EXHIBIT 10.15


 


SECURITY
AGREEMENT AND PLEDGE OF STOCK


(Minnesota – MTR Harness)


 


THIS SECURITY
AGREEMENT AND PLEDGE OF STOCK (“Agreement”) is made and entered into as of the
29th day of June, 2004, by and between MTR GAMING GROUP, INC., a Delaware
corporation, hereinafter referred to as “Debtor”, and WELLS FARGO BANK,
National Association, as Agent Bank on behalf of itself and each of the Banks
described hereinbelow, hereinafter referred to as “Secured Party”.


 


R E C I T A L S:


 


A.                                   Reference
is made to that certain Third Amended and Restated Credit Agreement dated as of
March 28, 2003, as amended by First Amendment to Amended and Restated
Credit Agreement dated as of June 18, 2003, Second Amendment to Amended
and Restated Credit Agreement dated as of November 12, 2003, Third
Amendment to Third Amended and Restated Credit Agreement dated as of
February 25, 2004 and by Fourth Amendment to Third Amended and Restated
Credit Agreement dated as of June 4, 2004 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), executed by and
among MTR Gaming Group, Inc., a Delaware corporation, Mountaineer Park, Inc., a
West Virginia corporation, Speakeasy Gaming of Las Vegas, Inc., a Nevada
corporation, Speakeasy Gaming of Reno, Inc., a Nevada corporation, Presque Isle
Downs, Inc., a Pennsylvania corporation, Scioto Downs, Inc., an Ohio
corporation, successor by merger to Racing Acquisition, Inc., an Ohio
corporation and Speakeasy Gaming of Fremont, Inc., a Nevada corporation
(collectively referred to as the “Borrowers”), Wells Fargo Bank, National
Association, National City Bank of Pennsylvania, Branch Banking and Trust
Company and The Cit Group/Equipment Financing, Inc. (each individually a
“Lender” and collectively the “Lenders”), Wells Fargo Bank, National
Association, as the swingline lender (herein in such capacity, together with
its successors and assigns, the “Swingline Lender”), Wells Fargo Bank, National
Association, as the issuer of letters of credit (in such capacity, together with
it successors and assigns, the “L/C Issuer”), and Wells Fargo Bank, National
Association, as administrative and collateral agent for the Lenders, Swingline
Lender and L/C Issuer (herein, in such capacity, called the “Agent Bank” and,
together with the Lenders, Swingline Lender and L/C Issuer collectively
referred to as the “Banks”).


 


B.                                     In
this Agreement, all capitalized words and terms not otherwise defined herein
shall have the respective meanings and be construed herein as provided in
Section 1.01 of the Credit Agreement and any reference to a provision of
the Credit 


 

















 


Agreement shall be deemed to
incorporate that provision as a part hereof in the same manner and with the
same effect as if the same were fully set forth herein.


 


C.                                     Debtor
is the owner of all of the outstanding stock (collectively the “Pledged Stock”)
of the following Subsidiary (the “Pledged Subsidiaries”):


 


(i)                                     MTR-Harness,
Inc., a Minnesota corporation (“MTR Harness”) represented by Stock Certificate
No. 1, dated April 1, 2004, for one hundred (100) shares of the common
voting stock of MTR Harness.


 


D.                                    This
Agreement is governed by the laws of Nevada but is subject to the provisions of
Minnesota law that govern the conduct of harness horse racing, the operation of
a card club and other forms of gaming that may be authorized by subsequent
enabling legislation (collectively, “Gaming Laws”) as enforced by the Minnesota
Racing Commission (the “Commission) and by other applicable gaming authorities
(collectively, the “Gaming Authorities) .


 


AGREEMENTS:


 


In
consideration of the terms and conditions set forth herein and the making of
the Bank Facilities by Banks, the parties agree as follows:


 


1.                                As
security for the performance by Borrowers of each and every term and provision
contained in the Credit Agreement and the due and punctual payment of the
Revolving Credit Note and all other amounts owing under any of the Loan
Documents (collectively the “Secured Obligations”), Debtor hereby pledges,
assigns, and transfers as security the Pledged Stock to Secured Party, and
grants to Secured Party a security interest in the Pledged Stock, together with
all rights, products, proceeds, dividends, redemption payments, liquidation
payments, instruments and any other securities derived therefrom, substituted
therefor or otherwise subject to the lien hereof pursuant to the provisions
hereof, all of which shall be treated as part of the Pledged Stock and
collateral hereunder.


 


2.                                Debtor
represents and warrants as of the date hereof that: (a) the Pledged Stock represents
all of the issued and outstanding shares of the common voting stock of the
Pledged Subsidiaries, (b) the Pledged Subsidiaries have not authorized or
issued any class of stock other than common voting stock, (c) it is the
legal, record and beneficial owner of, has good and marketable title to and has
the right to pledge and create a security interest in the Pledged Stock,
(d) the Pledged Stock is validly issued, fully paid and non-assessable and
is not subject to any lien, pledge, charge, encumbrance or security interest
(other than the security interest hereby created in favor of Secured Party) or
right or option on the part of any third Person to purchase or otherwise
acquire the Pledged Stock or any part thereof nor is the Pledged Stock subject to
any restriction relating to the voting or other rights attaching thereto,


 

















 


(e)  this Agreement
and the delivery of the Pledged Stock to Secured Party creates a valid and
enforceable perfected lien on all of the Pledged Stock in favor of the Secured Party
for the benefit of the Banks, and (f) except for the required consents
specified herein, no consent, filing, recording or registration is required to
perfect the lien purported to be created by this Agreement.  Debtor covenants and agrees that it will
defend Secured Party’s right, title and lien in and to the Pledged Stock
against the claims and demands of all Persons and that it will have like title
to and right to pledge any other property at any time hereafter pledged to the
Secured Party as Pledged Stock.


 


3.                                Either
concurrently herewith or as soon as permitted by the Gaming Authorities, Debtor
shall cause to be delivered to Agent Bank in its capacity as Secured Party, or,
subject to compliance with applicable Gaming Laws, into an escrow pending permission
of the Gaming Authorities, the certificate or certificates evidencing the
Pledged Stock (each individually a “Certificate” and collectively the
“Certificates”) together with an Irrevocable Stock Power with respect to each
of the Pledged Subsidiaries in the form of Exhibit A, affixed hereto and
by this reference incorporated herein and made a part hereof (the “Stock
Power”).  Each Certificate evidencing
the Pledged Stock shall be delivered to Secured Party in suitable form for
transfer by delivery and shall be accompanied by a duly executed Stock Power,
all in form and substance reasonably satisfactory to Secured Party.


 


4.                                Upon
the full and complete satisfaction of the Revolving Credit Note and all other
amounts owing under any of the Loan Documents and termination of the Bank
Facilities, Secured Party shall release its security interest hereunder, and
will deliver to Debtor the Certificates evidencing the Pledged Stock, together
with all Stock Powers, and Secured Party shall, at the request and expense of
Debtor, file such documents and take such action as may be required by law or
as Debtor may reasonably request, at Debtor’s expense, to release Secured
Party’s security interest in the Pledged Stock.


 


5.                                Secured
Party shall have with respect to the Pledged Stock the rights and obligations
of a secured party under the Nevada Uniform Commercial Code, Chapter 104 of the
Nevada Revised Statutes (the “Code”). 
Such rights shall include, without limitation, subject to all applicable
Gaming Laws:


 


a.                                       The
right, upon the occurrence and during the continuance of an Event of Default,
to have the Pledged Stock or any part thereof transferred to its own name or to
the name of its nominee; or, if any Pledged Stock has been sold by Secured
Party in foreclosure after the occurrence of an Event of Default, to have such
Pledged Stock transferred to and issued in the name of the purchaser.


 

















 


b.                                      The
right, upon the occurrence and continuance of an Event of Default, to sell,
assign or deliver as many shares of the Pledged Stock as is reasonably
necessary to repay the defaulted Indebtedness owing the Banks, together with
expenses, including, but not limited to, reasonable selling expenses, broker’s
fees and attorneys’ fees attendant upon such sale and repayment, at public or
private sale, as Secured Party, at its sole option, may elect, and without
demand or advertisement, unless otherwise required by law.


 


6.                                Debtor
hereby covenants, agrees and acknowledges that an “Event of Default” shall
exist under this Agreement upon the occurrence of any of the following events
or conditions, and without the necessity of any demand or notice except as may
be expressly required herein or under the Credit Agreement:


 


a.                                       the
occurrence of any “Event of Default” as defined and described in the Credit
Agreement; and/or


 


b.                                      any
default hereunder not cured within thirty (30) days after written notice from
Agent Bank.


 


7.                                At
any private or public sale of the Pledged Stock or any part thereof, Secured
Party may, to the extent permitted under applicable Law and subject to
compliance with all applicable Gaming Laws, purchase and pay for the same by
cancellation of a principal amount of the Credit Facility and Revolving Credit
Note or other amounts owing under the Credit Agreement and Loan Documents equal
to the Purchase Price and free of any right of redemption on the part of
Debtor.  For the purpose of this
Paragraph, the “Purchase Price” where the Pledged Stock is listed on any
publicly traded stock exchange (“Exchange”), shall be deemed to be the mean of
the high and low selling prices in that Exchange on the date of sale.  Secured Party may, in its sole and absolute
discretion, sell all or any part of the Pledged Stock at private sale in such
manner and under such circumstances as Secured Party may deem necessary or
advisable in order that the sale may be lawfully conducted.  Without limiting the foregoing, Secured
Party may (i) approach and negotiate with a limited number of potential
purchasers; and (ii) restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing the Pledged Stock
for their own account for investment and not with a view to the distribution or
resale thereof.  In the event that the
Pledged Stock is sold at private sale, Debtor agrees that if the Pledged Stock
is sold in a manner that conforms with reasonable commercial practices of
banks, commercial finance companies, insurance companies or other financial
institutions disposing of property similar to the Pledged Stock, then: (aa) the
sale shall be deemed to be commercially reasonable in all respects; and
(bb) Secured Party shall not incur any liability or responsibility to
Debtor in connection therewith, notwithstanding the possibility that a
substantially higher price might have been realized at a public sale.  Debtor recognizes that a ready market may


 

















 


not exist for the Pledged Stock
if it is not regularly traded on a recognized securities exchange, and that a
sale by Secured Party of the Pledged Stock for an amount substantially less
than a pro rata share of the fair market value of the issuer’s assets minus
liabilities may be commercially reasonable in view of the difficulties that may
be encountered in attempting to sell the Pledged Stock.  Secured Party agrees, however, that the
Debtor shall have all rights, including rights of notice, provided by the
Code.  In any case where notice is
required, ten (10) days notice shall be deemed to be reasonable notice.  In the event of any sale hereunder, Secured
Party shall apply the proceeds in the order set forth in Section 7.03 of
the Credit Agreement.  Secured Party may
resort to the Pledged Stock or any portion thereof with no requirement on the
part of Secured Party to proceed first against any other Person or Collateral
or under any other Security Documentation. 
Additionally, (a) Debtor hereby waives and releases to the fullest
extent permitted by law any right or equity of redemption with respect to the
Pledged Stock, whether before or after sale hereunder and all rights, if any,
of marshalling of the Pledged Stock and any other security for the obligations
of the Borrowers under the Credit Agreement or otherwise; (b) Debtor
agrees it will not sell or otherwise dispose of or create any lien on any
portion of the Pledged Stock (except as permitted by the Credit Agreement); and
(c) Debtor agrees to promptly take all actions required under applicable
law to maintain the perfection of the security interest in the Pledged Stock in
the event that such stock is or becomes uncertified and to take such actions as
the Secured Party reasonably deems necessary or desirable to effect the
foregoing and to permit the Secured Party to exercise any of its rights and
remedies hereunder.


 


8.                                While
the Pledged Stock shall continue to be held by Secured Party pursuant to this
Agreement, so long as no Event of Default has occurred and remains continuing
and until written notice from Secured Party: (a) Debtor shall be entitled
to exercise any rights (including, without limitation, the right to vote the Pledged
Stock) or subscription privileges accruing to it as the owner of the Pledged
Stock which are not in violation of the terms of this Agreement or the Credit
Agreement or any other Loan Document or any other instrument or agreement
referred to herein or therein, or which would have the effect of impairing the
security interest of Secured Party, any Bank or holder of the Revolving Credit
Note, provided, however, that any additional shares of stock purchased or
otherwise received on account of any such rights or subscription privileges
shall be delivered to Secured Party, together with an appropriate Stock Power,
and shall be treated as part of the Pledged Stock; and (b) Debtor shall be
entitled to receive and to retain and use any dividends or distributions paid
in respect of the Pledged Stock. 
Subject to compliance with applicable Gaming Laws, the Secured Party
shall also be entitled to receive directly, and retain as part of the
Collateral:


 


a.                                       all
other or additional stock or securities (other than Cash or Cash Equivalents)
paid or distributed by way of dividend in respect of the Pledged Stock;


 

















 


b.                                      all
other or additional stock or securities (other than Cash or Cash Equivalents)
paid or distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and


 


c.                                       all
other or additional stock or other securities (other than Cash or Cash
Equivalents) which may be paid in respect of the Pledged Stock by reason of any
consolidation, merger, exchange of stock, conveyance of assets, liquidation or
similar corporate reorganization.


 


9.                                Debtor
will at all times comply with all Securities and Exchange Commission, Gaming
Authorities and other regulatory requirements with respect to its ownership and
pledge of the Pledged Stock.  Secured
Party will at all times comply with all Securities and Exchange Commission,
Gaming Authorities and other regulatory requirements with respect to the pledge
and security interest in the Pledged Stock.


 


10.                          Upon
the occurrence and continuance of any Event of Default hereunder, subject to
applicable law and the requirements of the Gaming Authorities: (a) Secured
Party shall have the right, upon written notice to Debtor, but shall not be
required, to vote or give its consent with respect to the voting of any or all
of the Pledged Stock, and in such event and for such purpose Debtor hereby
irrevocably constitutes and appoints Secured Party the proxy and
attorney-in-fact of the Debtor, with full power of substitution to do so, and
(b) Secured Party shall be entitled to receive all dividends and
distributions and apply the same toward payment of the Indebtedness owing under
the Bank Facilities in the manner and sequence set forth in Section 7.03
of the Credit Agreement.


 


11.                          The
Debtor represents to Secured Party that the Debtor has made its own
arrangements for keeping informed of changes or potential changes affecting the
Pledged Stock including, but not limited to, rights to convert, rights to
subscribe, payment of dividends, reorganization or other exchanges, tender
offers and voting rights, and the Debtor agrees that Secured Party shall have
no responsibility or liability for informing the Debtor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto.


 


12.                          No
renewal, extension, amendment, restatement or modification of the Credit
Agreement, Revolving Credit Note or any other Loan Document shall affect the
rights of Secured Party with respect to the Pledged Stock or any part thereof,
except to the extent specifically provided in such renewal, extension,
amendment, restatement or modification. 
No release or surrender of any Pledged Stock as security hereunder shall
affect the security interest in any of the remaining Pledged Stock not so
released or surrendered.  Secured
Party’s rights, liens and security interests hereunder shall continue
unimpaired and Debtor shall be and remain obligated in


 

















 


accordance with the terms
hereof notwithstanding any compromise or other indulgence granted by Secured
Party.  The Debtor hereby waives notice
of acceptance of this Agreement and of extensions of credit, loans, advances,
or other financial assistance made by Banks to Borrowers.  The Debtor further waives presentment and
demand for payment on the Revolving Credit Note, protest and notice of dishonor
or default with respect to the Revolving Credit Note or any other Loan
Document, and all other notices to which the Debtor might otherwise be entitled
except as herein otherwise expressly provided.


 


13.                          All
notices and other communications provided to any party hereto under this
Agreement shall be in writing or by facsimile and addressed, delivered or
transmitted to such party at its address or facsimile number set forth in the
Credit Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other parties.  Any notice, if mailed and properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted.


 


14.                          Whether
or not the transactions contemplated hereunder are completed, the Debtor will
pay all expenses relating to this Agreement, including, but not limited to:


 


a.                                       All
reasonable costs, outlays, attorneys’ fees and expenses of any kind and
character had or incurred in the enforcement or defense of any of the
provisions of this Agreement, the preparation for, negotiations regarding,
consultations concerning, or the defense of legal proceedings involving any
claim or claims made or threatened against Secured Party or any Bank arising
out of this transaction or the protection of the Pledged Stock securing the
Bank Facilities or advances made hereunder;


 


b.                                      All
filing and recording fees, costs, expenses which may be incurred by Secured
Party in respect of the filing and/or recording of any document or instrument
relating to the security interests granted in this Agreement.


 


15.                          Debtor
agrees that it will duly execute and deliver to Secured Party any additional
documents which may be reasonably required by Secured Party to give full effect
to, perfect or protect the pledge and security interest granted to Secured
Party hereunder or to enable Secured Party to exercise and enforce its rights
and remedies hereunder with respect to the Pledged Stock and to preserve,
protect and maintain the Pledged Stock and the value thereof, including,
without limitation, payment of all taxes, assessments and other charges imposed
on or relating to the Pledged Stock. 
Debtor hereby consents and agrees that the issuers of the Pledged Stock,
or any registrar or transfer agent or trustee for any of the Pledged Stock,
shall be entitled to accept the provisions of this Agreement as conclusive
evidence of the


 

















 


right of Secured Party to
effect any transfer or exercise any right hereunder, notwithstanding any other
notice or direction to the contrary heretofore or hereafter given by Debtor or
any other Person to such issuers or to any such registrar or transfer agent or
trustee.


 


16.                          Following
the occurrence and during the continuance of an Event of Default, Debtor agrees
to assist Secured Party in obtaining all approvals of the Gaming Authorities or
any other Governmental Authority that are required by law for or in connection
with any action or transaction contemplated by this Agreement or by the Code
and, at Secured Party’s request after and during the continuance of an Event of
Default, to prepare, sign and file with the Gaming Authorities the transferor’s
portion of any application or applications for consent to the transfer of
control thereof necessary or appropriate under applicable Gaming Laws for
approval of any sale or transfer of the Pledged Stock pursuant to the exercise
of Secured Party’s remedies hereunder and under the Loan Documents.


 


17.                          This
Agreement shall be binding upon and inure to the benefit of the Debtor, Secured
Party and their respective legal representatives, heirs, successors and
assigns, and the authorized transferees and holders of the Revolving Credit
Note; provided, however, that Debtor may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of Secured
Party.


 


18.                          This
Agreement, including the exhibits and other agreements referred to herein,
constitutes the entire agreement between the parties relating to the subject
matter hereof and cannot be changed or terminated orally, and shall be deemed
effective as of the date it is accepted by Secured Party.


 


19.                          Other
than with respect to compliance with all applicable Gaming Laws, this Agreement
shall be governed and construed under the laws of the State of Nevada in all
respects, including, but not limited to, matters of title, construction,
validity, performance and discharge. 
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under said laws.  However, if any provision of this Agreement
shall be held to be prohibited or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.


 


20.                          Time
is of the essence of this Agreement.


 


21.                          Debtor
agrees to indemnify and hold harmless Secured Party in accordance with the
provisions of Section 5.14 of the Credit Agreement which is incorporated
by this reference as though fully set forth herein.


 

















 


22.                          This
Security Agreement and Pledge of Stock may be executed in any number of
separate counterparts with the same effect as if the signatures hereto and
hereby were upon the same instrument. 
All such counterparts shall together constitute one and the same
document.


 


23.                          This
Security Agreement and Pledge of Stock shall terminate upon Bank Facility
Termination.  Upon the occurrence of
Bank Facility Termination, Secured Party shall return the Pledged Stock to
Debtor and take all such other actions as Debtor may reasonably request, as
Debtor’s expense, to terminate the lien and security interest created
hereunder.


 


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


 


	
  DEBTOR:

  
	
   

  
	
  MTR GAMING GROUP, INC.,

  
	
  a Delaware corporation

  
	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  
	
   

  	
  Edson R. Arneault,

  
	
   

  	
  President

  
	
   

  
	
   

  
	
  SECURED PARTY:

  
	
   

  
	
  WELLS FARGO BANK,

  
	
  National Association,

  
	
  Agent Bank

  
	
   

  
	
   

  
	
  By 

  	
  /S/ Rochanne Hackett

  	
   

  
	
   

  	
  Rochanne Hackett,

  
	
   

  	
  Vice President