Document:

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)
  831-3229Exhibit
10.6

 

THIS WARRANT AND THE SHARES ISSUABLE
UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.  THIS WARRANT OR SUCH SHARES MAY NOT BE
SOLD, DISTRIBUTED, PLEDGED, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAW COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES; (B) THE COMPANY (DEFINED BELOW)
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THIS WARRANT (IF SUCH AN
OPINION IS REASONABLY REQUESTED BY THE COMPANY) STATING THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION AND SUCH OPINION IS IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY; OR (C) PURSUANT TO RULE 144 UNDER
SUCH ACT.

 

AMERICAN
WAGERING, INC.

 

AMENDED AND
RESTATED WARRANT TO PURCHASE

SHARES OF COMMON STOCK

 

DATE OF ISSUANCE:  June 11, 2010 Original Warrant

 

DATE OF ISSUANCE: 
June 21, 2010

 

THIS AMENDED AND RESTATED WARRANT TO PURCHASE SHARES OF
COMMON STOCK amends and restates in its entirety that certain Warrant to
Purchase Shares of Common Stock dated June 11, 2010 (the “Original Warrant”).  Except for indicating the date upon which the
Warrant was issued to Holder, the Original Warrant is hereby terminated, null,
and void.

 

THIS IS TO CERTIFY THAT, for value received, Alpine
Advisors, LLC (the “Holder”) is entitled but not obligated, during a specified
period of time as set forth in Section 5 herein (the “Exercise Period”),
to purchase from American Wagering, Inc., a Nevada corporation (the “Company”),
up to six hundred thousand (600,000) fully paid and nonassessable shares of the
Company’s common stock, $.01 par value (the “Common Stock”), at an exercise
price per share as set forth in Section 1 herein (the “Exercise Price”).  The term “Warrant,” as used herein, refers to
this Warrant to Purchase Shares of Common Stock, the term “Warrant Shares,” as
used herein, refers to the shares of Common Stock purchasable hereunder, and
the term “Parties,” as used herein, refers collectively to the Holder and the
Company.

 

 

TERMS AND
CONDITIONS

 

This Warrant is subject to the following terms,
provisions, and conditions:

 

1.     Exercise Price. 
The Exercise Price is $0.22 per underlying share of Common Stock,
subject to adjustment as hereinafter provided.

 

2.     Manner of Exercise; Payment for Shares. 
Subject to the provisions hereof, this Warrant may be exercised by the
Holder, in whole or in part (but in not less than 25,000 share increments):

 

2.1.             By the surrender of this Warrant, together
with an exercise agreement in the form attached hereto (the “Exercise Agreement”),
duly completed and executed by the Holder, to the Company during normal
business hours on any business day at the Company’s principal executive offices
(or such other location as the Company may designate by notice to the Holder);
and

 

2.2.             Payment of the exercise price shall be
made, at the option of the Holder by the following methods:

 

a.             by delivery to the Company of a certified
or official bank check payable to the order of the Company or by wire transfer
of immediately available funds to an account designated in writing by the
Company, in the amount of such exercise price;

 

b.             by instructing the Company to withhold a
number of Warrant Shares then issuable upon exercise of this Warrant with an
aggregate fair market value as of the exercise date equal to such exercise
price;

 

c.             by surrendering to the Company
(x) Warrant Shares previously acquired by the Holder with an aggregate
fair market value as of the exercise date equal to such exercise price and/or
(y) other securities of the Company having a value as of the exercise date
equal to the exercise price (which value in the case of debt securities shall
be the principal amount thereof plus accrued and unpaid interest, in the case
of preferred stock shall be the liquidation value thereof plus accumulated and
unpaid dividends and in the case of shares of Common Stock shall be the fair
market value thereof); or

 

d.             any combination of the foregoing.

 

2.3.             In the event of any withholding of Warrant
Shares or surrender of other equity securities pursuant to clause (ii),
(iii) or (iv) above where the number of shares whose value is equal
to the  exercise price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder (by delivery of a certified or official bank check or by wire
transfer of immediately available funds) based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount equal to
the product of (x) such incremental fraction of a share being so withheld
or surrendered multiplied by (y) in the case of

 

3

 

Common Stock, the
fair market value per Warrant Share as of the exercise date, and, in all other
cases, the value thereof as of the exercise date determined in accordance with
clause (iii)(y) above. For purposes of this Warrant, “fair market value”
shall mean the average closing sales price of the Company’s shares on the
NASDAQ OTC Bulletin Board for the ten business days immediately preceding the
exercise date.

 

3.     Vesting.  The rights
under this Warrant are fully vested.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  In lieu of
such fractional shares, which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall round up to the next whole
share.

 

4.     Issuance of Certificates. 
The Warrant Shares so purchased shall be deemed to be issued to the
Holder, as the record owner of such Warrant Shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such Warrant Shares as set in Section 2 above.  Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) business days, after this Warrant shall have been
so exercised.  The certificates so
delivered shall be in such denominations as may be reasonably requested by the
Holder and shall be registered in the name of the Holder.  If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the Holder a
new warrant representing the number of Warrant Shares with respect to which
this Warrant shall not then have been exercised.

 

5.     Exercise Period. 
This Warrant may be exercised any time before 5:00 p.m., Pacific
Standard Time, June 11, 2015.

 

6.     Covenants of the Company.  The Company hereby covenants and
agrees as follows:

 

6.1.             Shares to be Fully Paid. 
All Warrant Shares shall, upon issuance in accordance with the terms of
this Warrant, be validly issued, fully paid, and non-assessable.

 

6.2.             Reservation of Shares. 
During the Exercise Period, the Company shall at all times have
authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

 

6.3.             Successors and Assigns. 
This Warrant shall be binding upon any entity succeeding to the Company
by merger, consolidation, or acquisition of all or substantially all the
Company’s assets.

 

7.     Representations
and Warranties of the Company.  The Company hereby represents and warrants to the
Holder (which representations and warranties shall survive the execution and
delivery of this Warrant and consummation of the transactions contemplated hereby)
that:

 

4

 

7.1.             Existence; Authority.  The Company is a Nevada
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has the power and authority to enter into this
Warrant and to carry out its obligations hereunder.

 

7.2.             Execution and Delivery. 
The execution and delivery of this Warrant by the Company and
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Company and no other
proceedings on the part  of the
Company are necessary to authorize this Warrant or any of the transactions
contemplated hereby.

 

5

 

7.3.             Binding Effect; Valid Issuance of Warrant:

 

a.             This Warrant has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company and, assuming this Warrant constitutes a legal, valid and
binding obligation of Holder, is enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to
or affecting the enforcement of creditors’ rights generally in effect from time
to time and by general principles of equity.

 

b.             This Warrant is, and any
Warrant issued in substitution for or replacement of this Warrant shall be,
upon issuance, duly authorized and validly issued.

 

c.             All Warrant Shares issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be, upon
issuance, and the Company shall take all such actions as may be necessary or
appropriate in order that such Warrant Shares are, validly issued, fully paid
and non-assessable, issued without violation of any preemptive or similar
rights of any stockholder of the Company and free and clear of any liens.

 

d.             The Company shall take
commercially reasonable actions as may be necessary to ensure that all such
Warrant Shares are issued without violation by the Company of any applicable
law or governmental regulation or any requirements of any domestic securities
exchange upon which shares of Common Stock or other securities constituting
Warrant Shares may be listed at the time of such exercise.

 

e.             The Company shall use take commercially reasonable
actions to cause the Warrant Shares, immediately upon such exercise, to be
listed on any domestic national securities exchange upon which shares of Common
Stock or other securities constituting Warrant Shares are listed, if any, at
the time of such exercise.

 

8.     Registration Rights.

 

8.1.             Demand Registration Rights

 

a.             On or after June 11, 2012, the Holder
may make a written request to the Company that the Company file a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”)
covering the registration of the Warrant Shares.  Upon receipt of such request, the Company, at
it sole cost and expense, shall as soon as practicable, but no later than
ninety (90) days following receipt of such request, file a registration
statement with the Securities and Exchange Commission (“SEC”) covering the
Warrant Shares, and use its commercially reasonable efforts to cause, as soon
as practicable, the registration statement for the Warrant Shares to be
declared effective by the SEC and such Warrant Shares to be qualified in those
jurisdictions as the Holder may reasonably request.

 

6

 

b.             If the Holder intends to distribute the Warrant
Shares covered by its request by means of an underwriting, it shall so advise
the Company as a part of its request pursuant to Section 8.1 or any
request pursuant to Section 8.2.  In
such event, the Holder shall enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company (which underwriter or underwriters shall be reasonably acceptable to
the Holder).

 

c.             The Company shall not be required to
effect a registration pursuant to this Section 8.1: (i) during the
period starting with the date sixty (60) days prior to the Company’s good faith
estimate of the date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated registration;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective; (ii) if
the Company shall furnish to the Holder a certificate signed by the Chairman of
the Board stating that in the good faith and reasonable judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration statement to be effected at such
time, in which event the Company shall have the right to defer such filing for
a period of not more than ninety (90) days after receipt of the request of the
Holder; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or (iii) if
the Holder proposes to dispose of Warrant Shares that may be immediately
registered on Form S-3 pursuant to a request made pursuant to
Section 8.2 below.

 

d.             The Company may include in any such
registration other securities for sale for its own account or for the account
of any other person; provided that, if the underwriter for the offering shall
determine that the number of shares proposed to be offered in such offering
would be reasonably likely to adversely affect such offering, then the securities
to be sold by the Holder shall be included in such registration before any
securities proposed to be sold for the account of the Company or any other
person.

 

8.2.             Form S-3 Registration. 
If, on or after June 11, 2012, the Company shall receive from the
Holder a written request that the Company effect a registration on
Form S-3 (or any successor to Form S-3) or any similar short-form
registration statement and any related qualification or compliance with respect
to all or a part of the Warrant Shares owned by the Holder, the Company, at it
sole cost and expense, will, as soon as practicable, but no later than sixty
(60) days following receipt of such request, file such registration statement
and use its commercially reasonable efforts to have such registration statement
declared effective and obtain all such qualifications and compliances as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of the Holder’s Warrant Shares as are specified in such request,
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 8.2:
(a) if Form S-3 is not available for such offering by the Holder;
(b) if the Holder, together with the holders of any other securities of
the Company entitled to inclusion in such registration, proposes to sell
Warrant Shares and such other securities (if any) at an aggregate price to the
public of less than one million dollars ($1,000,000); or (c) if the Company
shall furnish to the Holder a certificate

 

7

 

signed by
the Chairman of the Board of Directors of the Company stating that in the good
faith and reasonable judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than sixty (60) days after
receipt of the request of the Holder under this Section 8.2; provided,
that such right to delay a request shall be exercised by the Company not more
than once in any twelve (12) month period.

 

8.3.             Incidental Registration
Rights.  If the Company proposes to register any of its stock
or other securities under the Securities Act of 1933 in connection with the
public offering of such securities (other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to
an SEC Rule 145 transaction, or (iii) a registration effected
pursuant to a form of registration statement that is not available for
registration of the Warrant Shares for sale to the public), the Company shall
provide Holder with written notice of such determination. Upon the written
request of Holder given within twenty (20) days after receipt of any such
notice from the Company, the Company, at its sole cost and expense, shall cause
to be registered under the Act all of the Warrant Shares that Holder has
requested be registered.

 

8.4.             Most-Favored Nation. If the Company grants any person any rights with
respect to the registration of any shares of equity securities of the Company
or any securities convertible or exercisable into shares of any equity
securities of the Company that are more favorable to such person than the
rights of the Holder set forth in this Warrant, then the Company shall grant to
the Holder the same rights granted to such other person.

 

9.     Tag-Along Rights.

 

9.1.             Transfers by majority stockholders of the
Company.

 

a.             In the event of any proposed transfer (a “Proposed
Tag-Along Transfer”) of any Common Stock or securities convertible into or
exchangeable for Common Stock (collectively, the “Subject Shares”) by existing
stockholders, including Victor J. Salerno (the “Existing Stockholders”), in a
single transaction or a series of related transactions involving Subject Shares
aggregating at least 51% of the Common Stock outstanding on a fully diluted
basis to an individual, corporation, association, partnership, joint venture,
limited liability company, joint-stock company, trust, organization, business,
or other entity (the “Proposed Purchaser”), the Holder shall have the
irrevocable and exclusive right, but not the obligation (the “Tag-Along Right”),
to require the purchase from it of up to such number of Warrant Shares as
determined in accordance with Section 9.3 below.

 

b.             Any Warrant Shares purchased from the
Holder pursuant to this Section 9.1 shall be paid for at the same price
per share and upon the same terms and conditions as apply to the Proposed
Tag-Along Transfer by the Existing Stockholders, provided that the price
payable by the Proposed Purchaser shall equal the price proposed to be paid per
share of

 

8

 

Common Stock for
which such Warrant Share is exercisable, less the Exercise Price of such
Warrant Share;

 

c.             The Company or the Existing Stockholders
shall give written notice of at least 30 days prior to the date of the Proposed
Tag-Along Transfer to the Holder stating (i) the name and address of the
Proposed Purchaser, (ii) the proposed amount of consideration and terms
and conditions of payment offered by such Proposed Purchaser (if the proposed
consideration is not cash, the notice shall describe the terms of the proposed
consideration), (iii) the number of Subject Shares proposed to be
transferred and (iv) that either the Proposed Purchaser has been informed
of the Tag-Along Right and has agreed to purchase Warrant Shares in accordance
with the terms hereof or that the Existing Stockholders will make such
purchase. The Tag-Along Right may be exercised by the Holder by giving written
notice to the Company and the Proposed Purchaser (the “Tag-Along Notice”),
within 20 Business Days of receipt of the notice specified in the preceding
sentence (such 20 day period being referred to herein as the “Tag-Along Period”),
indicating its election to exercise the Tag-Along Right. The Tag-Along Notice
shall state the amount of Warrant Shares that the Holder proposes to include in
the Proposed Tag-Along Transfer. Failure by the Holder to give such notice
within the Tag-Along Period shall be deemed an election by the Holder not to
sell its Warrant Shares in connection with that Proposed Tag-Along Transfer.
The closing with respect to any sale to a Proposed Purchaser pursuant to this
Section 9.1 shall be held at the time and place specified in the Tag-Along
Notice, but in any event within 90 days of the end of the Tag-Along Period.
Consummation of the sale of Subject Shares by the Existing Stockholders to a
Proposed Purchaser shall be conditioned upon the consummation of the sale by
the Holder to such Proposed Purchaser of the Warrant Shares subject to the
Tag-Along Right.

 

9.2.             Purchase Obligation of Existing
Stockholders.  In the event that the Proposed
Purchaser does not purchase such Warrant Shares from the Holder on the same
terms and conditions as purchased from the Existing Stockholders, then the
Existing Stockholders making such transfer shall purchase the Warrant Shares
from the Holder if the transfer occurs on such terms and conditions.

 

9.3.             Determination of Transferred Interests. 
The number of Warrant Shares purchased from the Holder shall be
determined by multiplying the aggregate amount of Subject Shares proposed to be
sold by the Existing Stockholders to the Proposed Purchaser by a fraction, the
numerator of which is the total number of shares of Common Stock (including the
number of Warrant Shares issuable upon exercise of the Warrant) owned by the
Holder and the denominator of which is the Common Stock outstanding on a fully
diluted basis.

 

9.4.             Cost of Transfer. 
The Existing Stockholders who are parties to a sale to a Proposed
Purchaser shall arrange for payment directly by the Proposed Purchaser to the
Holder, upon delivery of the certificate representing the Warrant Shares to be
sold, duly endorsed for transfer, together with such other documents as the
Proposed Purchaser may reasonably request. The Company shall be responsible for
and pay the costs and expenses (including the reasonable fees

 

9

 

and disbursements
of counsel) incurred by the Holder in connection with a sale to a Proposed
Purchaser, whether or not such sale is consummated.

 

9.5.             Expiration of the Tag-Along Right. 
If at the end of 90 days following the end of the Tag-Along Period, or
as otherwise extended pursuant to the provisions of Section 9.1, the sale
of Subject Shares by the Existing Stockholders and the sale of the Warrant
Shares by the Holder have not been completed in accordance with the terms of
the Proposed Purchaser’s offer, all certificates representing such Subject
Shares and Warrant Shares shall be returned to the Existing Holders and Holder,
as applicable, and all the restrictions on sale, transfer, or assignment
contained in this Agreement shall again be in effect.

 

10.   Drag-Along Rights.  In the event that the holders of at least 66%
of the outstanding Common Stock (the “66% Holders”) accept an offer to purchase
their shares from a bona fide third party, the 66% Holders may send a written
notice (the “Drag-Along Notice”) to the Holder specifying the name of the
purchaser, the consideration payable per share of Common Stock and a summary of
the material terms of such proposed purchase. 
Upon receipt of a Drag-Along Notice, the Holder shall be obligated to
(i) sell all of its Warrant Shares, free of any encumbrance, in the
transaction contemplated by the Drag-Along Notice on the same terms and
conditions as the 66% Holders (including payment of its pro-rata share of all
costs associated with such transaction), and (ii) otherwise take all
necessary action to cause the consummation of such transaction, including
voting its Warrant Shares in favor of such transaction and not exercising any
appraisal rights in connection therewith. The Holder (i) further agrees to
take all actions (including executing documents) in connection with
consummation of the proposed transaction as may reasonably be requested of it
by the 66% Holders, and (ii) hereby appoints the 66% Holders, acting
jointly, as its attorney-in-fact to do the same on its behalf.

 

11.   Observer Rights; Election of Directors.

 

11.1.           Observer Rights.  A
representative of Holder, or its appointee, shall be entitled to observe all
meetings of the Company’s Board of Directors (the “Board”) and receive all
information provided to the Board; provided, that such observer rights shall
terminate at such time as the Obligations between the Company, as Borrower, and
the Lender under that certain Loan Agreement dated June [·], 2010 are
satisfied and the Loan Agreement is terminated. 
The Company requires and the Holder agrees that as a condition precedent
to Holder’s representative or appointee attending a Board meeting or having
access to any information provided to the Board, the representative or
appointee shall agree to keep confidential all information so received during
such meetings or otherwise on the same basis as the Holder has agreed to
maintain confidentiality pursuant to Section 8 of the Engagement Agreement
dated March 12, 2010, between Issuer and Holder; and the Company reserves
the right not to provide information and to exclude such representative or
appointee from any Board meeting or portion thereof if delivery of such
information or attendance at such meeting by such representative or appointee
would result in the disclosure of trade secrets to such holders or its
representative in violation of the foregoing confidentiality obligation or
would adversely affect the attorney-

 

10

 

client
privilege between the Company and its counsel or if such representative or
appointee is a direct competitor of the Company.

 

11.2.           Election of Directors.  
The Amended and Restated Bylaws of the Company provide that the Board of
Directors shall consist of not more than 9 directors. The Company currently
consists of 5 directors.  Upon the
occurrence of an Event of Default in Section 12 the Loan Agreement, the
Company agrees that Holder may, at its sole discretion, (i) provide the Company
with a one-time only written notice demanding that the Company increase number
of its Board of Directors by two (2) persons from 5 directors to 7
directors and (ii) appoint persons designated by Holder to fill the 2
vacancies; provided that such appointed director positions do not include any
special voting, quorum, or replacement rights that are excessive, additional,
or absent rights available to the remaining directors of the Board of
Directors.  The Holder’s Election of
Directors as set forth in this Section in 11.2 shall terminate at such
time as the Obligations between the Company, as Borrower, and the Lender under
that certain Loan Agreement dated June [·], 2010 are satisfied and the Loan
Agreement is terminated.

 

12.   Representations,
Warranties and Covenants of the Holder.  The  Holder
hereby represents and warrants to the Company that:

 

12.1.           Accredited Investor Status.  The Holder represents and warrants
that the Holder is an “accredited investor” within the meaning of
Rule 501(a) of Regulation D, promulgated under the Securities
Act.  The
Holder understands that the Warrants are being
offered and sold only to “accredited investors” (as that term is defined under
Rule 501(a) of Regulation D), and the Holder represents that the
Holder is an accredited investor.

 

12.2.           The Holder understands that the Company is
relying on the Holder with respect to the accuracy of this representation and
understands the significance of the Holder’s representation to the Company that
the Holder is an accredited investor.

 

12.3.           Residence.  The address
set forth in Section 18 is the Holder’s true and correct residence or
principal place of business and the Holder has no present intention of becoming
a resident or domicile of any other state or jurisdiction.

 

12.4.           Authority. 
The Holder has the power and authority to enter into this Warrant and to
carry out its obligations hereunder.

 

12.5.           Binding Effect.  This Warrant has been duly executed and
delivered by the Holder and constitutes a legal, valid and binding obligation
of the Holder and, assuming this Warrant constitutes a legal, valid and binding
obligation of the Company, is enforceable against the Holder in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to
or affecting the enforcement of creditors’ rights generally in effect from time
to time and by general principles of equity.

 

11

 

12.6.          Purchase for Own Account. 
The Holder represents and warrants that the Warrant and the Warrant
Shares will be acquired for investment purposes only for the Holder’s own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Holder has no present intention of
selling, granting any participation in, or otherwise distributing the
same.  By executing this Warrant, the
Holder further represents and warrants that the Holder does not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Warrant or the Warrant Shares. Notwithstanding the foregoing, the Holder
may transfer this Warrant to members of Lender, the children of the members of
Lender, or a trust for the benefit of the individual members of the Lender or
for the children of the members of the Lenders provided such members, children
of members, or trust shall remain subject to the transfer restrictions provided
in this Agreement and under applicable law.

 

12.7.          Restricted Securities. 
The Holder acknowledges and understands that the Warrant and the Warrant
Shares are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the “Securities Act”), only in certain
limited circumstances.  In this regard,
the Holder represents and warrants that the Holder is familiar with Securities
and Exchange Commission Rule 144 (“Rule 144”), as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.  Without in any way
limiting the representations set forth above, the Holder agrees not to make any
disposition of all or any portion of the Warrant and the Warrant Shares unless
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement, or the Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition.  The Holder acknowledges that the Company is
under no obligation to register any resale or transfer of the Warrant Shares.

 

12.8.          Legend. 
The Holder understands that, prior to the registration of the Warrant
Shares, the stock certificate evidencing the Warrant Shares shall bear the
restrictive legend set forth below:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO
UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF
SAID ACT AND COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAW.

 

12

 

12.9.          Risk of Loss.  The
Holder acknowledges, represents and warrants
that it understands investment in the Company involves a high degree of
risk.  The Holder is financially capable
of bearing the loss of the Holder’s entire investment, understands that an
investment in the Warrant and Warrant Shares involves special and substantial
risks and recognizes the lack of liquidity of the Warrant and the Warrant
Shares and the restrictions upon transferability thereof.

 

12.10.        No Solicitation. 
The Holder represents and warrants that the Holder was not solicited to
acquire the Warrant or the Warrant Shares by any means of general solicitation,
including but not limited to the following: 
(1) any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or broadcast over
television or radio; or (2) any meeting where attendees were invited by
any general solicitation or general advertising.

 

12.11.        Access to
Information; Opportunity to Inquire.  The
Holder:  (i) has had access to
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition; (ii) has such knowledge of
business and financial affairs as is necessary to enable Holder to understand
the speculative nature of and the risks attendant to investments in securities,
in general, and to an investment in the Warrants and Shares, in particular, and
to understand the financial, legal and tax implications of the business to be
conducted by the Company; (iii) has had the opportunity to ask questions
and receive answers from the Company and its management with respect to Holder’s
proposed acquisition of the Warrants and the Shares; and (iv) has
determined on the basis of consultation with its own legal counsel and tax
advisors that the acquisition of the Warrants and the Shares is consistent with
his/her own investment objectives and income prospects.

 

12.12.        Finder’s Fee. 
No person, firm or corporation has or will have, as a result of any act
or omission by the Holder, any right, interest or valid claim against the
Company for any commission, fee or other compensation as a finder or broker, or
in any similar capacity, in connection with the transactions contemplated by
this Warrant.

 

13.  Adjustment Provisions. 
Until the closing of the first (1st) financing after the execution of this
Warrant, number of Warrants or the strike price may be adjusted as provided in
this Section 12 to provide for certain anti-dilution protection.

 

13.1.          The ratio of Warrant Shares to outstanding
shares of Common Stock shall be the ratio thereof existing on the date hereof
(the “Ratio”, which the parties agree is currently 5.03%), after giving effect
to the issuance of a maximum of 2.3 million shares of Common Stock to be
covered by options or grants issued to management of the Company.  For purposes hereof, the term “outstanding
shares of Common Stock” includes the said maximum of 2.3 million shares, plus
8,379,879 issued shares of Common Stock outstanding as of the date hereof, as
well as 647,300 shares currently reserved for issuance under existing options,
rights and any other outstanding securities of the Company.  If the Company shall (1) declare a
dividend or make a distribution of
Common Stock payable in shares of Common Stock, (2) subdivide its
outstanding shares of

 

13

 

Common Stock into a greater number of shares of Common Stock, (3) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or
(4) issue any shares of capital stock of the Company by reclassification
or capital reorganization of its shares of Common Stock, then the number of
Warrant Shares and the Exercise Price in effect immediately prior to such
action shall be adjusted so that the Holder shall be entitled to receive the
number and kind of shares of Common Stock or other Capital Stock which the
Holder would have owned or have been entitled to receive immediately after such
action had the Holder exercised the Warrant immediately prior to the record
date in the case of (1), or the effective date in the case of (2), (3) or
(4).  In the event that any adjustment of
the Exercise Price as required herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the nearest cent; or

 

13.2.          Should the Company complete a financing
transaction that includes convertible debt or equity securities, or warrants or
options for equity securities, at a strike price that is less than $.22, Holder’s
unexercised Warrants shall be re-priced to match the strike price of the
convertible debt or equity security, option or warrant.

 

14.  Payment of Expenses. 
The Company shall be responsible for and pay Holder’s costs and expenses
(including reasonable fees and disbursements of counsel) payable in connection
with:  (1) the negotiation,
preparation, execution and delivery of this Warrant and the other agreements to
be executed in connection herewith; (2) the issuance of certificates for
Warrant Shares upon the exercise of this Warrant; and (3) the enforcement
by Holder of any of its rights or remedies under or in connection with this
Warrant and the other agreements to be executed in connection herewith.  The Company shall pay any issuance tax in
connection with the issuance of certificates for Warrant Shares; provided,
however, that the Holder shall be responsible for any income or other taxes
based on the Holder’s net income in connection with such issuance.

 

15.  No Rights or Liabilities as a Stockholder. 
This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company. 
No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

 

16.  Transfer and Replacement of Warrant. 
Neither this Warrant, nor any interest in this Warrant, may be sold,
distributed, assigned, offered, pledged or otherwise transferred without the
express written consent of the Company, except that transfers of this Warrant
or an interest in this Warrant may be made at any time during the term to
members of Lender, the children of the members of Lender, or a trust for the benefit
of the individual members of the Lender or for the children of the members of
the Lenders provided such members, children of members, or trust shall remain
subject to the transfer restrictions provided in this Agreement and under
applicable law.

 

14

 

16.1.          Replacements of Warrants. 
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.

 

16.2.          Cancellation: Payment of Expenses.  Upon the surrender of this Warrant in
connection with any transfer or replacement as provided in this
Section 15, this Warrant shall be promptly canceled by the Company.  The Company shall be responsible for and pay
all costs and expenses payable in connection with the preparation, execution,
and delivery of new Warrants pursuant to this  Section 15.  The Holder shall be responsible for any tax
which may be payable in connection with any transfer of a certificate for
Warrant Shares.

 

16.3.          Registrar.  The Company
shall maintain, at its principal executive offices (or such other location as
the Company may designate by notice to the Holder), a registrar for this
Warrant, in which the Company shall record the name and address of the person
in whose name this Warrant has been issued, as well as the name and address of
each transferee and each prior owner of this Warrant.

 

17.  Representation of Counsel. 
The parties acknowledge that they have consulted with or have had the
opportunity to consult with their own legal counsel prior to executing this
Warrant.  This Warrant has been freely
negotiated by the parties and any rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Warrant.

 

18.  Choice of Laws; Actions. 
This Warrant shall be construed in accordance with the internal laws of
the State of Nevada, without regard to the choice of law principles
thereof.  The exclusive venue of any
legal suit, action, or proceeding arising out of or relating to this Warrant
shall be state court in Clark County, Nevada.

 

19.  Notices.  Any notice given to either party shall be
in writing and shall be deemed to have been given when delivered personally or
sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently give notice of:

 

	
  If to the Company:

  
	
   

  
	
   

  	
  American
  Wagering, Inc.

  
	
   

  	
  Attn:
  General Counsel

  
	
   

  	
  675
  Grier Drive

  
	
   

  	
  Las
  Vegas, NV 89119

  

 

15

 

	
  If to the Holder:

  
	
   

  
	
   

  	
  Alpine
  Advisors, LLC

  
	
   

  	
  825
  Lakeshore Blvd

  
	
   

  	
  Incline
  Village, NV 89451

  

 

20.  Severability. 
In case any provision of this Warrant shall be invalid, illegal or
unenforceable in any jurisdiction then, as to such jurisdiction only, such
provision shall to the extent of such prohibition or unenforceability be deemed
severed from the remainder of this Warrant and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

21.  Section Headings. 
The various headings used in this Warrant are inserted for convenience
of reference only and shall not affect the meaning or interpretation of this
Warrant or any provision hereof.

 

22.  Amendments.  No amendment
or modification of any provision of this Warrant shall be effective without the
written agreement of the parties, and no termination or waiver of any provision
of this Warrant, or consent to any departure by the Company therefrom shall in
any event be effective without the written concurrence of the Holder, which
concurrence the Holder shall have the right to grant or withhold at its sole
discretion.

 

23.  Counterparts. 
This Warrant may be executed in any number of counterparts, each
constituting an original, but all together one and the same instrument.

 

16

 

24.  Entire Agreement. 
This Warrant, together with the Agreement, constitutes the sole and
entire agreement of the parties with respect to the subject matter contained
herein, and supersedes all prior and contemporaneous understandings and
agreements, both written and oral, with respect to such subject matter.

 

IN
WITNESS WHEREOF, the Company and the Holder have executed this Warrant as of
the date first written above.

 

	
  COMPANY:

  	
   

  	
  HOLDER:

  
	
  American
  Wagering, Inc.,

  	
   

  	
  Alpine
  Advisors, LLC

  
	
   A Nevada corporation

  	
   

  	
   A Nevada Limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Victor Salerno

  	
   

  	
  By:

  	
  /s/
  Don R. Kornstein

  
	
  Name:
  Victor Salerno

  	
   

  	
  Name:
  Don R. Kornstein

  
	
  Its:
  Chief Executive Officer

  	
   

  	
  Its:
  Managing Member

  
					

 

17

 

EXERCISE
AGREEMENT

 

TO:         AMERICAN WAGERING, INC. (THE “COMPANY”)

 

The undersigned, pursuant to the provisions set forth in
the attached Warrant to Purchase Shares of Common Stock (the “Warrant”) hereby
irrevocably elects and agrees to purchase
                        
shares (the “Exercised Shares”) of the Company’s common stock (“Common Stock”)
covered by the Warrant and makes payment herewith in full therefor at the price
per share provided by the Warrant in cash or by certified or official bank
check in the amount of
$                                .

 

If said number of shares of Common Stock shall not be
all the shares available under the Warrant, a new warrant is to be issued in
the name of said undersigned covering the balance of the shares available
thereunder less any fraction of a share paid in cash.  Please issue a certificate or certificates
for the Exercised Shares in the name of and pay any cash for any fractional
share to:

 

	
   

  	
  NAME:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DATED:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NOTE:

  	
  The above signature should correspond exactly with the
  name on the face of the Warrant.

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