Exhibit 10.5


 


CBS
SECURITY AGREEMENT


 


This CBS Security Agreement
(the “Security Agreement”) is entered into on June 22, 2010 (the “Effective
Date”) by and between Computerized Bookmaking Systems, Inc. (the “Grantor”),
a Nevada corporation, and Alpine Advisors LLC (the “Lender” or the “Secured
Party”), a Nevada limited liability company (individually, Grantor and Secured
Party may be referred to as a “party” or collectively as the “parties”).


 


RECITALS


 


WHEREAS,
Grantor is a wholly owned subsidiary of American Wagering, Inc. (“Borrower”),
which entered into a Loan Agreement dated as of June 22, 2010 (as amended,
supplemented, restated or otherwise modified and in effect from time to time,
the “Loan Agreement”; capitalized terms used
herein without definition are used as defined or used in the Loan Agreement),
with Secured Party, pursuant to which, among other things, Secured Party has
agreed, in its sole discretion, to make loans to Borrower upon the terms and
subject to the conditions specified in the Loan Agreement;


 


WHEREAS,
in order to secure all Obligations, Grantor has agreed to execute and deliver
to Secured Party a security agreement in substantially the form hereof;


 


NOW,
THEREFORE, in consideration of the promises and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:


 


1.               Grant of Security Interest.


 


a)              To secure the payment or performance, as
the case may be, in full of the Obligations, whether at stated maturity, by
acceleration or otherwise, Grantor hereby grants to Secured Party a first
priority and exclusive Lien upon the collateral described in paragraph c) below
(the “Collateral”).  As used herein, the
term Lien” shall mean any security interest, mortgage, lien, encumbrance or
adverse claim, and any financing statement or similar document filed in respect
of same.


 


b)             [reserved]


 


c)              The Collateral is described as
follows:  all of Grantor’s right, title,
and interest in and to all present and future (i) accounts, accounts
receivable, and other receivables of Grantor, arising out of or in connection
with the sale or lease of goods by Grantor, the rendering of services by
Grantor, and the licensing of software or other intellectual property by
Grantor, whether or not earned by performance; (ii) chattel paper (whether
tangible or electronic) arising out of or in connection with the sale or lease
of goods by Grantor, the rendering of services by Grantor, and the licensing of
software or other intellectual property by Grantor; (iii) all contract
rights, 


 

















 


including without limitation all rights under or with respect to all
Equipment Purchase and Software License Agreements, all purchase orders,
contracts or other agreements relating to the sale, lease and/or maintenance of
equipment or the license and/or maintenance of software, and all other
contracts evidencing, securing or otherwise relating to any of the foregoing; (iv) all
books and records and other general intangibles relating to or in connection
with the foregoing; (v) all supporting obligations relating to any of the
foregoing; (vi) all deposit accounts; and (vii) all proceeds of all
of the foregoing.  Such security interest
constitutes a valid security interest in the Collateral.  Grantor shall take such action, or authorizes
Secured Party at Grantor’s sole expense, to file one or more financing
statements (X) describing the Collateral and (Y) containing any other
information required by part 5 of Article 9 of the Uniform Commercial Code
as in effect in any jurisdiction (the “UCC”) for the sufficiency or filing
office acceptance of any initial financing statement or amendment, including
whether Grantor is an organization, the type of organization and any
organization identification number issued to Grantor, in any and all
jurisdictions where, and with any and all governmental authorities with whom,
Secured Party deems such filing to be necessary or appropriate to perfect and
establish the priority of the Liens granted herein (including any amendments,
modifications, extensions, or renewals thereof) including, without limitation,
the Secretary of State of the State of Nevada. 
Grantor agrees to furnish any such information to Secured Party promptly
upon request.  Grantor agrees to
cooperate fully with Lender in establishing and maintaining Secured Party’s
perfection of Secured Party’s security interest in the Collateral. Grantor also
ratifies its authorization for Secured Party to have filed in any UCC
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.


 


2.               Grantor Remains Liable. 
Anything herein to the contrary notwithstanding, (a) Grantor shall
remain liable under the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Secured Party of any
of the rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and (c) Secured
Party shall not have any obligations or liability under the contracts and
agreements included in the Collateral by reason of this Security Agreement or
the Loan Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.


 


3.               Use of Collateral. 
For so long as no Event of Default shall have occurred and be
continuing, Grantor shall be entitled to use and possess the Collateral,
subject to the rights, remedies, powers, and privileges of Secured Party under
this Agreement.


 

















 


4.               Representations and Warranties of Grantor. 
Grantor hereby represents and warrants to Secured Party that:


 


a)              Grantor has full right, power, and
authority to enter into this Security Agreement, without the consent, approval,
authorization of, or notice to, any other person or entity, including any
governmental entity or regulatory authority;


 


b)             Grantor has good and marketable title to
the Collateral free and clear of any Lien, except for the Liens in favor of
Secured Party. Grantor has not filed or consented to the filing of (a) any
financing statement or analogous document under the UCC or any other applicable
laws covering any Collateral, (b) any assignment in which Grantor assigns
any Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement or
similar instrument is still in effect, except, in each case, for the Liens in
favor of Secured Party.


 


c)              Grantor is duly organized and validly
existing as a corporation under the laws of the State of Nevada, and is in good
standing as a corporation; Grantor has no organizational number; Grantor’s
exact legal name is Computerized Bookmaking Systems, Inc.


 


d)             The execution, delivery, and performance
of this Security Agreement and compliance with the terms, conditions and provisions
hereof are not prohibited or restricted under Grantor’s Articles of
Incorporation or Bylaws.  The execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby (i) do not conflict with or result in any breach or contravention
of any applicable law, regulation, judicial order, or decree to which Grantor
is subject, (ii) will not result in the existence or imposition of any
Lien nor obligate Grantor to create any Lien (other than the Lien in favor of
Secured Party) in favor of any person or entity over all or any of its assets,
and (iii) do not violate, conflict with, constitute a default or event of
default under, or result in any rights to accelerate or modify any obligations
under any agreement, instrument, lease, mortgage, or indenture to which Grantor
is a party or subject, or to which any of its assets are subject;


 


e)              Grantor has the requisite corporate power
and authority and is duly authorized to execute and deliver this Security
Agreement and perform the Obligation. 
This Security Agreement has been duly executed and delivered by Grantor
and constitutes a valid and legally binding obligation of Grantor, enforceable
in accordance with its terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
other laws relating to or affecting generally the enforcement of creditors’
rights and by equitable principles of general applicability (regardless of
whether such enforceability is considered in a proceeding in equity or at law);


 


f)                The security interest granted hereby in
and to the Collateral constitutes a present, valid, binding, and enforceable
security interest as collateral security for the Obligation; and


 

















 


g)             Grantor is a wholly-owned direct subsidiary
of Borrower; Grantor and Borrower share an identity of interests as members of
a combined group of companies; and Grantor will derive substantial direct and
indirect benefits from the making of the loans to Borrower Companies by Secured
Party.


 


5.               Covenants of
Grantor.  For as long as the Obligation
from Borrower to Lender remains outstanding under the Loan Agreement, Grantor
hereby covenants:


 


a)              Grantor agrees that without
the prior written consent of Secured Party it will not sell, pledge, or otherwise
dispose of any Collateral now or in the future owned by Grantor or permit or
suffer to exist any Lien or encumbrance to exist on any Collateral or on any of
Grantor’s present or future inventory in favor of any person other than Secured
Party, or create or assume any obligation for borrowed money, except for
borrowings from Secured Party.


 


b)             Grantor will at all times
keep accurate and complete records of the Collateral, and Secured Party, or any
of its agents, shall have the right at all reasonable times to examine,
inspect, and make extracts from Grantor’s books and records, to discuss Grantor’s
affairs with the officers of Grantor and its independent accountants, and to
verify the validity, amount, quality, quantity, value, condition and status of,
or any other matter relating to, the Collateral, including by contacting
account debtors or others obligated with respect to Collateral or by other
methods.  Grantor will provide to Secured
Party periodic ageings of all accounts and other receivables, including the
name of each account debtor, the amount owed by each such account debtor, the
due dates of the accounts and other receivables, the related invoice numbers
and if requested by Secured Party copies thereof.  Such ageings shall be in form and substance
satisfactory to Secured Party and shall be delivered to Secured Party on the
date hereof and thereafter monthly, within 5 days after the end of each month,
and, after the occurrence of a Default or an Event of Default, whenever Secured
Party requests.


 


c)              Grantor agrees to deliver to
Secured Party when requested, and in any event not less frequently than once
each per month, a balance sheet, profit and loss statement, and reconcilement
of surplus of Grantor.


 


d)             Grantor represents and
warrants to Secured Party that all financial statements furnished to Secured
Party have and will accurately reflect the financial condition and operations
of Grantor at the times and for the periods indicated in those statements.


 


e)              With respect to any
Collateral held by Secured Party as security for the liabilities, Grantor
assents to all extensions or postponements of the time of payment or any other
indulgence in connection with the Collateral, to each substitution, exchange or
release of Collateral, to the addition or release of any party primarily or
secondarily liable, to the acceptance of partial payments on the Collateral and
the settlement, compromise, or adjustment of them, all in such manner and at
such time or times as Secured Party shall deem advisable. Secured Party shall
have no duty as to the collection or protection of Collateral or any income 


 

















 


from the Collateral, nor as
to the preservation of rights against prior parties, nor as to the preservation
of any right pertaining to the Collateral, beyond the safe custody of
Collateral in the possession of Secured Party. 
Secured Party shall not be deemed to have waived any of its rights in
any Collateral unless the waiver be in writing and no delay or omission by
Secured Party in exercising any right shall operate as a waiver of that right
or of any other right. Secured Party shall have, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code.


 


f)                Grantor agrees, from time to
time at its expense, to execute, deliver, file, and record all such notices,
affidavits, assignments, financing statements, and other instruments, and take
all further action, as shall in the judgment of Secured Party be necessary or
as Secured Party may reasonably request, to evidence, perfect and protect the
Lien of Secured Party in the Collateral, and Secured Party shall also have the
right to notify any person or persons owing any receivable and to demand and
receive payment of it directly to Secured Party, but Secured Party shall have
no duty so to do.


 


g)             Grantor shall pay or cause
to be paid promptly all taxes and assessments on the Collateral when due.


 


h)             Grantor shall not change its
type of organization, jurisdiction of organization or other legal structure.
Without providing at least 30 days prior written notice to Secured Party,
Grantor shall not change its name.  If
Grantor obtains an organizational identification number after the date hereof,
Grantor shall forthwith notify Secured Party of such organizational identification
number.


 


i)                 If Grantor shall at any time
hold or acquire any promissory notes or tangible chattel paper constituting
Collateral, Grantor shall, forthwith after the occurrence of a Default or Event
of Default and upon Secured Party’s request before the occurrence of a Default
or Event of Default if Secured Party deems itself insecure, endorse, assign and
deliver the same to Secured Party, accompanied by such instruments of transfer
or assignment duly executed in blank as Secured Party may from time to time
specify and with respect to any such Collateral in the possession or control of
Secured Party, Grantor waives any restriction or obligation imposed on Secured
Party by Sections 9-207(c)(1) and 9-207(c)(2) of the Uniform
Commercial Code as in effect in the State of Nevada from time to time (the “NVUCC”).


 


j)                 For each deposit account
that Grantor at any time opens or maintains, Grantor shall, forthwith after the
occurrence of a Default or Event of Default and at Secured Party’s request
before the occurrence of a Default or Event of Default if Secured Party deems
itself insecure, either (i) cause the depositary bank to enter into a
written agreement or other authenticated record with Secured Party, in form and
substance satisfactory to Secured Party, pursuant to which such depositary bank
shall agree, among other things, to comply at any time with instructions from
Secured Party to such depositary bank directing the disposition of funds from
time to time credited to such deposit account, without further consent of
Grantor, or (ii) arrange for Secured Party to become the customer of the
depositary bank with respect to the deposit 


 

















 


account.  The foregoing provisions of this section
shall not apply to deposit accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
benefit of Grantor’s salaried employees. With respect to any deposit accounts,
rights arising under deposit accounts or proceeds thereof in the possession or
within the control of Secured Party, Grantor waives any restriction or
obligation imposed on Secured Party by Sections 9-207(c)(1), 9-207(c)(2) and
9-208 of the NVUCC.


 


k)              Grantor shall not, without
Secured Party’s prior written consent, grant any extension of the time of payment
of any of the Collateral consisting of accounts, chattel paper, instruments or
payment intangibles, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any obligor liable for the
payment thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its good faith business
judgment.


 


l)                 Grantor, at its sole cost
and expense, shall maintain or cause to be maintained insurance with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be
in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. 
Such insurance shall be in such minimum amounts that Grantor shall not
be deemed a co-insurer under applicable insurance laws, regulations and
policies and otherwise shall be in such amounts, contain such terms, be in such
forms and be for such periods as may be reasonably satisfactory to Secured
Party.  Without limiting the foregoing,
Grantor shall (i) keep all of its physical property insured with casualty
or physical hazard insurance on an “all risks” basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a full
replacement cost endorsement and an “agreed amount” clause in an amount equal
to 100% of the full replacement cost of such property; (ii) maintain all
such workers’ compensation or similar insurance as may be required by law; and (iii) maintain,
in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of Grantor; business
interruption insurance; and product liability insurance.


 


6.               Confidentiality
of CBS Related Contracts. 
Grantor provides confidentiality to certain of its account debtors to
protect the physical contracts as well as the information contained
therein.  Secured Party acknowledges and
agrees that pursuant to the terms of this Security Agreement the security
interest in Grantor’s contracts does not extend to the examining or possessing
the actual agreements unless an Event of Default occurs.  However, nothing in this section in any way
alters Grantor’s obligation to provide ageings of its accounts and other
receivables required pursuant to Section 5(b) above.


 


7.               Expenses. Grantor
agrees to pay to Secured Party on demand all expenses, including reasonable
attorney’s fees, incurred by Secured Party in protecting or enforcing its
rights in the Collateral.


 

















 


8.               Secured Party’s
Obligations and Duties. 
Anything herein to the contrary notwithstanding, Grantor shall remain
liable under each contract or agreement comprised in the Collateral to be
observed or performed by Grantor thereunder. 
Secured Party shall not have any obligation or liability under any such
contract or agreement by reason of or arising out of this Security Agreement or
the receipt by Secured Party of any payment relating to any of the Collateral,
nor shall Secured Party be obligated in any manner to perform any of the
obligations of Grantor under or pursuant to any such contract or agreement, to
make inquiry as to the nature or sufficiency of any payment received by Secured
Party in respect of the Collateral or as to the sufficiency of any performance
by any party under any such contract or agreement, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to Secured Party or to which
Secured Party may be entitled at any time or times.  Secured Party’s sole duty with respect to the
custody, safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the NVUCC or otherwise, shall be to
deal with such Collateral in the same manner as Secured Party deals with
similar property for its own account.


 


9.               Continuing
Obligation.  The
liability of Grantor and the Lien created under this Agreement shall be
absolute and unconditional irrespective of: 
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect thereof,
or any other amendment or waiver of or any consent to departure from the Loan
Agreement or any other Loan Document, including any increase in the Obligations
resulting from the extension of additional credit to Borrower or otherwise; (ii) any
sale, exchange, release, surrender, realization upon any property by whomsoever
at any time pledged or mortgaged to secure, or howsoever securing, all or any
of the Obligations, and/or any offset thereagainst, or failure to perfect, or
continue the perfection of, any Lien in any such property, or delay in the
perfection of any such Lien, or any amendment or waiver of or consent to
departure from any other guaranty for all or any of the Obligations; (iii) any
exercise or failure to exercise any rights against Borrower or others
(including Grantor); (iv) any settlement or compromise of any Obligation,
any security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and any
subordination of the payment of all or any part thereof to the payment of any
Obligation (whether due or not) of Borrower to creditors of Borrower other than
Grantor; (v) any manner of application of Collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other disposition of
any Collateral for all or any of the Obligations or any other assets of
Borrower; (vi) any change, restructuring or termination of the existence
of Borrower; or (vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Agreement and/or obligations of Grantor hereunder, or a
defense to, or discharge of, Borrower or any other person or party relating to
this Agreement or the obligations of Grantor hereunder or otherwise with
respect to the Loans to Borrower.


 
















 


10.         Appointment and
Powers of Secured Party.


 


a)              Grantor hereby irrevocably
constitutes and appoints Secured Party and any member, director, officer or
agent thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of Grantor or in Secured Party’s own name, for the purpose of carrying
out the terms of this Security Agreement, to take any and all appropriate
action and to execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes of this Security Agreement
and, without limiting the generality of the foregoing, hereby gives said
attorneys the power and right, on behalf of Grantor, without notice to or
assent by Grantor, to do the following:


 


i)                 upon the occurrence and
during the continuance of an Event of Default, generally to sell, transfer,
pledge, license, lease, otherwise dispose of, make any agreement with respect
to or otherwise deal with any of the Collateral in such manner as is consistent
with the NVUCC and as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do at Grantor’s expense, at any
time, or from time to time, all acts and things which Secured Party deems necessary
to protect, preserve or realize upon the Collateral and the Lien therein, in
order to effect the intent of this Security Agreement, all as fully and
effectively as Grantor might do, including, without limitation:  (i) making, settling and adjusting
claims in respect of Collateral under policies of insurance, endorsing the name
of Grantor on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect thereto; and (ii) executing, delivering and
recording, in connection with any sale or other disposition of any Collateral,
of the endorsements, assignments or other instruments of conveyance or transfer
with respect to such Collateral; and


 


ii)              to the extent that Grantor’s
authorization given in Section 1 above is not sufficient, to file such
financing statements with respect hereto, with or without Grantor’s signature,
or a photocopy of this Security Agreement in substitution for a financing
statement, as Secured Party may deem appropriate and to execute in Grantor’s
name such financing statements and amendments thereto and continuation
statements which may require Grantor’s signature.


 


b)             To the extent permitted by
law, Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue of this Section. 
This power of attorney is a power coupled with an interest and is
irrevocable.


 


c)              The powers conferred on
Secured Party, its members, directors, officers and agents pursuant to this Section are
solely to protect Secured Party’s interests in the Collateral and shall not
impose any duty upon any of them to exercise any such powers.  Secured Party shall be accountable only for
the amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to Grantor for any act or failure to act, except for
Secured Party’s own gross negligence or willful misconduct.


 

















 


11.         Rights and Remedies
of Secured Party.  Upon the
occurrence of an Event of Default, Secured Party may exercise any one or more
of the following rights and remedies:


 


a)              Without demand, notice or
legal process of any kind, declare this Security Agreement to be in default;


 


b)             Have in any jurisdiction in
which enforcement hereof is sought, in addition to all other rights and
remedies, all of the rights and remedies provided to a secured party with
respect to the Collateral under the NVUCC or the UCC of any other jurisdiction
in which Collateral is located, including, without limitation, the right to
take possession of the Collateral, and for that purpose Secured Party may, so
far as Grantor can give authority therefor, enter upon any premises on which
the Collateral may be situated and remove the same therefrom.  Secured Party may in its discretion require
Grantor to assemble all or any part of the Collateral at such location or
locations within the jurisdiction(s) of Grantor’s principal office(s) or
at such other locations as Secured Party may reasonably designate.  Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party shall give to Grantor at least 10 days’ prior
written notice of the time and place of any public sale of Collateral or of the
time after which any private sale or any other intended disposition is to be
made.  Grantor hereby acknowledges that
10 days prior written notice of such sale or sales shall be reasonable notice.  In addition, Grantor waives any and all
rights that it may have to a judicial hearing in advance of the enforcement of
any of Secured Party’s rights hereunder, including, without limitation, its
right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto. The provisions of Section 9-209
of the NVUCC shall not apply to any account, chattel paper or payment
intangible as to which notification of assignment has been sent to the account
debtor.


 


c)              Pursue any other rights or
remedies available to Secured Party at law or in equity including recovery of
all costs of collection incurred by Secured Party due to the Event of Default,
including, without limitation, reasonable attorneys’ fees and expenses;


 


d)             Notification to Account
Debtors and Other Persons Obligated on Collateral.  At the request of Secured Party, notify
account debtors and other persons obligated on any of the Collateral of the
Lien of Secured Party in any account, chattel paper, general intangible,
instrument or other Collateral and that payment thereof is to be made directly
to Secured Party, or to the Lock Box established pursuant to Section 11(e) below
or to any other financial institution designated by Secured Party as Secured
Party’s agent therefor, and Secured Party may itself, without notice to or
demand upon Grantor, so notify account debtors and other persons obligated on
Collateral.  After the making of such a
request or the giving of any such notification, Grantor shall hold any proceeds
of collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by Grantor as trustee for Secured Party without
commingling the same with other funds of Grantor and shall turn the same over to
Secured Party in the identical form received, together with any necessary
endorsements or assignments.  Secured
Party may apply the proceeds of collection of accounts, chattel paper, 


 

















 


general intangibles,
instruments and other Collateral received by Secured Party to the Obligations
or hold such proceeds as additional Collateral, at the option of Secured Party.
The provisions of Section 9-209 of the NVUCC shall not apply to any
account, chattel paper or payment intangible as to which notification of assignment
has been sent to the account debtor or other person obligation on the
Collateral; and


 


e)              Lock Box.  Cause that all collections and proceeds of
Collateral shall be made to a lock box and remitted in kind to Secured
Party.  Grantor hereby confirms to
Secured Party that a post office box (the “Lock Box”) under the sole dominion
and control of Secured Party shall be established by Grantor and that Wells
Fargo Bank, N.A. (“Bank”) or another bank selected by Secured Party shall have
access to the items deposited in the Lock Box from time to time.  Grantor agrees and acknowledges that the Lock
Box is for the purpose of receiving all checks and other forms of payment,
amounts and cash from all account debtors and other persons and entities and
third party payors and obligors of Grantor relating to the Collateral.  Grantor hereby confirms to Secured Party that
upon the written request of Secured Party, a special, separate account number
(the “Lock Box Account”) under the sole dominion and control of Secured Party
will be established solely for the purpose of (i) depositing checks and
all other forms of payment, amounts and cash received relating to the
Collateral in the Lock Box, and (ii) receiving electronic fund transfers
from the CBS Payors.  All fees, costs and
expenses charged by Bank for the Lock Box and the Lock Box Account shall be in
accordance with Bank’s customary practices and shall be payable by
Grantor.  Secured Party shall not bear
any responsibility for such amounts.


 


12.         Standards for
Exercising Remedies.  To the
extent that applicable law imposes duties on Secured Party to exercise remedies
in a commercially reasonable manner, Grantor acknowledges and agrees that it is
not commercially unreasonable for Secured Party (a) to fail to incur
expenses reasonably deemed significant by Secured Party to prepare Collateral
for disposition or to postpone any such disposition pending any such
preparation; (b) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of; (c) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to remove any Lien on or any adverse claims against
Collateral; (d) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists; (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature;
(f) to contact other persons, whether or not in the same business as Grantor,
for expressions of interest in acquiring all or any portion of the Collateral;
(g) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature; (h) to dispose of Collateral by utilizing Internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capability of doing so, or that match buyers and
sellers of assets; (i) to disclaim disposition warranties; (j) to
purchase insurance or credit 


 

















 


enhancements
to insure Secured Party against risks of loss, collection or disposition of
Collateral or to provide to Secured Party a guaranteed return from the
collection or disposition of Collateral; or (k) to the extent deemed appropriate
by Secured Party, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist Secured Party in the collection
or disposition of any of the Collateral. 
Grantor acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Secured Party would
not be commercially unreasonable in Secured Party’s exercise of remedies
against the Collateral and that other actions or omissions by Secured Party
shall not be deemed commercially unreasonable solely on account of not being
indicated in this Section.  Without
limiting the foregoing, nothing contained in this Section shall be
construed to grant any rights to Grantor or to impose any duties on Secured
Party that would not have been granted or imposed by this Security Agreement or
by applicable law in the absence of this Section.


 


13.         Waiver.  Grantor, except as otherwise specifically set
forth herein, for itself and for its successors, transferees, and assigns,
hereby irrevocably waives diligence, presentment, and demand for payment,
protest, notice, notice of protest and nonpayment, dishonor and notice of
dishonor and all other demands or notices of any and every kind whatsoever in
connection with this Agreement, the other Loan Documents, and the Collateral
and the benefit of all statutes, ordinances, judicial rulings, and other legal
principles of any kind, now or hereafter enacted or in force, affording any
right of redemption or cure or any right to a stay of execution or extension of
time for payment or exempting any property of such person from levy and sale
upon execution of any judgment obtained by Secured Party or any successor or
assignee of Secured Party in respect of this Agreement, the other Loan Documents,
or the Collateral. Grantor hereby agrees that this Agreement, the other Loan
Documents, and the Collateral, and any or all payments coming due hereunder may
be extended from time to time in the sole discretion of Secured Party without
in any way affecting or diminishing Grantor’s liabilities hereunder.


 


14.         Survival of
Agreement.  All
covenants, agreements, representations and warranties made by Grantor herein
and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Security Agreement shall be considered to
have been relied upon by Secured Party and shall survive the execution and
delivery of this Security Agreement, the Loan Agreement and the advance of all
extensions of credit contemplated thereby, regardless of any investigation made
by Secured Party, and shall continue in full force and effect until this
Security Agreement shall terminate (or thereafter to the extent provided
herein).


 


15.         Notices.  Except as otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telecopier) and, mailed, telecopied, cabled, couriered or delivered
by hand to Grantor or to Secured Party, as the case may be, in each case
addressed to it at its address set forth below the name of such party on the
signature pages hereof, or, as to any party, at such other address as
shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of 


 

















 


this
Section.  All such notices and other
communications shall, when mailed, be effective three days after being
deposited in the mails, when telecopied or cabled, be effective when telecopied
or delivered to the cable company, respectively, and when couriered or
delivered by hand, be effective when received; except that notices and other
communications to Secured Party shall not be effective until received by
Secured Party.


 


16.         General
provisions.


 


a)              This agreement shall be
governed by and construed in accordance with the laws of the State of Nevada in all respects, including
matters of construction, validity and performance, shall inure to the benefit
of Secured Party, its successors, and assigns and to any other holder who
derives from Secured Party title to or an interest in any liabilities, and
shall be binding upon Grantor and the heirs, executors, administrators,
successors, and assigns of Grantor except that Grantor shall have no right to
delegate, assign or transfer its rights or obligations hereunder or any
interest herein (and any such assignment or transfer shall be void).


 


b)             This
Security Agreement may be executed in two or more separate counterparts, each
of which shall constitute an original and all of which shall collectively and
separately constitute one and the same agreement.  Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Security
Agreement shall be effective as delivery of an original executed counterpart
thereof.


 


c)              The
headings of each section of this Security Agreement are for convenience only
and shall not define or limit the provisions thereof.


 


d)             The
parties hereto have participated jointly in the negotiation and drafting of
this Security Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.


 


e)              In
the event any one or more of the provisions contained in this Security
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction).


 


f)                No failure or delay of
Secured Party in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power.  The rights and
remedies of Secured Party hereunder and of Secured Party under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies that
it would otherwise have.  No amendment of
this Security Agreement, and no waiver of any provisions of this Security 


 

















 


Agreement or consent to any
departure by Grantor therefrom, shall in any event be effective except pursuant
to a writing entered into by Secured Party and Grantor, and then any such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.  No notice to or
demand on Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.


 


IN
WITNESS WHEREOF, intending to be legally bound, Grantor has caused this
Security Agreement to be duly executed as of the date first above written.


 


	
  American
  Wagering, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Victor Salerno

  	
   

  
	
   

  	
  Victor
  Salerno

  	
   

  
	
   

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  675 Grier Drive

  	
   

  
	
   

  	
  Las Vegas, Nevada 89119

  	
   

  
	
  Attention:

  	
   General
  Counsel

  	
   

  
	
  Telecopier
  No.: 

  	
     (702)
  735-0142

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  	
   

  
	
  Alpine Advisors LLC,

  	
   

  
	
  as Secured Party

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Don R. Kornstein

  	
   

  
	
   

  	
  Don
  R. Kornstein

  	
   

  
	
   

  	
  Managing
  Member

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  825
  Lakeshore Blvd

  	
   

  
	
   

  	
  Incline Village, Nevada 89119

  	
   

  
	
  Attention: 

  	
  Don R. Kornstein

  	
   

  
	
  Telecopier No.: 

  	
     (702)
  831-3229