Exhibit 10.4


 


EXECUTION VERSION


 


SECURITY AGREEMENT


 


This
SECURITY
AGREEMENT (this “Agreement”), is entered into as of
January 23, 2004, is executed and delivered by and among Poster Financial
Group, Inc., a Nevada corporation (the “Note Issuer”), GNL, Corp., a
Nevada corporation (“GNL”), GNLV, Corp., a Nevada corporation (“GNLV”),
Golden Nugget Experience, LLC, a Nevada limited liability company (“GNE”,
and together with the Note Issuer, GNL and GNLV each, a “Grantor” and
collectively, jointly and severally, the “Grantors”) in favor of Wells
Fargo Bank, National Association, as the collateral agent (in such capacity,
together with its successors and assigns, if any, in such capacity, the “Collateral
Agent”) for the benefit of the Secured Parties (as defined below), in light
of the following:


 


WHEREAS, the Note
Issuer has entered into an Indenture, dated as of December 3, 2003 (as
such Indenture may be amended, amended and restated, supplemented or otherwise
modified from time to time pursuant to the terms thereof, the “Indenture”)
between the Note Issuer and HSBC Bank USA, as the indenture trustee (the “Indenture
Trustee”) pursuant to which the Note Issuer has issued the 8 3⁄4 % Senior
Secured Notes due 2011 (“Senior Secured Notes”);


 


WHEREAS, the Note
Issuer, GNL and GNLV, as borrowers, Wells Fargo Foothill, Inc., as the
arranger, administrative agent and documentation agent (the “Agent”) for certain financial
institutions from time to time parties thereto, (the “Lenders”), have entered into that certain Loan and Security
Agreement dated as of  January  23,
2004 (as amended, amended and restated, supplemented, renewed or otherwise
modified from time to time, the “Loan
Agreement”);


 


WHEREAS, each Grantor,
Wells Fargo Foothill, Inc., as the agent for the Lenders, and the Collateral
Agent are parties to a certain Intercreditor Agreement, dated as of
January  23, 2004 (as amended, amended and restated, modified,
supplemented, renewed or otherwise modified from time to time, the “Intercreditor
Agreement”);


 


WHEREAS, the Note Issuer, GNL, GNLV, GNE, and the
Collateral Agent are, contemporaneously herewith, entering into that certain
Stock Pledge Agreement (as amended, amended and restated, supplemented, renewed
or otherwise modified from time to time, the “Stock Pledge Agreement”);


 


WHEREAS, each Grantor
desires to secure its obligations under the Noteholder Documents (as defined
herein) to which it is party by granting to the Collateral Agent, for the
benefit of the Secured Parties (as defined below), security interests in the
Collateral (as defined herein) as set forth herein;


 


WHEREAS , the Note
Issuer, the Indenture Trustee and HSBC USA, as agent and as securities
intermediary (the “Pledge Agent”) have entered into that certain Pledge
Agreement dated as of December 3, 2003 (as amended, amended and restated,
supplemented, modified, renewed or otherwise modified from time to time, the “Pledge
Agreement”);


 


WHEREAS , the Note
Issuer, GNLV, GNL and the Collateral Agent are, contemporaneously herewith,
entering into that certain Copyright Security Agreement (as amended, amended
and restated, supplemented, renewed or otherwise modified from time to time,
the “Copyright  Security Agreement”);


 

















 


WHEREAS , the Note
Issuer, GNLV, GNL and the Collateral Agent are, contemporaneously herewith,
entering into that certain Trademark Security Agreement (as amended, amended
and restated, supplemented, renewed or otherwise modified from time to time,
the “Trademark  Security
Agreement”); and


 


WHEREAS, each Grantor
is a subsidiary of the Note Issuer, and will benefit by virtue of the financial
accommodations from the Secured Parties to the Note Issuer.


 


NOW, THEREFORE, in
consideration of the premises set forth above, the terms and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and each intending to be bound
hereby, the Collateral Agent and each Grantor agree as follows:


 


1.             DEFINITIONS AND CONSTRUCTION.


 


1.1           Definitions.  All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.  As used in this Agreement,
the following terms shall have the following definitions:


 


(a) Terms used herein without definition that are
defined in the Code have the meanings given to them in the Code, including the
following terms (which are capitalized herein):


 


“Account Debtor”


“Certificated Security”


“Chattel Paper”


“Commercial Tort Claim”


“Commodity Account”


“Commodity Intermediary”


“Deposit Account”


“Documents”


“Entitlement Holder”


“Entitlement Order”


“Financial Asset”


“Goods”


“Instruments”


“Letter-of-Credit Right”


“Securities Account”


“Securities Intermediary”


“Security”


“Security Entitlement”


 


(b) 
The following terms shall have the following meanings:


 


“Account” means any “account” (as that term is defined in the
Code), and any and all supporting obligations in respect thereof.


 


“Agreement”
means this Security Agreement and any extensions, riders, supplements, notes,
amendments, or modifications to or in connection with this Security Agreement.


 


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“Approved
Securities Intermediary” means a Securities Intermediary or Commodity
Intermediary selected or approved by the Collateral Agent and with respect to
which a Grantor has delivered to the Collateral Agent an executed Control
Account Agreement.


 


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


 


“Books”
means each Grantor’s now owned or hereafter acquired books and records
(including all of its Records indicating, summarizing, or evidencing its assets
(including the Collateral) or liabilities, all of its Records relating to its
business operations or financial condition, and all of its goods or General
Intangibles related to such information).


 


“Cash
Equivalents” means (a) securities issued or fully guaranteed or
insured by the United States government or any agency thereof,
(b) certificates of deposit, eurodollar time deposits, overnight bank
deposits and bankers’ acceptances of any commercial bank organized under the
laws of the United States, any state thereof, the District of Columbia, any
foreign bank, or its branches or agencies (fully protected against currency
fluctuations) that, at the time of acquisition, are rated at least “A-1” by
S&P or “P-1” by Moody’s, (c) commercial paper of an issuer rated at
least “A-1” by S&P or “P-1” by Moody’s and (d) shares of any money
market fund that (i) has at least 95% of its assets invested continuously
in the types of investments referred to in clauses (a), (b) and (c) above, (ii) has net
assets of not less than $500,000,000 and (iii) is rated at least “A-1” by
S&P or “P-1” by Moody’s; provided, however, that the
maturities of all obligations of the type specified in clauses (a), (b)
and (c)
above shall not exceed 180 days.


 


“Casino
Bankroll” means only the amount of cash or Cash Equivalents required by the
provisions of Section 6.150 of the Regulations of the NGC to satisfy the
Casino minimum bankroll requirements, mandatory game security reserves,
allowances for redemption of casino chips and tokens, or payment of winning
wagers to gaming patrons, or as otherwise may be required by the Gaming Laws or
a directive of the Chairman of the NGCB.


 


“CFC”
means a controlled foreign corporation (as such term is defined in the IRC).


 


“Code”  means the Uniform Commercial
Code as from time to time in effect in the State of New York; provided,
however,
that, in the event that, by reason of mandatory provisions of law, any of the
attachment, perfection or priority of the Collateral Agent’s and the Secured
Parties’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New
York, the term “Code” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or
priority and for purposes of definitions related to such provisions..


 


“Collateral”
means, with respect to each Grantor, all of each Grantor’s now owned or
hereafter acquired right, title, and interest in and to each of the
following:  all of its Accounts; all of
its Books; all of its Commercial Tort Claims; all of its Deposit Accounts; all
of its Equipment; all of its General Intangibles; all of its Inventory; all of
its Investment Property (including all Securities and Securities Accounts); all
of its Negotiable Collateral; any money, or other assets of each Grantor which
now or hereafter come into the possession, custody or control of the Collateral
Agent; all other Goods and personal property of such Grantor, whether tangible
or intangible and wherever located, and the proceeds and products, whether
tangible or intangible, of any of the foregoing, including proceeds of
insurance covering any or all of the foregoing, all Vehicles, Real Property,
money, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any


 


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portion thereof or interest therein, and the proceeds thereof;
excluding in each case the Excluded Property.


 


“Collateral
Agent” has the meaning set forth in the preamble to this Agreement.


 


“Collateral
Agent’s Liens” means the Liens granted by each Grantor to the Collateral
Agent under this Agreement or the other Noteholder Documents to which such
Grantor is a party.


 


“Collateral
Documents” means this Agreement, the Intercreditor Agreement, the Stock
Pledge Agreement, the Deposit Account Control Agreement, the Trademark Security
Agreement, the Copyright Security Agreement, the Mortgages, the Guarantee under
the Indenture and any document or instrument executed and delivered pursuant to
any Noteholder Document at any time or otherwise pursuant to which a Lien is
granted by a Grantor to secure the Secured Obligations or under which rights or
remedies with respect to any such Lien are governed, as the same may be
amended, restated, renewed, extended, supplemented or modified from time to
time.


 


“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, proceeds of cash sales, rental proceeds, and tax
refunds).


 


“Control
Account” means a Securities Account or Commodity Account that is subject of
an effective Control Account Agreement and that is maintained by any Grantor
with an Approved Securities Intermediary. 
Control Account includes all Financial Assets held in a Securities
Account or a Commodity Account and all certificates and instruments, if any,
representing or evidencing the Financial Assets contained therein.


 


“Control
Account Agreement” means a letter agreement, substantially in the form of Annex
2(Form  of Control Account Agreement)
(with such changes as may be agreed to by the Collateral Agent), executed by
the relevant Grantor, the Collateral Agent and the relevant Approved Securities
Intermediary.


 


 “Copyright
Licenses” means any written
agreement naming any Grantor as licensor or licensee granting any right under
any Copyright, including the grant of any right to copy, publicly perform,
create derivative works, manufacture, distribute, exploit or sell materials
derived from any Copyright.


 


“Copyrights” means (a) all copyrights arising under
the laws of the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Copyright Office or in any foreign counterparts thereof,
and (b) the right to obtain all renewals thereof.


 


“Gaming Laws”
means all applicable federal, state and local laws, rules and regulations
pursuant to which the Nevada Gaming Authorities possess regulatory, licensing
or permit authority over the ownership or operation of gaming facilities within
the State of Nevada, including, without limitation, the Nevada Gaming Control
Act, as codified in Chapter 463 of the Nevada Revised Statutes, as amended from
time to time, and the regulations of the NGC promulgated thereunder.


 


“Grantors”
has the meaning set forth in the preamble to this Agreement.


 


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“Deposit
Account Bank” means a financial institution selected or approved by the
Collateral Agent and with respect to which a Grantor has delivered to the
Collateral Agent an executed Deposit Account Control Agreement.


 


“Deposit
Account Control Agreement” means a letter agreement, substantially in the
form of Annex 1
(Form of Deposit Account Control Agreement) (with such changes as
may be agreed to by the Collateral Agent), executed by the Grantor, the
Collateral Agent and the relevant Deposit Account Bank.


 


“Equipment”
means “equipment” (as that term is defined in the Code), and includes
machinery, machine tools, motors, furniture, furnishings, fixtures, Vehicles
(including motor vehicles), computer, hardware, tools, parts, goods (other than
consumer goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.


 


“Excluded
Property” means, collectively,
(i) Casino Bankroll, (ii) the “participation” slot machines listed on Schedule 8
(Excluded Property), (iii) the
Stock of the Note Issuer’s Subsidiaries that are licensed or registered under
the Gaming Laws and are “Pledged Collateral” pursuant to the Stock Pledge
Agreement , (iv) the Government Treasury Strips, (v) any Investment Property of
the Grantors constituting Stock of such Grantors’ Subsidiaries that are CFCs,
solely to the extent that such Investment Property is in excess of 65% of the
voting power of Stock of such CFC, and (vi)  any agreements
(including that certain Starbucks Corporation Master Licensing Agreement, dated
as of January 21, 2004, between Starbucks Corporation and Parent) and the
joinders thereto by GNL and GNLV dated as of January 21, 2004, permits or
licenses (including Gaming Licenses) solely in the event and to the extent that
a grant of a Lien on such license, contract, or agreement is prohibited by law
or results in a breach or termination of the terms of, or constitutes a default
under, or termination of any such license, contract, or agreement (other than
to the extent that any such term would be rendered ineffective pursuant to
Section 9-406, 9-407, or 9-408 or 9-409 of the Code (or any successor
provision or provisions) of any relevant jurisdiction) and, in any event,
immediately upon the ineffectiveness, lapse or termination of any such terms or
default under such license, contract or agreement, the Excluded Property shall
not include, and the applicable Grantor shall be deemed to have granted a security
interest in, all such licenses, contracts, or agreements as if such terms or
defaults had never been in effect; provided,
however, that Excluded Property
shall not include (and, accordingly, Collateral shall include) any and all
proceeds of any of such assets; provided,
further, that, any agreement, permit, license, or the like qualifying as an
Excluded Property under clauses (ii) and (vi) above no longer shall
constitute an Excluded Property (and instead shall constitute Collateral) from
and after such time as the lessor, licensor, or other party to such agreement,
permit, license, or the like consents to the grant of a Lien in favor of
Collateral Agent in such agreement, permit, license, or the like or the
prohibition against granting a Lien therein in favor of Collateral Agent shall
cease to be effective.


 


“General
Intangibles” means “general intangibles” (as that term is defined in the
Code), (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trade secrets, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists, rights to payment
and other rights under any royalty or licensing agreements, infringement
claims, computer programs, information contained on computer disks or tapes,
software, literature, reports, catalogs, insurance premium rebates, tax
refunds, and tax refund claims), and any and all supporting obligations in
respect thereof, and any other personal property other than Accounts, Deposit
Accounts, Goods, Investment Property, and Negotiable Collateral.


 


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“Government Treasury Strips” means those certain United States Treasury securities in an amount not
to exceed $3,089,752 maintained by Mirage Resorts, Incorporated in a restricted
account for the benefit of GNLV as a reserve in accordance with Nevada Gaming
Commission Regulation 5.115, pursuant to the order of the NGC dated
August 27, 1993, and to be maintained after
January      , 2004 in a restricted account of
GNLV as a reserve pursuant to Gaming Laws, securing periodic payments due to a
progressive slot machine jackpot winner at GNLV, which jackpot totaled
$3,089,752 payable in 20 equal annual installments of $154,488, without
interest, commencing September 24, 1988 and ending September 24,
2007.


 


“Governmental
Authority” means any nation, sovereign or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, including any central bank.


 


“Intellectual
Property” means, collectively, all rights, priorities and privileges of any
Grantor relating to intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, trade
secrets and Internet domain names, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.


 


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


 


“Investment
Property” means “investment property” (as that term is defined in the
Code), and any and all supporting obligations in respect thereof.


 


“IRC”
means the Internal Revenue Code of 1986, as in effect from time to time and any
successor statute.


 


“Lien” means
any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, lien (statutory or other), security interest or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever intended to assure payment of any Indebtedness
(as such term is defined in the Indenture) or the performance of any other
obligation, including any conditional sale or other title retention agreement,
the interest of a lessor under a Capital Lease (as such term is defined in the
Indenture) and any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Code or comparable law of any jurisdiction naming the owner of the asset to
which such Lien relates as debtor.


 


“Material
Adverse Change” means a material adverse change in (a) any of the
condition (financial or otherwise), business, performance, prospects,
operations or properties of the Note Issuer and its Subsidiaries taken as a
whole, (b) any Grantor’s ability to perform its obligations under any of
the Noteholder Documents to which it is a party or the Collateral Agent’s
ability to enforce the Obligations or realize upon the Collateral or
(c) the enforceability or priority of the Liens granted pursuant to the
Collateral Documents.


 


“Material
Adverse Effect” means an effect that results in or causes, or could
reasonably be expected to result in or cause, a Material Adverse Change.


 


“Material
Intellectual Property” means Intellectual Property owned by or licensed to
a Grantor and material to the conduct of any Grantor’s business.


 


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“Negotiable
Collateral” means letters of credit, letter of credit rights, Instruments,
promissory notes, drafts, Documents, and Chattel Paper (including electronic
Chattel Paper and tangible Chattel Paper), and any and all supporting
obligations in respect thereof.


 


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


 


“NGC” means the
Nevada Gaming Commission.


 


“NGCB” means the
Nevada State Gaming Control Board.


 


“Note
Issuer” shall have the respective meaning set forth in the recitals to this
Agreement.


 


“Noteholder
Documents” means the Indenture, the Senior Secured Notes, the other
Collateral Documents, and such other agreements, instruments and certificates
executed and delivered pursuant to any Noteholder Document at any time or
otherwise evidencing any Secured Obligations, as the same may be amended, amended
and restated, renewed, extended, supplemented or modified from time to time.


 


“Patents”
means (a) all letters patent of the United States, any other country or
any political subdivision thereof and all reissues and extensions thereof,
(b) all applications for letters patent of the United States or any other
country and all divisionals, continuations and continuations-in-part thereof
and (c) all rights to obtain any reissues or extensions of the foregoing.


 


“Patent
License” means all agreements, whether written or oral, providing for the
grant by or to any Grantor of any right to manufacture, have manufactured, use,
import, sell or offer for sale any invention covered in whole or in part by a
Patent.


 


“Person”
means an individual, partnership, corporation (including a business trust),
joint stock company, estate, trust, limited liability company, unincorporated
association, joint venture or other entity, or a Governmental Authority.


 


“Pledged
Collateral” means “Pledged Collateral” as such term is defined in the Stock
Pledge Agreement.


 


“Pledged
Debt Instruments” means all right, title and interest of any Grantor in
Instruments evidencing any Indebtedness owed to such Grantor, including all
Indebtedness described on Annex 3 (Form of Pledge Amendment), issued
by the obligors named therein.


 


“Qualified
Cash” means, as of any date of determination, the amount of unrestricted
cash and Cash Equivalents of the Grantors that is in Deposit Accounts or in
Securities Accounts, or any combination thereof, and which such Deposit Account
or Securities Account is the subject of a Control Agreement and is maintained
by a branch office of the Deposit Account Bank or Approved Securities
Intermediary located within the United States.


 


“Quarterly”
means each of the three month period ending on March 31, June 30,
September 30 and December 31.


 


“Real Property”
means any estates or interests in real property now owned or hereafter acquired
by any Grantor or a Subsidiary of any Grantor and the improvements thereto.


 


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


 


“Requirement
of Law” means, with respect to any Person, the common law and all federal,
state, local and foreign laws, rules and regulations, orders, judgments,
decrees and other determinations of any Governmental Authority or arbitrator,
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.


 


“Secured
Obligations” shall mean, with respect to each Grantor, all liabilities,
obligations, or undertakings owing by such Grantor to the Secured Parties of
any kind or description arising out of or outstanding under, advanced or issued
pursuant to, or evidenced by the Indenture, this Agreement, or any of the other
Noteholder Documents, as amended, amended and restated, modified, renewed,
refunded, replaced, or refinanced in whole in part from time to time, irrespective
of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, voluntary or involuntary, whether now
existing or hereafter arising, and including all interest, premium, costs, fees
(including attorneys fees) and expenses in addition to all fees and expenses
(including attorney fees) arising under or in connection with the Pledge
Agreement (including, interest, costs, fees, and expenses that, but for the
provisions of the Bankruptcy Law, would have accrued irrespective of whether a
claim thereof is allowed) and any and all other amounts which each Grantor is
required to pay pursuant to any of the foregoing, by law, or otherwise.


 


“Secured
Parties” means the Senior Noteholders, the Collateral Agent, the Indenture
Trustee and the Pledge Agent (solely in respect of fees and expenses (including
attorneys fees) arising under or in connection with the Pledge Agreement),
together with their transferees, assigns or successors.


 


“Senior
Noteholders”  means the holders from
time to time of the Senior Secured Notes.


 


“Stock”
means “Stock” as such term is defined in the Stock Pledge Agreement.


 


“Trademark
License” means any agreement, whether written or oral, providing for the
grant by or to any Grantor of any right to use any Trademark.


 


“Trademarks”
means (a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos
and other source or business identifiers, and, in each case, all goodwill
associated therewith, whether now existing or hereafter adopted or acquired,
all registrations and recordings thereof and all applications in connection
therewith, in each case whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, and (b) the right to
obtain all renewals thereof.


 


“Vehicles”
means all vehicles covered by a certificate of title law of any state.


 


“Voidable
Transfer” has the meaning set forth in Section 11.9 to this Agreement.


 


1.2           Construction.  Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term “including” is not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. 
Section,  subsection, clause,
schedule, and exhibit references are to this


 


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Agreement unless otherwise specified.  Any reference in this Agreement or in any of
the other Noteholder Document to this Agreement or any of the other Noteholder
Document  shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.  In the event of a direct conflict between
the terms and provisions of this Agreement and the Indenture, it is the intention
of the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the Indenture shall control and govern; provided, however,
that the inclusion herein of additional obligations on the part of each Grantor
and supplemental rights and remedies in favor of the Collateral Agent, in each
case in respect of the Collateral, shall not be deemed a conflict with the
Indenture.


 


1.3           Schedules
and Exhibits.  All of the
schedules and exhibits attached to this Agreement shall be deemed incorporated
herein by reference.


 


2.             CREATION OF
SECURITY INTEREST.


 


2.1           Grant of
Security Interest. 
Each Grantor hereby pledges, grants, transfers, and assigns to the
Collateral Agent, for the benefit of the Secured Parties, a security interest
in and a continuing Lien on, all of such Grantor’s right, title, and interest
in all currently existing and hereafter acquired Collateral in order to secure
prompt and complete payment and performance of any and all of the Secured
Obligations in accordance with the terms and conditions of the Noteholder
Documents, and in order to secure prompt performance by each Grantor of each such
Grantor’s covenants and duties under each Noteholder Document to which such
Grantor is a party.  Anything contained
in this Agreement or any other Noteholder Document to the contrary
notwithstanding, except for Asset Sales permitted in the Indenture, no Grantor
has any authority, express or implied, to dispose of any item or portion of the
Collateral.


 


2.2           Negotiable
Collateral.  In the
event that any Collateral, including proceeds, is evidenced by or consists of
Negotiable Collateral, and if and to the extent that perfection or priority of
the Collateral Agent’s security interest is dependent on or enhanced by
possession, each Grantor, promptly upon the request of the Collateral Agent,
shall endorse and assign such Negotiable Collateral to the Collateral Agent and
deliver physical possession of such Negotiable Collateral to the Collateral
Agent.


 


2.3           Collection
of Accounts, General Intangibles, Negotiable Collateral.  At any time after the occurrence and during
the continuation of an Event of Default, the Collateral Agent or the Collateral
Agent’s designee may (a) notify Account Debtors of each Grantor that the
Accounts, Chattel Paper, or General Intangibles have been assigned to the
Collateral Agent or that the Collateral Agent has a security interest therein,
or (b) collect the Accounts, Chattel Paper, or General Intangibles directly and
charge the reasonable collection costs and expenses to the Account.  Each Grantor agrees that it will hold in
trust for the Collateral Agent, as the Collateral Agent’s trustee, any
Collections that it receives and promptly will deliver said Collections to the
Collateral Agent or a Deposit Account Bank in their original form as received
by each Grantor.


 


2.4           Delivery of
Additional Documentation Required.  Subject to the terms of the Intercreditor Agreement:


 


Each
Grantor authorizes the Collateral Agent to file any financing statement
necessary or desirable to effectuate the transactions contemplated by this
Agreement and any other Noteholder


 


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Documents,
and any continuation statement or amendment with respect thereto, in any
appropriate filing office without the signature of each Grantor where permitted
by applicable law and describing the Collateral in the same manner as described
herein or in any other manner as the Collateral Agent may determine is
necessary, advisable or prudent, including, without limitation, describing such
property as “all assets” or “all personal property whether now owned or
hereafter acquired.”  Each Grantor
hereby ratifies the filing of any financing statement filed without the
signature of each Grantor prior to the date hereof.


 


At
any time upon the request of the Collateral Agent, each Grantor shall execute
and deliver to the Collateral Agent, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents (the “Additional Documents”) that the Collateral
Agent may request in its sole discretion, in form and substance reasonably
satisfactory to the Collateral Agent, to perfect and continue perfected or
better perfect the Collateral Agent’s Liens in the Collateral (whether now
owned or hereafter arising or acquired), and in order to fully consummate all
of the transactions contemplated hereby and under the other Noteholder
Documents.  In addition, on such
periodic basis as the Collateral Agent shall reasonably require, each Grantor
shall (a) provide the Collateral Agent with a report of all new material
patentable, copyrightable, or trademarkable materials acquired or generated by
each Grantor during the prior period, (b) cause all material Patents and
Trademarks acquired or generated by each Grantor that are necessary in the
conduct of each Grantor’s business and that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in
a manner sufficient to impart constructive notice of each Grantor’s ownership
thereof, (c) solely at the reasonable request of the Collateral Agent (but not
otherwise), cause all material Copyrights acquired or generated by each Grantor
that are necessary in the conduct of each Grantor’s business and that are not
already the subject of a registration with the appropriate filing office (or an
application therefor diligently prosecuted) to be registered with such
appropriate filing office in a manner sufficient to impart constructive notice
of each Grantor’s ownership thereof, and (d) cause to be prepared, executed,
and delivered to the Collateral Agent supplemental schedules to the applicable
Noteholder Document to identify such material Patents and Copyrights to the
extent registered after the date hereof, and such material Trademarks as being
subject to the security interests created hereunder.


 


2.5           Power of
Attorney.  Subject to
Gaming Laws, each Grantor hereby irrevocably appoints the Collateral Agent (and
any of the Collateral Agent’s officers, employees, or agents designated by the
Collateral Agent) as such Grantor’s attorney-in-fact, with power to:  (a) if each Grantor refuses to, or fails
timely to execute and deliver any of the documents described in Section 2.4,
sign the name of each Grantor on any of the documents described in Section 2.4;
(b) at any time that an Event of Default has occurred and is continuing, sign
each Grantor’s name on any invoice or bill of lading relating to the
Collateral, drafts against Account Debtors, or notices to Account Debtors; (c)
send requests for verification of Accounts; (d) endorse each Grantor’s name on
any Collection item that may come into the Collateral Agent’s possession; (e)
at any time that an Event of Default has occurred and is continuing, make,
settle, and adjust all claims under each Grantor’s policies of insurance and
make all determinations and decisions with respect to such policies of
insurance (other than workers’ compensation); and (f) at any time that an Event
of Default has occurred and is continuing, settle and adjust disputes and
claims respecting the Accounts, Chattel Paper, or General Intangibles directly
with Account Debtors, for amounts and upon terms which the Collateral Agent
determines to be reasonable, and the Collateral Agent may cause to be executed
and delivered any documents and releases which the Collateral Agent determines
to be necessary.  The appointment of the
Collateral Agent as each Grantor’s attorney, and each and every one of the
Collateral Agent’s rights and powers, being coupled with an interest, is
irrevocable until, and shall terminate when, all of


 


10

















 


the Secured Obligations have been fully and
finally repaid and performed.  In
accordance with Section 9-207(a) of the Code, the Collateral Agent shall
use reasonable care in the custody and preservation of the Collateral in its
possession.


 


2.6           Right to
Inspect.  The
Collateral Agent (through any of its respective officers, employees, or agents)
shall have the right, from time to time
hereafter to inspect during regular business hours the Books and to check,
test, and appraise the Collateral in order to verify each Grantor’s financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.


 


2.7           Control
Agreement.  Each
Grantor agrees that it will not transfer assets out of any Securities Account
or Deposit Account other than as permitted hereunder.  No arrangement contemplated hereby or by any Control Agreement in
respect of any Securities Account, Deposit Account, or other Investment
Property shall be modified by each Grantor without the prior written consent of
the Collateral Agent.  Upon the
occurrence and during the continuance of a Default or Event of Default, the
Collateral Agent may notify any Deposit Account Bank or Approved Securities
Intermediary to liquidate the applicable Deposit Account or Securities Account
or any related Investment Property maintained or held thereby and remit the
proceeds thereof to any of the Collateral Agent’s bank accounts.


 


2.8           Release of
Security Interest. 
Subject to the terms of the Intercreditor Agreement and upon the payment
in full of all Secured Obligations or the cancellation or termination of the
commitments and any other contingent obligation included in the Secured
Obligations, the security interest granted hereby shall terminate hereunder and
all rights to the Collateral shall revert and be deemed reassigned to each
Grantor.  Upon any such termination, the
Collateral Agent shall, at each Grantor’s request and expense, execute and
deliver to each Grantor such documents as each Grantor shall reasonably request
to evidence such termination and/or reassignment, without recourse, representation
or warranty of any kind.


 


3.             REPRESENTATIONS
AND WARRANTIES


 


Each
Grantor hereby represents and warrants each of the following to the Collateral
Agent and the Secured Parties:


 


3.1           Title; No Other Liens


 


Except
for the Lien granted to the Collateral Agent pursuant to this Agreement and the
other Liens permitted to exist on the Collateral under the Indenture, such
Grantor (a) is the record and beneficial owner of the Negotiable Collateral
pledged by it hereunder constituting Instruments, (b) is the Entitlement Holder
of any Collateral constituting Investment Property held in a Securities Account
and (c) has rights in or the power to transfer each other item of Collateral in
which a Lien is granted by it hereunder, free and clear of any other Lien.


 


3.2           Perfection and Priority


 


Subject
to the terms of the Intercreditor Agreement, the security interest granted
pursuant to this Agreement shall constitute a valid and continuing perfected
second priority (subordinate solely in respect of the security interest granted
to the Agent and subject to the terms of the Intercreditor Agreement) security
interest in favor of the Collateral Agent in the Collateral for which
perfection is governed by the Code or filing with the United States Patent and
Trademarks Office or the United States


 


11

















 


Copyright Office, as applicable upon (i) in the case of all
Collateral in which a security interest may be perfected by filing a financing
statement under the Code the completion of the filings specified on Schedule 3
(Filings)  (which, in the
case of all filings and other documents referred to on such schedule, have been
delivered to the Collateral Agent in completed and duly executed form),
(ii) the delivery to the Collateral Agent of all Collateral consisting of
Instruments, in each case properly endorsed for transfer to the Collateral
Agent or in blank, (iii) the execution of Control Account Agreements with
respect to Collateral consisting of 
Investment Property not in certificated form, (iv) the execution of
Deposit Account Control Agreements with respect to all Deposit Accounts of a
Grantor and (v) all appropriate filings having been made with the United
States Patent and Trademark Office or the United States Copyright Office as
applicable.  Upon taking of all the
foregoing actions, such security interest shall be prior to all other Liens on
the Collateral except for Liens having priority over the Collateral Agent’s
Lien by operation of law or Liens granted in favor of the Agent as permitted by
the Indenture and subject to the Intercreditor Agreement.


 


3.3           Jurisdiction of Organization; Chief Executive Office


 


Such
Grantor’s jurisdiction of organization, legal name, organizational
identification number, if any, and the location of such Grantor’s chief
executive office or sole place of business, in each case as of the date hereof,
is specified on Schedule 1 (Jurisdiction of Organization; Principal Executive
Office) and such Schedule 1 (Jurisdiction of Organization;
Principal Executive Office) also lists all jurisdictions of
incorporation, legal names and locations of such Grantor’s chief executive
office or sole place of business for the five years preceding the date hereof.


 


3.4           Inventory and Equipment


 


On
the date hereof, such Grantor’s Inventory and Equipment (other than mobile
goods and Inventory or Equipment in transit) are kept at the locations listed
on Schedule 4
(Location of Inventory and Equipment) and such Schedule 4 (Location of Inventory
and Equipment) also list the locations of such Inventory and
Equipment for the five years preceding the date hereof.


 


3.5           Accounts


 


No
amount payable to such Grantor under or in connection with any Account is
evidenced by any Instrument or Chattel Paper that has not been delivered to the
Collateral Agent, properly endorsed for transfer, to the extent such delivery
is required by Section 2.2 (Negotiable Collateral)


 


3.6           Negotiable Collateral


 


Schedule 2 (Negotiable Collateral) lists all
Negotiable Collateral required to be pledged by each Grantor under this
Agreement.


 


3.7           Intellectual Property


 


(a)           Schedule 5
(Intellectual Property)  lists
all Intellectual Property that is registered Intellectual Property or for which
any application for registration has been filed with the United States Patent
and Trademarks Office and the United States Copyright Office and which is owned
or exclusively licensed to or by such Grantor on the date hereof.  Such Intellectual Property set forth on Schedule 5
(Intellectual Property) for such Grantor includes all Material
Intellectual Property that is registered Intellectual Property or for which any
application for registration has been filed with the United States


 


12

















 


Patent and Trademarks Office and the United States Copyright Office and
which is owned or exclusively licensed to or by such Grantor on the date
hereof, and that is necessary to the conduct of such Grantor’s business.


 


(b)           All Material Intellectual Property owned by such
Grantor is valid, subsisting, unexpired and enforceable, has not been adjudged
invalid and has not been abandoned and the use thereof in the business of such
Grantor does not, to the knowledge of such Grantor, infringe, misappropriate,
dilute or violate the intellectual property rights of any other Person.


 


(c)           Except as set forth in Schedule 5 (Intellectual Property),
none of the Material Intellectual Property owned by such Grantor is the subject
of any licensing or franchise agreement pursuant to which such Grantor is the
licensor or franchisor.


 


(d)           No holding, decision or judgment has been rendered
by any Governmental Authority against a Grantor that would limit, cancel or
question the validity of, or such Grantor’s rights in, any Material
Intellectual Property.


 


(e)           No action or proceeding seeking to limit, cancel or
question the validity of any Material Intellectual Property owned by such
Grantor or such Grantor’s ownership interest therein is pending or, to the
knowledge of such Grantor, threatened. 
There are no claims, judgments or settlements to be paid by such Grantor
relating to the Material Intellectual Property.


 


3.8           Deposit Accounts; Securities Accounts


 


The
only Deposit Accounts or Securities Accounts maintained by any Grantor on the
date hereof are those listed on Schedule 6 (Bank Accounts) which sets
forth such information separately for each Grantor.


 


3.9           Commercial Tort Claims


 


The
only Commercial Tort Claims of any Grantor existing on the date hereof
(regardless of whether the amount, defendant or other material facts can be determined
and regardless of whether such Commercial Tort Claim has been asserted,
threatened or has otherwise been made known to the obligee thereof or whether
litigation has been commenced for such claims) are those listed on Schedule 7
(Commercial Tort Claims), which sets forth such information
separately for each Grantor.


 


4.             COVENANTS


 


Each
Grantor agrees with the Collateral Agent to the following, as long as any
Secured Obligation remains outstanding and, in each case, unless the Collateral
Agent otherwise consent in writing:


 


4.1           Generally


 


Such
Grantor shall (a) except for the security interest created by this
Agreement, not create or suffer to exist any Lien upon or with respect to any
Collateral, except Liens permitted under the Indenture, (b) not use or
permit any Collateral to be used unlawfully or in violation of any provision of
this Agreement, any other Noteholder Document, any Requirement of Law or any
policy of insurance covering the Collateral, (c) not sell, transfer or
assign (by operation of law or otherwise) any Collateral except as permitted
under the Indenture, (d) not enter into any agreement or undertaking
restricting the


 


13

















 


right or ability of such Grantor or the Collateral Agent to sell,
assign or transfer any Collateral if such restriction would have a Material
Adverse Effect and (e) promptly notify the Collateral Agent of its entry
into any agreement or assumption of undertaking that restricts the ability to
sell, assign or transfer any Collateral regardless of whether or not it has a
Material Adverse Effect.


 


4.2           Maintenance of Perfected Security Interest; Further
Documentation


 


(a)           Such Grantor shall maintain
the security interest created by this Agreement as a perfected security interest
having at least the priority described in Section 3.2 (Perfection and Priority) and
Section 2.2
(Negotiable Collateral) and, subject to the terms of the
Intercreditor Agreement, shall defend such security interest and such priority
against the claims and demands of all Persons.


 


(b)           Such Grantor shall furnish
to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail and in form and substance satisfactory to the Collateral
Agent.


 


(c)           At any time and from time to
time, upon the written request of the Collateral Agent, and at the sole expense
of such Grantor, such Grantor shall promptly and duly execute and deliver, and
have recorded, such further instruments and documents and take such further
action as the Collateral Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including the filing of any financing or
continuation statement under the Code (or other similar laws) in effect in any
jurisdiction with respect to the security interest created hereby and the
execution and delivery of Deposit Account Control Agreements and Control
Account Agreements.


 


4.3           Changes in Locations, Name, Etc.


 


(a)           Except upon 15 days’ prior
written notice to the Collateral Agent and delivery to the Collateral Agent of
(i) all additional financing statements and other documents reasonably
requested by the Collateral Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (ii) if
applicable, a written supplement to Schedule 4 (Location of Inventory and Equipment)
showing (A) any additional locations at which Inventory or Equipment shall
be kept or (B) any changes in any location where Inventory or Equipment
shall be kept that would require the Collateral Agent to take any action to
maintain a perfected security interest in such Collateral, such Grantor shall
not do any of the following:


 


(i)            permit any Inventory or
Equipment to be kept at a location other than those listed on Schedule 4
(Location of Inventory and Equipment), except for Inventory or
Equipment in transit;


 


(ii)           change its jurisdiction of
organization or its location, in each case from that referred to in
Section 3.3 (Jurisdiction of Organization; Chief Executive office);
or


 


(iii)          change its legal name or any
trade name used to identify it in the conduct of its business or ownership of
its properties or organizational identification number, if any, or corporation,
limited liability company or other organizational structure to such an extent
that any financing statement filed in connection with this Agreement would
become misleading.


 


14

















 


(b)           Such Grantor shall keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral.  If requested by the Collateral Agent, the
security interest of the Collateral Agent shall be noted on the certificate of
title of each Vehicle.


 


4.4           Negotiable Collateral


 


Subject
to the terms of the Intercreditor Agreement, such Grantor shall, subject to
Section 2.2 herein (i) deliver to the Collateral Agent any Collateral
representing or evidencing any Negotiable Collateral whether now existing or
hereafter acquired, in suitable form for transfer by delivery or, as
applicable, accompanied by such Grantor’s endorsement, where necessary, or duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent.


 


4.5           Accounts


 


(i)            Such Grantor shall not,
other than in the ordinary course of business consistent with its past
practice, (i) grant any extension of the time of payment of any Account,
(ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the
payment of any Account, (iv) allow any credit or discount on any Account
or (v) amend, supplement or modify any Account in any manner that could
adversely affect the value thereof.


 


(ii)           The Collateral Agent shall
have the right to make test verifications of the Accounts in any manner and
through any medium that it reasonably considers advisable, and such Grantor
shall furnish all such assistance and information as the Collateral Agent may
reasonably require in connection therewith. 
At any time and from time to time, upon the Collateral Agent’s request
and at the expense of the relevant Grantor, such Grantor shall cause independent
public accountants or others satisfactory to the Collateral Agent to furnish to
the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts; provided, however,
that unless a Default or Event of Default shall be continuing, the Collateral
Agent shall request no more than four such reports during any calendar year.


 


4.6           Investment
Property


 


(a)           Such Grantor shall
(i) maintain all Collateral constituting Investment Property in a Control
Account, subject to the proviso to Section 4.7.


 


(b)           Such Grantor shall not grant
control over any Collateral constituting Investment Property to any Person
other than the Collateral Agent, subject to the terms of the Intercreditor
Agreement.


 


4.7           Control
Accounts; Approved Deposit Accounts


 


Such
Grantor shall (i) deposit in an Approved Deposit Account all cash received
by such Grantor, (ii) not establish or maintain any Securities Account
that is not a Control Account and (iii) not establish or maintain any
Deposit Account other than with a Deposit Account Bank, provided, however,
that any Grantor may maintain other accounts not subject to a Deposit
Account Control Agreement or a Control Agreement so long as the aggregate
balance in all such accounts does not exceed $500,000.


 


15

















 


4.8           Intellectual Property


 


(a)           Such Grantor (either itself or through licensees)
shall (i) continue to use each Trademark that is Material Intellectual
Property in order to maintain such Trademark in full force and effect with respect
to each class of goods for which such Trademark is currently used, free from
any claim of abandonment for non-use, (ii) maintain as in the past the
quality of products and services offered under such Trademark, (iii) use
such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not
adopt or use any mark that is confusingly similar or a colorable imitation of
such Trademark unless the Collateral Agent shall obtain a perfected security
interest in such mark pursuant to this Agreement and (v) not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby any registered Trademark (or any goodwill associated
therewith) that is Material Intellectual Property may become destroyed,
invalidated, impaired or harmed in any way.


 


(b)           Such Grantor (either itself or through licensees)
shall not do any act, or omit to do any act, whereby any Patent that is
Material Intellectual Property may become forfeited, abandoned or dedicated to
the public.


 


(c)           Such Grantor (either itself or through licensees)
(i) shall not (and shall not permit any licensee or sublicensee thereof
to) do any act or omit to do any act whereby the registered Copyrights that are
Material Intellectual Property may become invalidated or otherwise impaired and
(ii) shall not (either itself or through licensees) do any act whereby the
Copyrights that are Material Intellectual Property may fall into the public
domain.


 


(d)           Such Grantor (either itself or through licensees)
shall not do any act, or omit to do any act, whereby any trade secret that is
Material Intellectual Property may become publicly available or otherwise
unprotectable.


 


(e)           Such Grantor (either itself or through licensees)
shall not do any act that knowingly uses any Material Intellectual Property to
infringe, misappropriate, or violate the intellectual property rights of any
other Person.


 


(f)            Such Grantor shall promptly notify the Collateral
Agent if it knows, that any application or registration relating to any
Material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination (including the institution of, or
any such determination in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal
in any country) regarding such Grantor’s ownership of, right to use, interest
in, or the validity of, any Material Intellectual Property or such Grantor’s
right to register the same or to own and maintain the same.


 


(g)           Whenever such Grantor, either by itself or through
any agent, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
within or outside the United States or register any Internet domain name, such
Grantor shall report such filing to the Collateral Agent within five Business
Days after the last day of the fiscal quarter in which such filing occurs.  Upon request of the Collateral Agent, such
Grantor shall execute and deliver, and have recorded, all agreements,
Instruments, Documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent’s security interest in any
registration or application for Copyright, Patent, Trademark or internet domain
name and the goodwill and General Intangibles of such Grantor relating thereto
or represented thereby.


 


16

















 


(h)           Such Grantor shall take all reasonable actions
necessary whether or not  requested by
the Collateral Agent, including in any proceeding before the United States
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency and any Internet domain name registrar, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of any Copyright, Trademark, Patent or Internet domain name that
is Material Intellectual Property, including filing of applications for
renewal, affidavits of use, affidavits of incontestability and opposition and
interference and cancellation proceedings.


 


(i)            In the event that any Material Intellectual Property
is or has been infringed upon or misappropriated or diluted by a third party,
such Grantor shall notify the Collateral Agent promptly after such Grantor
learns thereof.  Such Grantor shall take
appropriate action in response to such infringement, misappropriation of
dilution, including as appropriate, promptly bringing suit for infringement,
misappropriation or dilution and to recover all damages for such infringement,
misappropriation of dilution, and shall take such other actions as may be appropriate
in its reasonable judgment under the circumstances to protect such Material
Intellectual Property.


 


(j)            Unless otherwise agreed to by the Collateral Agent,
such Grantor shall execute and deliver to the Collateral Agent for filing as
applicable, (i) in the United States Copyright Office a short-form
copyright security agreement in the form attached hereto as Annex 5
(Form of Short Form Intellectual Property Security Agreement),
(ii) in the United States Patent and Trademark Office a short form patent
security agreement in the form attached hereto as Annex 5 (Form of Short Form
Intellectual Property Security Agreement), and (iii) in the
United States Patent and Trademark Office a short-form trademark security
agreement in form attached hereto as Annex 5 (Form of Short Form Intellectual Property
Security Agreement).


 


4.9           Vehicles


 


Upon
the request of the Collateral Agent, within 30 days after the date of such
request and, with respect to any Vehicle acquired by such Grantor subsequent to
the date of any such request, within 30 days after the date of acquisition
thereof, such Grantor shall file all applications for certificates of title or
ownership indicating the Collateral Agent’s security interest in the Vehicle
covered by such certificate and any other necessary documentation, in each
office in each jurisdiction that the Collateral Agent shall deem advisable to
perfect its security interests in the Vehicles.


 


4.10         Payment of Obligations


 


Such
Grantor shall pay and discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of
income or profits therefrom, as well as all claims of any kind (including claims
for labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, reserves in
conformity with GAAP with respect thereto have been provided on the books of
such Grantor and such proceedings could not reasonably be expected to result in
the sale, forfeiture or loss of any material portion of the Collateral or any
interest therein.


 


4.11         Insurance


 


Such
Grantor shall (i) maintain, and cause to be maintained for each of its
Subsidiaries, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar


 


17

















 


properties in the same general areas in which such Grantor or such
Subsidiary (as defined in the Indenture) operates, and such other insurance as
may be reasonably requested by the Collateral Agent, and, in any event, all
insurance required by any Collateral Documents and (ii) cause all such
insurance to name the Collateral Agent on behalf of the Secured Parties as
additional insured or loss payee, as appropriate, and to provide that no
cancellation shall be effective until after 30 days’ written notice thereof to
the Collateral Agent.


 


4.12         Notice of Commercial Tort Claims 


 


Such
Grantor agrees that, if it shall acquire any interest in any Commercial Tort
Claim (whether from another Person or because such Commercial Tort Claim shall
have come into existence), (i) such Grantor shall, immediately upon such
acquisition, deliver to the Collateral Agent, in each case in form and
substance satisfactory to the Collateral Agent, a notice of the existence and
nature of such Commercial Tort Claim and deliver a supplement to Schedule 7
(Commercial Tort Claims) containing a specific description of such
Commercial Tort Claim, (ii) the provision of Section 2 (Grant of Security
Interests) shall apply to such Commercial Tort Claim and
(iii) such Grantor shall execute and deliver to the Collateral Agent, in
each case in form and substance satisfactory to the Collateral Agent, any
certificate, agreement and other document, and take all other action, deemed by
the Collateral Agent to be reasonably necessary or appropriate for the
Collateral Agent to obtain, on behalf of the Noteholders, a, perfected security
interest in all such Commercial Tort Claims. 
Any supplement to Schedule 7 (Commercial Tort Claims)  delivered pursuant to this
Section 4.12 (Notice of Commercial Tort Claims) shall, after
the receipt thereof by the Collateral Agent, become part of Schedule 7(Commercial
Tort Claims) for all purposes hereunder other than in respect of
representations and warranties made prior to the date of such receipt.


 


4.13         Collateral Reporting


 


Provide
Collateral Agent (and if so requested by the Collateral Agent) with the
following documents at the following times in form  reasonably satisfactory to the Collateral Agent:


 


	
  Within 5 Business Days of any issuance or filing

  	
   

  	
  copies of
  each report in respect of the Grantors’, and their respective Subsidiaries’
  businesses issued by a Nevada Gaming Authority or made by any Grantor or any
  of their Subsidiaries, to a Nevada Gaming Authority,

  
	
   

  	
   

  	
   

  
	
  Monthly (not later than the 10th day of each month)

  	
   

  	
  a summary
  aging, by vendor, of Grantors’ and their Subsidiaries’ accounts payable  and any book overdraft,

  
	
   

  	
   

  	
  a
  detailed report regarding Grantors’ and their Subsidiaries’ cash and Cash
  Equivalents including an indication of which amounts constitute Qualified
  Cash,

  
	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  a
  report regarding Grantors’ and their Subsidiaries’ accrued, but unpaid, ad
  valorem taxes.

  



 


5.             COLLATERAL AGENT’S RIGHTS AND REMEDIES.


 


18

















 


5.1           Rights and
Remedies.


 


Subject
to the terms of the Intercreditor Agreement and the Gaming Laws, upon the
occurrence and during the continuance of an Event of Default, the security
hereby constituted shall become enforceable and, in addition to all other
rights and remedies available to the Collateral Agent as provided hereafter,
the Collateral Agent may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by each Grantor:


 


(a)           Proceed directly and at once, without notice,
against each Grantor to collect and recover the full amount or any portion of
the Secured Obligations, without first proceeding against the Note Issuer, or
against any security or collateral for the Secured Obligations;


 


(b)           Without notice to each Grantor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate
and apply toward the payment of the Secured Obligations (i) any indebtedness
due or to become due from the Collateral Agent to each Grantor and (ii) any
moneys, credits or other property belonging to each Grantor at any time held by
or coming into the possession of the Collateral Agent;


 


(c)           Exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies available to it at law (including those of a
secured party under the Code) or in equity;


 


(d)           Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which the Collateral Agent considers
advisable, and in such cases,


 


(e)           Without notice or demand upon each Grantor, make
such payments and do such acts as the Collateral Agent considers necessary or
reasonable to protect its security interest in the Collateral.  Each Grantor agrees to assemble the
Collateral if the Collateral Agent so requires, and to make the Collateral
available to the Collateral Agent as the Collateral Agent may designate.  Each Grantor authorizes the Collateral Agent
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 encumbrance, charge, or lien which in the Collateral Agent’s
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith.  With respect to any of each Grantor’ owned premises, each Grantor
hereby grants the Collateral Agent a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
the Collateral Agent’s rights or remedies provided herein, at law, in equity,
or otherwise;


 


(f)            Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral.  Each
Grantor hereby grants to the Collateral Agent a license or other right to use,
without charge, each Grantor’s labels, Patents, Copyrights, rights of use of
any name, trade secrets, trade names, Trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in advertising for sale or selling any Collateral, and each
Grantor’s rights under all licenses and all franchise agreements shall inure to
the Collateral Agent’s benefit.  Solely
to the extent necessary to avoid the invalidation of any Grantors’ material
rights and interests in any Trademarks that have material economic value and solely
in connection with the Collateral Agent’s advertising or sale of goods on which
such Trademarks are affixed, the Collateral Agent agrees to maintain quality
control standards with respect to such goods reasonably similar to those in
effect immediately prior to the exercise of remedies with respect to such
goods;


 


(g)           Sell all or any part of 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


 


19

















 


(including each Grantor’s premises) as the Collateral Agent determines
is commercially reasonable.  It is not
necessary that the Collateral be present at any such sale;


 


(h)           The Collateral Agent shall
give notice of the disposition of the Collateral as follows:


 


(i)            The Collateral Agent shall give each Grantor 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 is to be made
of the Collateral, then the time on or after which the private sale or other
disposition is to be made; and


 


(ii)           The notice shall be personally delivered or mailed,
postage prepaid, to each Grantor, 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;


 


(i)            The Collateral Agent may
credit bid and purchase at any public sale;


 


(j)            The Collateral Agent 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 or keeper without the
requirement of prior notice or a hearing;


 


(k)           The Collateral Agent, on
behalf of the Secured Parties, shall have all other rights and remedies
available at law or in equity or pursuant to any other Loan Document; and


 


(l)            Any deficiency that exists
after disposition of the Collateral as provided above will be paid immediately
by each Grantor.  Any excess will be
returned, without interest and subject to the rights of third Persons, by the
Collateral Agent to each Grantor.


 


5.2           Remedies
Cumulative.  The
Collateral Agent’s rights and remedies under this Agreement, the other
Noteholder Documents, and all other agreements shall be cumulative.  The Collateral Agent shall have all other
rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity.  No exercise by the
Collateral Agent of one right or remedy shall be deemed an election, and no
waiver by any member of the Secured Parties of any Event of Default on each
Grantor’s part shall be deemed a continuing waiver. No delay by any member of
the Secured Parties shall constitute a waiver, election, or acquiescence by it.


 


6.             TAXES AND EXPENSES REGARDING THE COLLATERAL.  If each Grantor fails to pay any monies (whether
taxes, rents, assessments, insurance premiums, or, in the case of leased
properties or assets, rents or other amounts payable under such leases) due to
third Persons by the end of any applicable grace period, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then, the Collateral Agent, in its sole
discretion and without prior notice to each Grantor, may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves as the Collateral Agent deems necessary to protect the Secured Parties
from the exposure created by such failure; or (c) obtain and maintain insurance
policies insuring each Grantor’s ownership and use of the Collateral, and take
any action with respect to such policies as the Collateral Agent deems prudent,
in accordance with the terms of the Indenture. 
Any amounts paid or deposited by the Collateral Agent shall constitute
Secured Parties’ expenses, shall immediately become additional Secured
Obligations, shall bear interest at the applicable rate of the Senior Secured
Notes, and


 


20

















 


shall be secured by the Collateral. 
Any payments made by the Collateral Agent shall not constitute an
agreement by the Collateral Agent or the Secured Parties, to make similar
payments in the future or a waiver by the Secured Parties, or the Collateral
Agent on behalf thereof, of any Event of Default under this Agreement.  The Collateral Agent need not inquire as to,
or contest the validity of, any such expense, tax, security interest,
encumbrance, or lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing; provided, however, if each Grantor is contesting a tax
claim in good faith with appropriate provision therefor on its financing
statements, the Collateral Agent shall not cause such claim to be paid or
interfere with such contest.  The Collateral
Agent shall use its best efforts to provide prompt notice to each Grantor of
any action taken by it under this Section 6.


 


7.             WAIVERS; INDEMNIFICATION.


 


7.1           Demand;
Protest; etc. 
Except as otherwise specifically and explicitly set forth in this Agreement,
the Indenture or the other Noteholder Documents, and to the extent permitted by
law, each Grantor waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of Accounts, Documents, Instruments, Chattel Paper, and guarantees at any time
held by the Secured Parties, or the Collateral Agent on behalf thereof, on
which each Grantor may in any way be liable.


 


7.2           Secured
Parties’ Liability for Collateral.  So long as the Collateral Agent complies with its obligations
under the Code and no willful misconduct or gross negligence occurs, the
Collateral Agent shall not in any way or manner be liable or responsible
for:  (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person.  All risk of loss, damage,
or destruction of the Collateral shall be borne by each Grantor.


 


7.3           Indemnification.  The Note Issuer agrees to defend, indemnify,
save, and hold the Collateral Agent and the Secured Parties, and each of their
respective officers, employees, and agents (each an “Indemnified Person”)
harmless (to the fullest extent permitted by law) against:  (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other Person, and (b) all losses
(including reasonable attorneys fees and disbursements) in any way suffered,
incurred, or paid by the Collateral Agent, the Secured Parties as a result of
or in any way arising out of, following, or consequential to transactions with
any Grantor, whether under this Agreement, the other Noteholder Documents or
otherwise (all of the foregoing, collectively, the “Indemnified Liabilities”).  Notwithstanding the foregoing, the Note
Issuer shall not have any obligation under this Section 7.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. 
This provision shall survive the termination of this Agreement.


 


8.             THE APPOINTMENT OF THE COLLATERAL AGENT:


 


8.1           Appointment   The Indenture Trustee hereby designates and
appoints Wells Fargo Bank National Association, as Collateral Agent to act as
specified herein and in the Stock Pledge Agreement.  The Indenture Trustee hereby irrevocably authorizes the
Collateral Agent to take such action on its behalf under the provisions of this
Agreement and the Stock Pledge Agreement and any other instruments and
agreements referred to herein or therein and to exercise all powers set forth
herein and therein, for the benefit of the Secured Parties to the extent set
forth in this Agreement and


 


21

















 


the Stock Pledge Agreement, including without limitation the right to
foreclose or otherwise realize upon the Collateral or the Pledged Collateral
and to initiate, prosecute and defend any and all legal proceedings against the
Grantors or any other party which is or may become party to this Agreement and
to the Stock Pledge Agreement and to perform such duties hereunder and
thereunder as are specifically delegated to or permitted or required of the
Collateral Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto (it being understood that all the rights and
remedies of the Collateral Agent under this Section 8 solely in respect of
the Stock Pledge Agreement shall be subject to the Gaming Laws) .


 


The Collateral Agent accepts its appointment as
Collateral Agent and agrees to execute its duties and obligations hereby created
upon the terms and conditions set forth herein and in other Noteholder
Documents.


 


8.2           Specific
Duties Of The Collateral Agent    Subject to the terms of the Intercreditor Agreement, the Collateral
Agent shall:


 


(a)           upon the receipt by it of
written instructions of the Indenture Trustee, execute and deliver on behalf of
the Secured Parties such documents or instruments as described in the written
instruction of the Indenture Trustee as shall be necessary or appropriate from
time to time to maintain the perfection of any lien in, to or upon the
Collateral, Pledged Collateral or any portion thereof, which liens have been,
are or will be granted pursuant to this Agreement and the Stock Pledge
Agreement;


 


(b)           accept, on behalf of the
Secured Parties, any part of the Collateral or the Pledged Collateral delivered
to it, including without limitation any certificated Notes, licenses,
instruments and documents, and accept, on behalf of the Secured Parties, any
new Collateral or Pledged Collateral given as security for the obligations
secured by this Agreement or the Stock Pledge Agreement, which Collateral and
Pledged Collateral may be delivered for safekeeping to third-party custodians
and, upon the receipt of written instructions of the Indenture Trustee, execute
and deliver, on behalf of the Secured Parties, such documents or instruments
evidencing the creation of any lien with respect thereto and perfecting such
lien as shall be set forth in such instructions;


 


(c)           release the Collateral, the
Pledged Collateral or any portion thereof from any liens thereon which were
created pursuant to this Agreement and the Stock Pledge Agreement if such
release is in compliance with the terms of this Agreement, the Indenture or the
Intercreditor Agreement or otherwise at the direction of the Indenture Trustee;


 


(d)           furnish the Indenture
Trustee, promptly upon request, duplicates of all reports, notices, requests,
demands, certificates and other documents received by the Collateral Agent
under this Agreement, the Intercreditor Agreement, the Stock Pledge Agreement
or any instrument or document entered into pursuant thereto unless any such
document shall state thereon that it has previously been (or is being)
furnished directly to the Indenture Trustee;


 


(e)           upon receipt by it of
written instructions from the Indenture Trustee, take such action as set forth
in the instructions to protect and preserve the Collateral and the Pledged
Collateral and realize on and foreclose upon the Collateral and the Pledged
Collateral, including without limitation exercising any powers or any of the
remedies or making any determinations of fact described in this Agreement and
in the Stock Pledge Agreement;


 


22

















 


(f)            provide notice required by
this Agreement, the Stock Pledge Agreement, the Intercreditor Agreement or by
law to the Grantors or any other party entitled thereto, in order to take any
actions required or authorized to be taken under this Agreement, the Stock
Pledge Agreement or the Intercreditor Agreement;


 


(g)           take, or refrain from
taking, such other actions (but only such actions that are set forth in this
Agreement) as the Indenture Trustee shall from time to time direct by written
instruction to the Collateral Agent;


 


8.3           Duties Limited   (a)  Except
as expressly provided herein, in this Agreement or in written instructions of
the Indenture Trustee, the
Collateral Agent shall not have any duty or obligation, express or implied, to:


 


(i)            manage, control, use,
maintain, sell, dispose of, purchase, bid for or otherwise deal with the
Collateral, the Pledged Collateral or any portion thereof, or to otherwise take
or refrain from taking any action under, or in connection with this Agreement,
the Stock Pledge Agreement or the Intercreditor Agreement, except to the extent
required by law;


 


(ii)           take any action which
relates to, materially affects or impairs the amounts which the Secured Parties
may recover from disposition of the Collateral and the Pledged Collateral,
including without limitation any election or waiver of remedies available under
this Agreement or the Stock Pledge Agreement or with respect to the Collateral
and the Pledged Collateral or the manner of foreclosure upon the same; any
determination of the order and timing of foreclosure upon any portion of the
Collateral and the Pledged Collateral or of the amount of any credit bid to be
entered at any public or private, judicial or nonjudicial sale of the
Collateral and the Pledged Collateral; the pursuit of any remedies against the
Grantors following the completion of foreclosure upon the Collateral and the
Pledged Collateral; the compromise or settlement of any claims against the
Grantors including the conduct of any negotiations relating to the same or with
a view toward the termination of any pending foreclosure proceedings;


 


(iii)          obtain or maintain insurance
on the Collateral or the Pledged Collateral, as applicable, or any other
insurance;


 


(iv)          pay or discharge any tax,
assessment or other governmental charge or any lien or encumbrance of any kind
owing with respect to, or assessed or levied against, any part of the
Collateral or the Pledged Collateral;


 


(v)           advance any moneys related
to the Collateral or the Pledged Collateral or for the benefit of the Secured
Parties for any purpose;


 


(vi)          take any action or omit to
take any action not expressly provided for in this Agreement, the Stock Pledge
Agreement or the Intercreditor Agreement and documents related thereto and
executed in connection therewith; or


 


(vii)         take any action or omit to
take any action to perfect or insure priority for the security interest granted
by this Agreement unless instructed in writing by the Indenture Trustee.


 


23

















 


(b)           In addition to the
provisions of Section 8.3(a) herein, under no circumstances shall the
Collateral Agent have any duty or obligation to take any actions hereunder,
even if instructed to do so by the Indenture Trustee, if the Collateral Agent
determines, in its reasonable discretion, that such actions would subject it to
liability or expense for which satisfactory indemnity has not been provided
hereunder or otherwise.


 


8.4           Written Instructions  In the event
that the Collateral Agent receives written instructions from the Indenture
Trustee which the Collateral Agent determines, in its discretion, to be
ambiguous, inconsistent, in conflict with this Agreement, the Stock Pledge
Agreement or the Intercreditor Agreement or otherwise insufficient to direct
the actions of the Collateral Agent, then the Collateral Agent shall have no
obligation whatsoever to take or refrain from taking any action pursuant to
such written instructions, but shall instead do one or more of the following:


 


(a)           seek additional written
instructions satisfactory to it from the Indenture Trustee; or


 


(b)           resign as Collateral Agent
in accordance with this Agreement; or


 


(c)           at the expense of the
Secured Parties, which fees and expenses shall be paid in advance, commence an
action in a court of appropriate jurisdiction requiring the Secured
Parties  to interplead and settle among
themselves their rights in and to the Collateral and any proceeds thereof then
held by the Collateral Agent.


 


8.5           Reliance.  In acting with respect to this Agreement, the Stock Pledge
Agreement and the Intercreditor Agreement, the Collateral Agent shall be
entitled to:


 


(a)           rely on any communication
believed by it to be genuine and to have been made, sent or signed by the
person, firm or institution by whom it purports to have been made, sent or
signed;


 


(b)           rely as to any matters of
fact which might reasonably be expected to be within the knowledge of the
Indenture Trustee or any Grantor upon a certificate signed by or on behalf of
any such party;


 


(c)           rely on the representations
made by the Indenture Trustee in their respective instructions regarding its
respective authority to provide the instructions; and


 


(d)           rely on the advice or
services of any persons, firms or professionals employed by it and rely upon
the opinions and statements of any professional advisor so employed.


 


8.6           No
Responsibility  The Collateral Agent does
not assume any responsibility for:


 


(a)           any failure or delay in
performance or breach by the Grantors or by any Secured Party of any
obligations under this Agreement, the Stock Pledge Agreement or the
Intercreditor Agreement; or


 


(b)           the truth or accuracy of any
representation or warranty or statement given or made in connection with this
Agreement; or


 


(c)           the legality, validity,
effectiveness, adequacy or enforceability of this Agreement, the Stock Pledge
Agreement or the liens on the Collateral and Pledged Collateral; or


 


24

















 


(d)           the validity, enforceability
or sufficiency of any agreement or instrument or any depreciation or diminution
in the value of any Collateral including the Pledge Collateral or the income
thereon.


 


(e)           the Collateral Agent shall not be liable for any
action taken, suffered or omitted or for any error of judgment made by it in
good faith in the performance of its duties under this Agreement, the Stock
Pledge Agreement, the Intercreditor Agreement or any Collateral Document except
to the extent that such liability arises from the Collateral Agent’s gross
negligence or willful misconduct.


 


8.7           Reliance
By Collateral Agent  The Collateral Agent may rely
upon any certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond or paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.  The Collateral Agent may consult with
independent counsel, and a written opinion of such counsel shall constitute
full and complete protection in respect of any action taken, suffered or
omitted by it under this Agreement, the Intercreditor Agreement, the Stock
Pledge Agreement or any other Collateral Document in good faith and in
accordance with such opinion of counsel. 
The Collateral Agent may execute any of its powers hereunder or perform
any duties hereunder either directly or through agents or attorneys (it being
understood that the Collateral Agent shall not be liable for any claims,
damages, or losses arising out of the Collateral Agent’s actions under this
Section 8.7) and the Collateral Agent shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.  


 


8.8           Moneys to be Held in Trust  Subject to the terms of the Intercreidtor Agreement, all moneys received by the Collateral
Agent hereunder and under this Agreement, including but not limited to moneys
in the Deposit Account or the Securities 
Account, shall be held by the Collateral Agent in trust and applied for
the purposes of this Agreement, and segregated from other funds of the
Collateral Agent.


 


8.9           Application of Sale Proceeds  All moneys collected by the Collateral Agent upon any
sale of the Collateral and the Pledged Collateral, together with any other
moneys received by the Collateral Agent under this Agreement and the Stock
Pledge Agreement, shall be applied as set forth in this Agreement, the Stock
Pledge Agreement, subject to the terms of the Intercreditor Agreement.


 


8.10         Expenses; Indemnification  The
Collateral Agent shall be entitled to payment or reimbursement by the Grantors
of its reasonable expenses and disbursements (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) hereunder.  In addition, the Collateral Agent shall be indemnified by the
Grantors for, and held harmless by it against, any and all damages, losses,
liability, costs, charges, expenses and judgments incurred without gross
negligence or willful misconduct on its or its officers’, directors’,
employees’ or agents’ part, arising out of or in connection with the acceptance
or administration of the agency hereunder, including the costs and expenses
(including reasonable costs and expenses of its attorneys and agents) of
defending itself against any claims, suits or causes of action.  


 


8.11         Resignation or Removal  The
Collateral Agent may resign on not less than 30 days’ written notice to the
Grantors and the Indenture Trustee, but such resignation shall not take effect
until a successor has been appointed by the Indenture Trustee and accepted its
duties in accordance with this Section 8 herein.  If no successor Collateral Agent shall have been appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Collateral Agent may, on behalf of the Secured
Parties, appoint a successor Collateral Agent which shall be a


 


25

















 


financial institution with an office in New York, New York having a
combined capital and surplus of at least $500,000,000.  The Collateral Agent may be removed at any
time, with or without cause, by written notice from the Indenture Trustee
delivered to the Collateral Agent and the Grantors, but such removal shall not
take effect until a successor has been appointed and accepted its duties in accordance
with Section 8 herein.


 


8.12         Successor Collateral Agent  Any
corporation or association which succeeds to the business of the Collateral
Agent as a whole or substantially as a whole, whether by sale, merger,
consolidation or otherwise, shall thereby become vested with all the property,
rights and powers of the Collateral Agent hereunder and shall be deemed to have
assumed all of the obligations of the Collateral Agent hereunder, without any
further act or conveyance.  In the event
of the resignation or removal of the Collateral Agent or a vacancy from any
other cause, a successor may be appointed by the Indenture Trustee.  Any successor Collateral Agent under this
Section 8 shall be a financial institution, having a combined capital and
surplus of not less than $500,000,000. 
Any such successor Collateral Agent shall become vested with all the
property rights and powers of the Collateral Agent hereunder, without any
further act or conveyance.  Any
predecessor Collateral Agent shall from time to time execute, deliver and
record such instruments as the Collateral Agent may reasonably require to
confirm any succession hereunder.


 


9.             NOTICES. All notices and other communications hereunder to
the Collateral Agent shall be in writing and shall be mailed, sent or delivered
in accordance with the Indenture and all notices and other communications
hereunder to each Grantor shall be in writing and shall be mailed, sent or
delivered in care of Note Issuer in accordance with the Indenture.


 


10.           CHOICE OF LAW AND VENUE.  JURY TRIAL WAIVER.  GRANTORS AND COLLATERAL AGENT AGREE THAT THE PROVISIONS IN THE
INDENTURE WITH RESPECT TO CHOICE OF LAW AND VENUE AND JURY TRIAL WAIVER ARE
APPLICABLE TO THIS AGREEMENT AS IF FULLY SET FORTH HEREIN.


 


11.           GENERAL PROVISIONS.


 


11.1         Effectiveness.  This Agreement shall be binding and deemed
effective when executed by each Grantor and accepted and executed by the
Collateral Agent.


 


11.2         Successors
and Assigns.  This
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties; provided, however, that each
Grantor may not assign this Agreement or any rights or duties hereunder without
the Collateral Agent’s prior written consent and any prohibited assignment
shall be absolutely void.  No consent to
an assignment by the Collateral Agent shall release each Grantor from its
Secured Obligations.  The Collateral
Agent may assign this Agreement and its rights and duties hereunder and no
consent or approval by each Grantor is required in connection with any such
assignment.


 


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


 


11.4         Interpretation.  Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against any member of the
Secured Party or any Grantor, whether under any rule of construction or
otherwise.  On the contrary, this
Agreement has been reviewed by all parties


 


26

















 


and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.


 


11.5         Severability
of Provisions.  Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


11.6         Amendments
in Writing.  Subject to
the terms of the Intercreditor Agreement, this Agreement can only be amended by
a writing signed by the Collateral Agent and each Grantor (to the extent such
amendment affects any obligation or right of such Grantor).


 


11.7         Counterparts;
Telefacsimile Execution.  This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.


 


11.8         Additional
Grantors  If, pursuant to Section 4.19 (Additional
Guarantees) of the Indenture, the Note Issuer shall be required to
cause any Subsidiary (as defined in the Indenture) that is not a Grantor to
become a Grantor hereunder, such Subsidiary shall execute and deliver to the
Collateral Agent a Joinder Agreement substantially in the form of Annex 4
(Form of Joinder Agreement) and shall thereafter for all purposes be
a party hereto and have the same rights, benefits and obligations as a Grantor
party hereto on the Closing Date.


 


11.9         Revival and
Reinstatement of Obligations.  If the incurrence or payment of the Secured Obligations by each
Grantor or the transfer by each Grantor to the Collateral Agent of any property
of each Grantor 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 Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Collateral
Agent 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 Collateral
Agent is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys’ fees of the Collateral Agent related thereto,
the liability of each Grantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.


 


11.10       Continuing
Security Interest.  This Agreement shall create a
continuing security interest in the Collateral and shall: (i) remain in full
force and effect until the payment in full in cash of the Secured Obligations,
including the full and final termination of any commitment to extend any
financial accommodations under the Indenture; (ii) be binding upon each Grantor
and its successors and assigns; and (iii) inure to the benefit of the
Collateral Agent and the Secured Parties and their respective successors,
transferees, and assigns.  Upon the
payment in full in cash of the Secured Obligations, or the satisfaction and
discharge of the Secured Obligations in accordance with Article 12 of the
Indenture or the release of all of the Collateral otherwise in accordance with
the terms of the Indenture, and the full and final termination of any
commitment to extend any financial accommodations under the Indenture, subject
to the terms of the Intercredidtor Agreement, the security interests granted
herein shall automatically terminate and all rights to the Collateral shall


 


27

















 


revert and be deemed re-assigned to each Grantor.  Upon any such termination, the Collateral
Agent will, at Grantors’ expense, execute and deliver to the applicable
Grantors such documents as Grantors shall reasonably request to evidence such
termination without recourse against or representation or warranty of any kind
made by, the Collateral Agent.  Such
documents shall be prepared by Grantors and shall be in form and substance
reasonably satisfactory to the Collateral Agent. Notwithstanding the foregoing,
to the extent that any payments on the Secured Obligations or Proceeds of the
Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any Bankruptcy Law, common law or
equitable cause, then to such extent the Secured Obligations so satisfied shall
be revived and continue as if such payment or Proceeds had not been received by
the Collateral Agent for the benefit of the Secured Parties, and the Collateral
Agent’s security interests, rights, powers and remedies hereunder shall
continue in full force and effect.  In
such event, this Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to this Section 11.10.


 


11.11       Conflicting Provisions


 


To
the extent a term or provision of this Agreement conflicts with the Indenture
or the Intercreditor Agreement, the Intercreditor Agreement shall control with
respect to the subject matter of such term or provision.


 


11.12       Governing Law


 


This
agreement and the rights and obligations of the parties hereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York.


 


11.13       Entire
Agreement.  This Agreement together with the other
Noteholder Documents represent the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.


 


[signature page follows]


 


28

















 


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


 


	
   

  	
  GRANTORS:

  
	
   

  	
   

  
	
   

  	
  POSTER FINANCIAL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joanne Beckett

  	
   

  
	
   

  	
  Name:

  	
  Joanne Beckett

  	
   

  
	
   

  	
  Title:

  	
  VP & General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GNL, CORP.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joanne Beckett

  	
   

  
	
   

  	
  Name:

  	
  Joanne Beckett

  	
   

  
	
   

  	
  Title:

  	
  VP & General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GNLV, CORP.,

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joanne Beckett

  	
   

  
	
   

  	
  Name:

  	
  Joanne Beckett

  	
   

  
	
   

  	
  Title:

  	
  VP & General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLDEN NUGGET EXPERIENCE, LLC,

  
	
   

  	
  By: GNLV, Corp.

  
	
   

  	
     as sole
  member

  
	
   

  	
  By:

  	
  /s/ Joanne Beckett

  	
   

  
	
   

  	
  Name:

  	
  Joanne Beckett

  	
   

  
	
   

  	
  Title:

  	
  VP & General Counsel

  	
   

  
						



 


 


[SIGNATURE PAGE TO SECURITY AGREEMENT]


 

















 


	
  ACCEPTED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
  as Collateral Agent

  
	
   

  
	
  By:

  	
  /s/ Jane Y. Schweiger

  	
   

  
	
   

  	
  Name: Jane Y. Schweiger

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  HSBC BANK USA

  
	
  as Indenture Trustee

  
	
   

  
	
  By:

  	
  /s/ Deirdra N. Ross

  	
   

  
	
   

  	
  Name: Deirdra N. Ross

  
	
   

  	
  Title: Assistant Vice President

  



 


 


[SIGNATURE PAGE TO SECURITY AGREEMENT]