taylor & Kern,
independent certified public accountants, and (ii) each fiscal year of
each of WCW and NP Land, a copy of the unaudited consolidated balance sheet of
each of WCW and NP Land as at the end of such year, certified by a Responsible
Officer as being fairly stated in all material respects; provided, however,
that should this Agreement be assigned at the Second Closing pursuant to the
terms of this Agreement and the CUP Agreement, then the financial delivery
obligations pursuant to this Section 6.1(b) and Section 6.1(e) shall
apply to the assignee and its consolidated group, and not to the Nevada Palace
Acquired Companies, WCW and NP Land;


 


(c)                                  without
duplication, as soon as practicable, but in any event not later than thirty
(30) (or, after the Second Closing has occurred, twenty-five (25) days) after
the end of each of the first three (3) quarterly periods of (i) each
fiscal year of the Nevada Palace Acquired Companies, a copy of the unaudited
consolidated balance sheet of the Nevada Palace Acquired Companies as at the
end of such quarter, and the related unaudited consolidated statements of
operations and cash flows for such quarter, certified by a Responsible Officer
as being fairly stated in all material respects (subject to normal year-end
audit adjustments), and (ii) each fiscal year of each of WCW and NP Land,
a copy of the unaudited consolidated balance sheet of each of WCW and NP Land
as at the end of such quarter, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end
adjustments); provided, however, that should this Agreement be
assigned at the Second Closing pursuant to the terms of this Agreement and the
CUP Agreement, then the financial delivery obligations pursuant to this Section 6.1(c) and
Section 6.1(e) shall apply to the assignee and its consolidated
group, and not to the Nevada Palace Acquired Companies, WCW and NP Land;


 


(d)                                 promptly,
such additional financial and other information regarding the Borrower or any
Guarantor as the Lender may from time to time reasonably request in writing;
and


 


(e)                                  concurrently
with the delivery of any quarterly or annual financial statements of the
Borrower or any Guarantor pursuant to this Section 6.1, a certificate of a
Responsible Officer (i) stating that the Borrower or such Guarantor during
such period has observed or performed all of its covenants and other agreements
in this Agreement and the other Loan Documents to be observed or performed by
it, and that such Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate.


 


All such financial statements delivered pursuant to this Section 6.1
for the Nevada Palace Acquired Companies (or any assignee of this Agreement)
shall be complete and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except as


 


14

















 


approved by such accountants or officer, as the case may be, and
disclosed therein). All such financial statements delivered pursuant to this Section 6.1
for each of WCW and NP Land shall be complete and correct in all material
respects and shall be prepared on the cash basis of accounting in a manner
consistent with the internal financial reporting of each of WCW and NP Land.


 


6.2.                              Compliance;
Maintenance of Existence. The Borrower and each Guarantor shall (a) comply
in all material respects with all Laws, (b) perform all obligations under
all Contracts to which the Borrower or any Guarantor is a party in all material
respects, and (c)(i) preserve, renew and keep in full force and effect its
organizational existence and (ii) take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the ordinary
course of its business, except as permitted by the CUP Agreement or Section 6.5.


 


6.3.                              Inspection
of Property; Books and Records; Discussions. The Borrower and each
Guarantor shall (a) keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all Laws shall be
made of all dealings and transactions in relation to its business and
activities and (b) permit representatives of the Lender (not more
frequently than twice per year if no Default or Event of Default exists) upon
reasonable notice to the Borrower or any Guarantor to visit and inspect its
properties and request and obtain copies of its financial records and to
discuss the business, operations, properties and financial and other condition
of the Borrower or any Guarantor with officers of the Borrower or any Guarantor
and with their independent certified public accountants.


 


6.4.                              Notices.
The Borrower shall promptly give notice to the Lender of:


 


(a)                                  the
occurrence of any Default or Event of Default;


 


(b)                                 the
occurrence of any event that could be a default under the NP Business Loan
Agreement, whether or not such event may give rise to a right to notice or
otherwise, and whether or not any such right is waived by a party thereto;


 


(c)                                  any
Action or, to the Knowledge of the Borrower, investigation (i) that may
exist at any time between the Borrower or any Guarantor, on the one hand, and
any Governmental Authority, on the other hand, that is reasonably expected to
have a Material Adverse Effect or (ii) that relates to any Loan Document;
and


 


(d)                                 any
other development or event that could reasonably be expected to have a Material
Adverse Effect.


 


Each notice pursuant to this Section 6.4
shall be accompanied by a statement of a Responsible Officer setting forth
details of the occurrence referred to therein and stating what action the
affected party proposes to take with respect thereto.


 


6.5.                              Conduct
of the Business. Except as contemplated by the CUP Agreement or, from and
after the Second Closing Date or Termination of the CUP Agreement, as is
reasonably necessary to effect a refinancing of the Borrower, any Guarantor or
CCR, the proceeds of which will be used to repay the obligations pursuant to
the loans made by Oaktree


 


15

















 


under the CUP Agreement, the
Borrower and each Guarantor shall not, unless otherwise consented to by the
Lender:


 


(a)                                  with
respect to NP Land, incur or commit to incur any capital expenditures outside
the Ordinary Course of Business or incur any Debt;


 


(b)                                 create
or permit any Lien on any Business Tangible Property that is not an Excluded
Asset, other than Permitted Exceptions;


 


(c)                                  sell
or otherwise transfer any of its material assets or properties other than
Excluded Assets;


 


(d)                                 amend
its Governing Documents;


 


(e)                                  issue,
sell, pledge, encumber, transfer, dispose of or otherwise create any Lien on,
or redeem, purchase or acquire, any shares of its Capital Stock or any other
equity or debt interests, or grant any options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other agreements or
rights to purchase or otherwise acquire, any shares of its Capital Stock or any
other equity or debt interests, or grant any stock appreciation, phantom stock,
profit participation or similar rights;


 


(f)                                    effect
any recapitalization, reclassification, stock split or like change in its
capitalization;


 


(g)                                 declare
or pay any dividends on or make any other distributions (whether in cash,
property or otherwise) in respect of any of its Capital Stock or any other
equity interest;


 


(h)                                 make
any change in the principal nature of its business;


 


(i)                                     make
any change in any method of accounting for financial reporting, except for any
change in financial reporting after the 1A Closing Date required by reason of a
concurrent change in or interpretation of GAAP;


 


(j)                                     enter
into (i) any transaction with a Person or entity affiliated with or
related to itself, except upon arms-length terms and conditions, or (ii) any
transaction which is motivated by an intent to evade this Agreement or any
other Loan Document; or


 


(k)                                  make
any commitment (whether or not in writing) to any of the foregoing.


 


6.6.                              Limitation
on Fundamental Changes. The Borrower and each Guarantor shall not enter
into any merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of
its property, business or assets, except as contemplated by the CUP Agreement.


 


16

















 


6.7.                              Payment
of Taxes. The Borrower and each Guarantor shall pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all material taxes, assessments and governmental charges or levies imposed
upon any of them or their income or profits.


 


6.8.                              Ownership.
The direct and indirect ownership structure of the Capital Stock of the
Borrower and each Guarantor shall at all times remain as of the 1A Closing Date
except for such changes as are contemplated by the CUP Agreement or, after the
Second Closing, as are permitted under the Company Amended Operating Agreement
or the Omnibus Management Agreement.


 


6.9.                              Proceeds.
The Borrower shall use the proceeds from the Loan solely to fund the Back Rent
Payment, the Nevada Palace Intercompany Loan and the Schiff Esquire Redemption
and Payoff and for no other purpose whatsoever.


 


SECTION 7. DEFAULTS AND
EVENTS OF DEFAULT


 


7.1.                              Events
of Default. If any of the following events shall occur and be continuing:


 


(a)                                  the
Borrower shall fail to pay any principal of or interest on the Loan when due
and payable in accordance with the terms hereof;


 


(b)                                 the
Borrower shall fail to perform or observe (i) any term, covenant, or
agreement contained in Sections 6.2, 6.5, 6.6, 6.8 and 6.9, or (ii) any
other term, covenant or agreement contained in this Agreement or any other Loan
Document (other than as provided in Sections 7.1(a) and 7.1(b)) and, in
the case of any default under this clause (ii), such default shall continue
unremedied for thirty (30) days after the Lender shall have given notice
thereof to the Borrower;


 


(c)                                  an
“Event of Default” (as such term is defined therein) shall be declared under
the Wortman Loan Agreement, the Nevada Palace Oaktree Loan Agreement or, after
the Second Closing, the Company Oaktree Loan Agreement;


 


(d)                                 after
the Termination of the CUP Agreement for any reason, there shall have occurred
any “Event of Default,” as such term is defined under the NP Business Loan
Agreement (which shall not include (i) any “event of default” that has
been waived by any lender or administrative or other agent under the NP
Business Loan Agreement to the extent such waiver is unconditional (or, if
conditional, the conditions to such waiver have been fully satisfied prior to
the date of Termination) or not temporally limited (or, if temporally limited,
such wavier shall not expire until at least the applicable Maturity Date), (ii) any
“event of default” that has been cured or (iii) any “event of default”
that has occurred prior to the date of Termination of the CUP Agreement and is
continuing through such date of Termination);


 


(e)                                  the
Borrower or any Guarantor shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts as such
debts become due, (iii) make a general assignment for the benefit


 


17

















 


of its creditors, (iv) commence
a voluntary case under the federal bankruptcy Laws (as now or hereafter in
effect), (v) file a petition seeking to take advantage of any other Law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or readjustment of debts, (vi) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against the
Borrower or any Guarantor, as the case may be, in an involuntary case under
such federal Laws, or (vii) take any corporate action for the purpose of
affecting any of the foregoing;


 


(f)                                    an
Action shall be commenced (including commencement of such Action by way of
service of process on the Borrower or any Guarantor), in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of debts of the Borrower or any
Guarantor, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower or any Guarantor or of all or any
substantial part of the assets of the Borrower or any Guarantor or (iii) similar
relief in respect of the Borrower or any Guarantor under any Law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
readjustment of debts, or a warrant of attachment, execution or similar process
shall be issued against a substantial part of the property of the Borrower or
any Guarantor and such Action shall continue undismissed or unstayed and in
effect for a period of forty-five (45) days, or an Order approving or ordering
any of the foregoing shall be entered in an involuntary case under such federal
bankruptcy Laws;


 


(g)                                 a
trustee shall be appointed to administer any Plan under Section 4042 of
ERISA, or the PBGC shall institute proceedings to terminate, or to have a
trustee appointed to administer any Plan and such proceedings shall continue
undismissed or unstayed and in effect for a period of thirty (30) days, and any
such event shall result in any liability which is material in relation to the
consolidated financial condition of the Borrower or any Guarantor;


 


(h)                                 there
shall have been entered by a court of competent jurisdiction within the United
States one or more judgments or decrees for payment of money involving a
liability against the Borrower or any Guarantor in excess of $1,000,000 that is
not otherwise covered by insurance;


 


(i)                                     the
obligation of any Guarantor under its respective Guarantee Agreement is limited
or terminated by operation of Law (other than as a result of an action taken by
the Nevada Gaming Authorities solely attributable to any action or inaction of
the Lender, AcquisitionCo or any of their respective Affiliates) or the
obligation of such Guarantor thereunder is limited or terminated by such
Guarantor;


 


(j)                                     the
Borrower or any Guarantor is enjoined, restrained or in any way prevented by
Order from continuing to conduct all or any material part of its business;


 


(k)                                  any
Loan Document that purports to create a security interest in the Collateral
shall, for any reason (other than as a result of an action taken by the Nevada
Gaming Authorities solely attributable to any action or inaction of the Lender,
AcquisitionCo or any of their respective Affiliates), fail or cease to create a
valid and perfected first priority Lien on or security interest in the
Collateral covered hereby or thereby (other than as disclosed on Schedule 1
to any Pledge Agreement or pursuant to Section 10.1 of the Deed of Trust);


 


18

















 


(l)                                     any
direct or indirect change in the ownership of Capital Stock of the Borrower or
any Guarantor shall occur, other than changes of ownership as are permitted by
the CUP Agreement or, after the Second Closing, as are permitted under the
Company Amended Operating Agreement or the Omnibus Management Agreement; or


 


(m)                               any
provision of any Loan Document shall at any time for any reason (other than as
a result of an action taken by the Nevada Gaming Authorities solely
attributable to any action or inaction of the Lender, AcquisitionCo or any of
their respective Affiliates) be declared to be null and void, or the validity
or enforceability thereof shall be contested by the Borrower or any Guarantor,
or an Action shall be commenced by the Borrower, or any Guarantor, or by any
Governmental Authority (other than an Action by the Nevada Gaming Authorities
brought as a result of an action taken by the Nevada Gaming Authorities solely
attributable to any action or inaction of the Lender, AcquisitionCo or any of
their respective Affiliates) having jurisdiction over the Borrower or any
Guarantor seeking to establish the invalidity or unenforceability thereof, or
the Borrower or any Guarantor shall deny that the Borrower or any Guarantor has
any liability or obligation purported to be created under any Loan Document;


 


then, and in any such event, (i) if
such event is an Event of Default specified in paragraph (e) or (f) of
this Section 7, automatically the Loan hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents shall immediately become due and payable, and (ii) if such event
is any other Event of Default, the Lender may declare the Loan hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Except as expressly provided above in
this Section 7.1, presentment, demand, protest and all other notices of
any kind are hereby expressly waived. Subject to Section 7.2, the rights
of the Lender under this Section 7.1 are in addition to other rights and
remedies which the Lender may have, including the right to:


 


(A)                              Terminate this Agreement
and any of the other Loan Documents as to any future liability or obligation of
the Lender, but without affecting any of the security interests in the Collateral.


 


(B)                                Without notice to or
demand upon the Borrower, make such payments and do such acts as the Lender
considers necessary or reasonable to protect its security interests in the
Collateral. The Borrower and each Guarantor agrees to assemble the Collateral
if the Lender so requires, and to make the Collateral available to the Lender
at a place that the Lender may designate which is reasonably convenient to both
parties. The Borrower and each Guarantor authorizes the Lender to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest or compromise
any Lien that in the Lender’s determination appears to conflict with the
security interest in and to the Collateral and to pay all expenses incurred in
connection therewith and to charge the Borrower therefor. With respect to the
Borrower’s or any Guarantor’s owned premises, the Borrower and each Guarantor
hereby grants the Lender a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of the Lender’s
rights or remedies provided herein, at law, in equity or otherwise.


 


19

















 


(C)                                To the extent permitted
by applicable Law, foreclose on the Collateral and ship, reclaim, recover,
store, finish, maintain, repair, prepare for sale, advertise for sale and sell
(in the manner provided for herein) the Collateral. The Borrower and each
Guarantor hereby grants to the Lender a license or other right to use, without
charge, the labels, patents, copyrights, trade secrets, trade names,
trademarks, service marks and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of, advertising
for sale and selling any Collateral and rights of the Borrower or any Guarantor
under all licenses and all franchise agreements shall inure to the Lender’s
benefit.


 


(D)                               To the extent permitted
by applicable Law, sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including the Borrower’s or any Guarantor’s
premises) as the Lender determines is commercially reasonable. It is not
necessary that the Collateral be present at any such sale. The Borrower and
each Guarantor covenants and agrees that it will, upon the Lender’s request,
execute and deliver such documents and take such other action as the Lender
deems necessary or advisable in order that any such sale may be made in
compliance with Law. Each purchaser at any such sale shall hold the Collateral
so sold absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Borrower or any Guarantor,
as applicable, which may be waived, and the Borrower and any Guarantor, to the
extent permitted by Law, hereby specifically waives all rights of redemption,
stay or appraisal which it has or may have under any Law now existing or hereafter
adopted.


 


(E)                                 The Lender shall give
notice of the disposition of the Collateral as follows:


 


(1)                                  The Lender shall give
the Borrower and each Guarantor a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other disposition other
than a public sale, the time on or after which the private sale or other
disposition is to be made; and


 


(2)                                  The notice shall be
personally delivered or mailed, postage prepaid, to the Borrower and each
Guarantor, at least ten (10) days before the earliest time of disposition
set forth in the notice; no notice needs to be given prior to the disposition
of any portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market.


 


The Lender shall not be obligated to make any
such sale pursuant to any such notice. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned. In case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Lender until the selling price is paid by the purchaser thereof, but the Lender
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.


 


20

















 


(F)                                 The Lender may credit
bid and purchase at any public sale and may purchase at any private sale, each
as conducted in accordance with clause (E) above.


 


(G)                                The Lender may seek the
appointment of a receiver or keeper to take possession of all or any portion of
the Collateral or to operate same and, to the maximum extent permitted by Law,
may seek the appointment of such a receiver without the requirement of prior notice
or a hearing.


 


7.2.                              Effect
of Gaming Laws.


 


(a)                                  The remedies set
forth in Section 7.1 shall be subject to applicable limitations set forth
in the Pledge Agreements and the Deed of Trust required for purposes of the
Gaming Laws or with respect to the Nevada Gaming Authorities, if any.


 


(b)                                 In connection with
exercising its rights under Section 7.1, the Lender may, if it so elects
in its sole discretion, require the Borrower and any Guarantor to cooperate
with the Lender and immediately to take all actions required by the Lender to
assist with the preparation and filing by the Lender of all applications for
licensure and approval with all applicable regulatory authorities as are
necessary, if any, for the Lender to acquire ownership and control of any Person
owning or operating the Businesses of Nevada Palace or Esquire, or of the
Businesses and the hotels and casinos operated by Nevada Palace or Esquire. To
enforce the provisions of this Section 7.2(b), to the extent they are
applicable, the Lender is empowered to request the appointment of a receiver or
supervisor from the Nevada Gaming Authorities or, if applicable, from any court
of competent jurisdiction or to engage a licensed third party operator to
operate such Businesses until such time as the Lender is prepared to sell and
transfer the Collateral to a third party purchaser licensed by the Nevada
Gaming Authorities. The Borrower and each Guarantor shall use reasonable best
efforts to obtain the approval of the applicable Nevada 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
Nevada Gaming Authority of any applications relating to the change of control
of such Businesses and the properties and assets of the Borrower or any
Guarantor, to the extent approval is required by applicable Law.


 


SECTION 8. MISCELLANEOUS


 


8.1.                              Cooperation
with Gaming Laws. To the extent the Nevada Gaming Authorities have
regulatory jurisdiction over the Borrower or any Guarantor, the Lender shall
cooperate with the Nevada Gaming Authorities in connection with the
administration of their regulatory jurisdiction over the Borrower or such
Guarantor, including through the provision of such documents or other
information as may be requested by the Nevada Gaming Authorities relating to
the Lender or such companies. In connection therewith, to the extent the
foregoing sentence is applicable, the Lender, its successors and its permitted
assignees and designees acknowledge that each of them is subject to being
called forward by the Nevada Gaming Authorities, in the discretion of the
Nevada Gaming Authorities, for licensing or a finding of suitability in order
to remain entitled to the benefits under this Agreement and the other Loan
Documents.


 


21

















 


8.2.                              Termination.
This Agreement shall terminate on the last Maturity Date to occur of the Loan. As
set forth in Section 7.1(A), the Lender shall also have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default. No
termination of this Agreement shall relieve or discharge the Borrower or any
Guarantor of its duties, obligations or covenants hereunder, and except as
expressly set forth in the applicable Pledge Agreements or the Deed of Trust,
the Lender’s security interest in the Collateral shall remain in effect until
the Loan and other obligations under this Agreement (including Sections 2.8 and
8.6) or the Note has been paid in full. When all obligations under the Loan
have been paid in full, the Note shall be canceled. When this Agreement has
been terminated and all such obligations have been paid in full, or when the
security interests in the Collateral are otherwise released pursuant to the
applicable Pledge Agreements or the Deed of Trust, the Lender shall, at the
Borrower’s or any Guarantor’s sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, discharges of
security interests and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the security interests in the Collateral.


 


8.3.                              Amendments
and Waivers. The provisions of this Agreement and the other Loan Documents
may be amended, supplemented, modified or waived; provided, however,
that any such amendment, supplement, modification or waiver be in writing and
executed by each party hereto; and provided, further, that for
the purposes of waiver by the Borrower and any Guarantor under this Section 8.3,
as well as any other waiver, agreement or consent (including an agreement or
consent as to satisfactoriness, reasonability or termination) granted to or
required of the Borrower or any Guarantor under this Agreement, such waiver by
or agreement or consent of the Borrower or any Guarantor shall be considered
effective if given by Wortman, acting on behalf of all of them.


 


8.4.                              Notices.
Any and all notices and demands by a party hereto to
the other party hereto required or desired to be given hereunder shall be in
writing and shall be validly given or made only if: (a) delivered by hand;
(b) delivered by FedEx or other similar overnight delivery or courier
service which keeps records of deliveries; or (c) served by telecopy or
similar facsimile transmission, so long as such method is followed up by one of
the methods set forth in (a) or (b). Delivery of notice by method (a) or
(b) shall be effective upon receipt. Delivery of notice by telecopy or
similar facsimile transmission shall be effective upon the printing by sender
of a positive confirmation sheet, so long as such sheet reflects that the
telecopy or facsimile was received during regular business hours. Telecopy or
facsimile transmissions shown as having been received at any other time shall
be deemed received on the next Business Day. Notice on behalf of a party hereto
may be signed and sent by any attorney for such party.


 


(a)                                  Address of the Borrower and each Guarantor. Any notice or demand to the Borrower or any Guarantor
shall be addressed to the applicable party at:


 


Esquire Ltd., Inc.


211 North Rampart Boulevard


Las Vegas, Nevada  89145


Attn:  William Wortman


Fax:  (702) 507-5992


 


22

















 


with a copy to


 


Michael E. Kearney


Santoro, Driggs, Walch, Kearney, Johnson & Thompson


400 South Fourth Street, Suite 300


Las Vegas, Nevada  89101


Fax:  (702) 791-1912


 


(b)                                 Address of the Lender. Any notice
or demand to the Lender shall be addressed to Oaktree at:


 


OCM InvestCo,
LLC


333 South
Grand Avenue, 28th Floor


Los Angeles,
California  90071


Attn:  Chris Brothers


Attn:  Skardon Baker


Fax:  (213) 830-6394


 


with a copy to


 


Munger, Tolles &
Olson LLP


355 South
Grand Avenue, 35th Floor


Los Angeles,
California  90071


Attn:  Robert Knauss


Fax:  (213) 683-5137


 


(c)                                  Change of Address. Each of
the parties hereto may change its address for the purpose of receiving notices
or demands as herein provided by a written notice given in the manner aforesaid
to the others, which notice of change of address shall not become effective,
however, until the actual receipt thereof by the others.


 


8.5.                              No
Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising,
on the part of the Lender, any right, remedy, power or privilege hereunder or
under the other Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by Law.


 


8.6.                              Survival
of Representations and Warranties. All representations and warranties made
hereunder or incorporated by reference herein, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith or therewith shall survive the execution and delivery of
this Agreement and the making of the Loan hereunder until repaid in full.


 


23

















 


8.7.                              Payment
of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the
Lender for all its reasonable out-of-pocket costs and expenses incurred in
connection with any amendment, supplement or modification to, this Agreement
and the other Loan Documents, including the reasonable fees and expenses of
counsel in connection therewith, (b) to pay or reimburse the Lender for
all its out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement or the other
Loan Documents, including the fees and disbursements of counsel to the Lender, (c) to
pay, indemnify or reimburse the Lender for, and hold the Lender harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other taxes (other
than any net income or franchise taxes), if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement and the other Loan Documents, and (d) to
pay, indemnify, and hold the Lender and its respective directors, officers,
employees, affiliates and agents (each, an “Indemnified Person”)
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and the other
Loan Documents and the use of proceeds of the Loan (all the foregoing in this
clause (d), collectively, the “Indemnified Liabilities”); provided,
however, that the Borrower shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person; and provided,
further, that no matter may be indemnified pursuant to this Section 8.7
to the extent already fully indemnified pursuant to Article IX of the CUP
Agreement. This Section 8.7 shall survive termination of this Agreement.


 


8.8.                              Attorneys’
Fees For Disputes. In the event any Action is commenced by any party hereto
against any other party hereto in connection herewith, including any bankruptcy
proceeding, the prevailing party shall be entitled to recover, in addition to
its costs of enforcement, its costs and expenses, including reasonable
attorneys’ fees.


 


8.9.                              Transfer;
Successors and Assigns. The Borrower and each Guarantor may not assign or
transfer any of its rights or obligations under this Agreement at any time
without the prior written consent of the Lender; provided, however,
that the Borrower may assign its obligations as “Borrower” under this Agreement
and the Other Loan Documents to Millennium at the Second Closing as
consideration for the Esquire Purchase so long as (a) Millennium shall
assume such obligations and enter into such agreements as are reasonably
required by the Lender in connection therewith and (b) the Borrower shall
continue to remain liable under this Agreement and the Note. Prior to the 1A
Closing, the Lender may assign this Agreement to an Affiliate with the prior
written consent of the Borrower. After the 1A Closing, the Lender may freely
assign any Note or this Agreement to any Person (including AcquisitionCo),
including assigning rights to payment or to declare an Event of Default and
pursue remedies hereunder, and to designate any Person (including
AcquisitionCo) a third party beneficiary under any Note or this Agreement; provided,
however, that promptly following such assignment or designation, the
Lender must provide notice of such assignment or designation to the Borrower
and each Guarantor. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lender and their respective
successors and assigns.


 


24

















 


8.10.                        Disclosure. The Borrower authorizes the Lender to disclose to
any assignee (a “Transferee”) and any prospective Transferee, any and
all financial information in the Lender’s possession concerning the Borrower,
any Guarantor and their respective Affiliates which has been delivered to such
Lender by or on behalf of the Borrower or any Guarantor pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower or any Guarantor in connection with such Lender’s credit evaluation of
the Borrower, any Guarantor and their respective Affiliates prior to becoming a
party to this Agreement.


 


8.11.                        Revival
and Reinstatement of Obligations. If the incurrence or payment of any
principal, accrued interest or other obligations by the Borrower or any
Guarantor or the transfer to Lender of any Collateral should for any reason
subsequently be declared to be void or voidable under any state or federal Law
relating to creditors’ rights, including provisions of the bankruptcy Laws
relating to fraudulent conveyances, preferences or other voidable or
recoverable payments of money or transfers of property (each, a “Voidable
Transfer”), and if the Lender is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that the Lender is required or elects to repay or restore, and as to
all reasonable costs, expenses and attorneys’ fees of the Lender related
thereto, the liability of the Borrower or any Guarantor automatically shall be
revived, reinstated and restored and shall exist as though such Voidable
Transfer had never been made (including with respect to this Agreement, the
Pledge Agreements, the Guarantee Agreements and the Deed of Trust).


 


8.12.                        Counterparts.
This Agreement may be executed by facsimile and in any number of counterparts,
each of which when executed by and delivered shall be an original, but all such
counterparts shall constitute one and the same Agreement. Any signature page of
this Agreement may be detached from any counterpart without impairing the legal
effect of any signatures thereon, and may be attached to another counterpart,
identical in form thereto, but having attached to it one or more additional
signature pages.


 


8.13.                        Severability.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.


 


8.14.                        Integration.
This Agreement, the other Loan Documents and the CUP Agreement and the other
documents contemplated thereby represent the agreement of the Borrower and the
Lender with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Borrower and the Lender
relative to subject matter hereof not expressly set forth or referred to herein
or therein.


 


8.15.                        GOVERNING
LAW. THE INTERNAL LAWS OF THE STATE OF NEVADA APPLICABLE TO
CONTRACTS MADE AND WHOLLY PERFORMED THEREIN SHALL GOVERN THE VALIDITY,
CONSTRUCTION, PERFORMANCE AND EFFECT OF THIS AGREEMENT.


 


25

















 


8.16.                        WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY PERMITTED ACTION
ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, OR ANY DEALINGS BETWEEN ANY OF THE PARTIES
HERETO RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.


 


8.17.                        Service
of Process; Consent To Jurisdiction. The parties hereto hereby irrevocably
submit and consent to the non-exclusive jurisdiction of any federal or state
court located within Reno, Nevada over any dispute arising out of or relating
to this Agreement, the other Loan Documents or any of the transactions
contemplated hereby or thereby. The parties hereto hereby irrevocably waive, to
the fullest extent permitted by applicable Law, any objection which they may
now or hereafter have to the laying of venue of any such dispute brought in
such court or any defense of inconvenient forum for the maintenance of such
dispute. Each of the parties hereto agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable Law. The parties hereto irrevocably consent to
the service of any process, pleading, notice or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid,
to such party’s address set forth in Section 8.4 or permitted under Nevada
law.


 


8.18.                        Interpretation.
The parties hereto agree that no party hereto shall be deemed to be the drafter
of this Agreement and that in the event this Agreement is ever construed by a
court of law or equity, such court shall not construe this Agreement or any
provision hereof against any party hereto as the drafter of the Agreement. The
parties hereto acknowledge that each of them has contributed substantially and
materially to the preparation hereof. The captions appearing at the
commencement of the sections hereof are descriptive only and for convenience in
reference to this Agreement and in no way whatsoever define, limit or describe
the scope or intent of this Agreement, nor in any way affect this Agreement.


 


[Remainder of page intentionally left blank.]


 


26

















 


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


 


 


	
  Lender:

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
  Esquire Ltd., Inc.

  
	
  OCM InvestCo, LLC

  	
   

  
	
   

  	
  By:

  	
  /s/ William C. Wortman

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
  By:

  	
  /s/ Stephen Kaplan

  	
   

  	
   

  
	
   

  	
  Guarantor:

  
	
   

  	
  Name: 
  Stephen Kaplan

  	
   

  
	
   

  	
   

  	
  WCW Landco, LLC

  
	
   

  	
  Title: 
  Manager

  	
   

  
	
   

  	
  By:

  	
  /s/ William C. Wortman

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
	
  By:

  	
  /s/ Ronald Beck

  	
   

  	
   

  
	
   

  	
  Guarantor:

  
	
   

  	
  Name: Ronald Beck

  	
   

  
	
   

  	
   

  	
  Nevada Palace, Inc.

  
	
   

  	
  Title: Manager

  	
   

  
	
   

  	
  By:

  	
  /s/ William C. Wortman

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  
	
  Lender’s Office:

  	
  Guarantor:

  
	
   

  	
   

  
	
  333 South Grand Avenue, 28th
  Floor

  	
  NP Land, LLC

  
	
   

  	
   

  
	
  Los Angeles, California 90071

  	
   

  
	
   

  	
  By:

  	
  /s/ William C. Wortman

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
													



 


 


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