Exhibit 10.2


 


LIMITED
COVENANT NOT TO SUE AND RELEASE OF LIMITED GUARANTY


 


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


 


WITNESSETH:


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(a) the earlier to occur
of the following:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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


 


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


 


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


 


5

















 


Notices shall be addressed as follows:


 


	
  If to the
  Southwest Guarantors:

  	
  Southwest
  Casino Corporation and Southwest

  
	
   

  	
  Casino and
  Hotel Corp

  
	
   

  	
  2001
  Killebrew Drive, Suite 350

  
	
   

  	
  Minneapolis,
  MN 55425

  
	
   

  	
  ATTN:
  President

  
	
   

  	
  Fax:
  952-853-9991

  
	
   

  	
   

  
	
  With a copy
  to:

  	
  Oppenheimer
  Wolff & Donnelly, LLP

  
	
   

  	
  Plaza VII,
  Suite 3200

  
	
   

  	
  35 South 7th
  Street

  
	
   

  	
  Minneapolis,
  MN 55402

  
	
   

  	
  ATTN: D.
  William Kaufman

  
	
   

  	
  Fax:
  612-607-7100

  
	
   

  	
   

  
	
  If to Agent:

  	
  Black
  Diamond Commercial Finance, L.L.C.

  
	
   

  	
  100 Field
  Drive

  
	
   

  	
  Lake Forest,
  IL  60045-2580

  
	
   

  	
  ATTN: Hugo
  H. Gravenhorst

  
	
   

  	
  Fax:
  847-615-9064

  
	
   

  	
   

  
	
  With a copy
  to:

  	
  Black
  Diamond Capital Management, L.L.C.

  
	
   

  	
  One Sound
  Shore Drive

  
	
   

  	
  Suite 200

  
	
   

  	
  Greenwich,
  Connecticut 06830

  
	
   

  	
  ATTN: Bob
  Rosenbloom

  
	
   

  	
  Fax:
  203-552-1014

  
	
   

  	
   

  
	
  And to:

  	
  Latham &
  Watkins LLP

  
	
   

  	
  233 South
  Wacker Drive

  
	
   

  	
  Suite 5800,
  Sears Tower

  
	
   

  	
  Chicago,
  Illinois 60606

  
	
   

  	
  ATTN: Jeff
  Moran

  
	
   

  	
  Fax:
  312-993-9767

  



 


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


 


6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


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


 


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


 


Signature page follows.


 


8

















 


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


 


 


	
   

  	
  SOUTHWEST CASINO CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas E. Fox

  
	
   

  	
  Name:

  	
  Thomas E. Fox

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOUTHWEST CASINO AND HOTEL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas E. Fox

  
	
   

  	
  Name:

  	
  Thomas E. Fox

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLACK DIAMOND COMMERCIAL FINANCE,

  L.L.C., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Hugo H. Gravenhorst

  
	
   

  	
  Name:

  	
  Hugo H. Gravenhorst

  
	
   

  	
  Its:

  	
  Managing Director

  
				



 


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