Document:

Exhibit 10.8

 

STOCK PLEDGE AGREEMENT

(Southwest Entertainment, Inc.)

 

This PLEDGE AGREEMENT, dated as of October 20,
2005 (together with all amendments, if any, from time to time hereto, this “Agreement”)
between SOUTHWEST CASINO AND HOTEL CORP., a Minnesota corporation (the “Pledgor”)
and CROWN BANK, a Minnesota state banking corporation (“Lender”).

 

W  I  T  N  E
S  S  E  T  H:

 

WHEREAS, pursuant to that certain Revolving Credit and
Term Loan Agreement of even date herewith by and among Pledgor as Borrower, and
Lender (including all exhibits and schedules thereto, and as from time to time
amended, restated, supplemented or otherwise modified (the “Credit Agreement”)
the Lender has agreed to extend certain financial accommodations to the
Pledgor;

 

WHEREAS, Pledgor is the record and beneficial owner of
the common stock in the Pledged Entity (the “Stock”) listed in Schedule I hereto; and

 

WHEREAS, in order to induce Lender to extend the
financial accommodations provided for in the Credit Agreement, Pledgor has
agreed to pledge the Pledged Collateral to Lender in accordance herewith.

 

NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained and to induce Lender to extend the
financial accommodations provided for in the Credit Agreement, it is agreed as
follows:

 

1.     Definitions.  Unless
otherwise defined herein, terms defined in the Credit Agreement are used herein
as therein defined, and the following shall have (unless otherwise provided
elsewhere in this Agreement) the following respective meanings (such meanings
being equally applicable to both the singular and plural form of the terms
defined):

 

“Bankruptcy Code” means title 11, United States
Code, as amended from time to time, and any successor statute thereto.

 

“Pledged Collateral” has the meaning assigned
to such term in Section 2 hereof.

 

“Pledged Entity” means an issuer of Pledged Interests.

 

“Pledged Interests” means those the Stock listed on Schedule I
hereto.

 

“Secured Obligations” has the meaning assigned
to such term in Section 3 hereof.

 

2.     Pledge.  Pledgor
hereby pledges to Lender, a first -priority security interest in all of
the following (collectively, the “Pledged Collateral”):

 

(a)   the Pledged
Interests and the certificates, if any, representing the Pledged Interests, and all dividends,
distributions, cash, instruments and other property or 

 

 

proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Interests; and

 

(b)   any additional Stock
of a Pledged Entity from time to time acquired by Pledgor in any manner (which Stock shall be deemed to be part of
the Pledged Interests), and the
certificates representing such additional Stock, and all dividends, distributions, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Stock.

 

3.     Security for Obligations. 
This Agreement secures, and the Pledged Collateral is security for, the
prompt payment in full when due, whether at stated maturity, by acceleration or
otherwise, and performance of all Obligations of any kind under or in
connection with the Credit Agreement and the other Loan Documents and all
obligations of Pledgor now or hereafter existing under this Agreement
including, without limitation, all fees, costs and expenses whether in
connection with collection actions hereunder or otherwise (collectively, the “Secured
Obligations”).

 

4.     Delivery of Pledged Collateral. 
All certificates evidencing the Pledged Collateral shall be delivered to
and held by Lender, pursuant hereto.  All
Pledged Interests shall be
accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to Lender.

 

5.     Representations and Warranties. 
Pledgor represents and warrants to Lender that:

 

(a)   Pledgor is, and at the time of delivery of the Pledged Interests to Lender will be,
the sole holder of record and the sole beneficial owner of such Pledged
Collateral pledged by Pledgor free and clear of any lien or security interest
thereon or affecting the title thereto, except for the lien and security
interest created by this Agreement;

 

(b)   All of the Pledged
Interests have been duly authorized and validly issued;

 

(c)   Pledgor has the right and requisite authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
pledged by Pledgor to Lender as provided herein;

 

(d)   None of the Pledged
Interests has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to
which such issuance or transfer may be subject;

 

(e)   All of the Pledged
Interests are presently owned by Pledgor, and are presently represented
by the certificates listed on Schedule I hereto.  As of the date hereof, there are no existing
options, warrants, calls or commitments of any character whatsoever relating to
the Pledged Interests;

 

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(f)    No consent, approval, authorization or other order or
other action by, and no notice to or filing with, any Governmental Authority or
any other Person is required (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Pledgor, or (ii) for the exercise by
Lender of any rights provided for in this Agreement or the remedies in respect
of the Pledged Collateral pursuant to this Agreement, except as may be required
in connection with such disposition by laws affecting the offering and sale of
securities generally;

 

(g)   The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority lien
on and a first priority perfected security interest in favor of the Lender in
such Pledged Collateral and the proceeds thereof, securing the payment of the
Secured Obligations, subject to no other lien;

 

(h)   This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms; and

 

(i)    The Pledgor
hereby authorizes the Lender to file all of the Lender’s financing statements
and amendments to financing statements, and all terminations of the filings of
other secured parties, all with respect to the Pledged Collateral, in such form
and substance as the Lender, in its sole discretion, may from time to time
determine.

 

The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.

 

6.     Covenants.  Pledgor
covenants and agrees that until the Termination Date:

 

(a)   Without the prior written consent of Lender, Pledgor
will not sell, assign, transfer, pledge, or otherwise encumber any of its
rights in or to the Pledged Collateral, or any unpaid dividends, interest or
other distributions or payments with respect to the Pledged Collateral or grant
a lien in the Pledged Collateral;

 

(b)   Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such actions as
Lender from time to time may request in order to ensure to Lender the benefits
of the lien in and to the Pledged Collateral intended to be created by this
Agreement, including stock powers and the filing of any necessary UCC financing
statements, which may be filed by Lender and will cooperate with Lender, at
Pledgor’s expense, in obtaining all necessary approvals and making all
necessary filings under federal, state, local or foreign law in connection with
such liens or any sale or transfer of the Pledged Collateral;

 

(c)   Pledgor has and will defend the title to the Pledged
Collateral and the liens of Lender in the Pledged Collateral against the claim
of any Person and will maintain and preserve such liens; and

 

3

 

(d)   Pledgor will, upon obtaining ownership of any
additional Stock of a Pledged
Entity or Stock otherwise
required to be pledged to Lender pursuant to any of the Loan Documents which Stock, notes or instruments are not
already Pledged Collateral, promptly (and in any event within three (3) Business
Days) deliver to Lender a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II hereto (a “Pledge Amendment”)
in respect of any such additional Stock,
pursuant to which Pledgor shall pledge to Lender all of such additional Stock, notes and instruments.  Pledgor hereby authorizes Lender to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Interests and Pledged
Indebtedness listed on any Pledge Amendment delivered to Lender shall for all
purposes hereunder be considered Pledged Collateral.

 

7.     Pledgor’s Rights.  As long as no
Default or Event of Default shall have occurred and be continuing and until
written notice shall be given to Pledgor in accordance with Section 8(a) hereof,

 

(a)           Pledgor shall have the right, from
time to time, to vote and give consents with respect to the Pledged Collateral,
or any part thereof for all purposes not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position or interest of
Lender in respect of the Pledged Collateral or which would authorize, effect or
consent to (unless and to the extent expressly permitted by the Credit
Agreement):

 

(i)            the dissolution or liquidation, in whole or in part,
of a Pledged Entity;

 

(ii)           the consolidation or merger of a Pledged Entity with
any other Person;

 

(iii)          the sale, disposition or encumbrance of all or
substantially all of the assets of a Pledged Entity, except for liens in favor
of Lender;

 

(iv)          any change in the authorized number of membership or
economic interests in a Pledged Entity or the issuance of any additional Stock
unless such issuance is conditioned upon the recipient thereof pledging such
stock to Lender in accordance herewith; or

 

(v)           the alteration of the voting rights with respect to
the stock of a Pledged Entity.

 

(b)           Pledgor shall be entitled, from time
to time, to collect and receive for its own use all cash dividends, interest
and other distributions in respect of the Pledged Collateral.

 

8.     Defaults and Remedies; Proxy.

 

(a)   Upon the occurrence of an Event of Default and during
the continuation of such Event of Default, and concurrently with written notice
to Pledgor,

 

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Lender (personally or through an agent) is hereby authorized
and empowered to transfer and register in its name or in the name of its
nominee the whole or any part of the Pledged Collateral, to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations to collect and
receive all cash dividends, interest and other distribtuions made thereof, to
sell in one or more sales after ten (10) days’ notice of the time and
place of any public sale or of the time at which a private sale is to take
place (which notice Pledgor agrees is commercially reasonable) the whole or any
part of the Pledged Collateral and to otherwise act with respect to the Pledged
Collateral as though Lender was the outright owner thereof.  Any sale shall be made at a public or private
sale at Lender’s place of business, or at any place to be named in the notice
of sale, either for cash or upon credit or for future delivery at such price as
Lender may deem fair, and Lender may be the purchaser of the whole or any part
of the Pledged Collateral so sold and hold the same thereafter in its own right
free from any claim of Pledgor or any right of redemption.  Each sale shall be made to the highest
bidder, but Lender reserves the right to reject any and all bids at such sale
which, in its discretion, it shall deem inadequate.  Demands of performance, except as otherwise
herein specifically provided for, notices of sale, advertisements and the
presence of property at sale are hereby waived and any sale hereunder may be
conducted by an auctioneer or any officer or agent of Lender.  PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND
APPOINTS LENDER AS THE PROXY AND ATTORNEY-IN-FACT OF PLEDGOR WITH RESPECT TO
THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE THE PLEDGED INTERESTS, WITH FULL POWER OF SUBSTITUTION TO DO SO.  THE APPOINTMENT OF LENDER AS PROXY AND
ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE
TERMINATION DATE.  IN ADDITION TO THE
RIGHT TO VOTE THE PLEDGED INTERESTS,
THE APPOINTMENT OF LENDER AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT
TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER
OF THE PLEDGED INTERESTS WOULD
BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,
CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH
PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY PLEDGED
INTERESTS ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON
(INCLUDING THE ISSUER OF THE PLEDGED
INTERESTS OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT.  NOTWITHSTANDING THE
FOREGOING, LENDER SHALL NOT HAVE ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO
PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY
DELAY IN DOING SO.

 

(b)   If, at the original time or times appointed for the
sale of the whole or any part of the Pledged Collateral, the highest bid, if
there be but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at
any of such sales, the highest bid for the lot offered for sale would indicate
to Lender, in its discretion, that the proceeds of the sales of the whole of

 

5

 

the Pledged Collateral would be unlikely to be sufficient to
discharge all the Secured Obligations, Lender may, on one or more occasions and
in its discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days’ notice to Pledgor.

 

(c)   Pledgor recognizes that Lender may be unable to effect
a public sale of any or all the Pledged Collateral and may be compelled to
resort to one or more private sales thereof in accordance with applicable law
and the terms of the Loan Documents. 
Pledgor also acknowledges that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private.  Lender shall be under no obligation to delay
a sale of any of the Pledged Collateral for the period of time necessary to
permit the Pledged Entity to register such securities for public sale under the
Securities Act of 1933, as amended (or any similar statute then in effect), or
under applicable state securities laws, even if Pledgor and the Pledged Entity
would agree to do so.

 

(d)   Pledgor agrees to the maximum extent permitted by
applicable law that following the occurrence and during the continuance of an
Event of Default it will not at any time plead, claim or take the benefit of
any appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder,
and Pledgor waives the benefit of all such laws to the extent it lawfully may
do so.  Pledgor agrees that it will not
interfere with any right, power and remedy of Lender provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by Lender of any one or
more of such rights, powers or remedies. 
No failure or delay on the part of Lender to exercise any such right,
power or remedy and no notice or demand which may be given to or made upon
Pledgor by Lender with respect to any such remedies shall operate as a waiver
thereof, or limit or impair Lender’s right to take any action or to exercise
any power or remedy hereunder, without notice or demand, or prejudice its
rights as against Pledgor in any respect.

 

(e)   Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
Lender, that Lender shall have no adequate remedy at law in respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 8 shall be specifically enforceable against Pledgor, and
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that the
Secured Obligations are not then due and payable in accordance with the
agreements and instruments governing and evidencing such obligations.

 

6

 

9.     Waiver.  No delay on
Lender’s part in exercising any power of sale, lien, option or other right
hereunder, and no notice or demand which may be given to or made upon Pledgor
by Lender with respect to any power of sale, lien, option or other right
hereunder, shall constitute a waiver thereof, or limit or impair Lender’s right
to take any action or to exercise any power of sale, lien, option, or any other
right hereunder, without notice or demand, or prejudice Lender’s rights as
against Pledgor in any respect.

 

10.   Assignment.  Lender may
assign, endorse or transfer any instrument evidencing all or any part of the
Secured Obligations as provided in, and in accordance with, the Credit
Agreement, and the holder of such instrument shall be entitled to the benefits
of this Agreement.

 

11.   Termination.  Immediately
following the Termination Date, Lender shall deliver to Pledgor the Pledged
Collateral pledged by Pledgor at the time subject to this Agreement, and all
instruments of assignment executed in connection therewith, free and clear of
the liens hereof and, except as otherwise provided herein, all of Pledgor’s
obligations hereunder shall at such time terminate.

 

12.   Lien Absolute.  All rights of
Lender hereunder, and all obligations of Pledgor hereunder, shall be absolute
and unconditional irrespective of:

 

(a)   any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;

 

(b)   any change in the time, manner or place of payment of,
or in any other term of, all or any part of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument governing
or evidencing any Secured Obligations;

 

(c)   any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations;

 

(d)   the insolvency of the Borrower or any Guarantor; or

 

(e)   any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.

 

13.   Release.  Pledgor
consents and agrees that Lender may at any time, or from time to time, in its
discretion:

 

(a)   renew, extend or change the time of payment, and/or
the manner, place or terms of payment of all or any part of the Secured
Obligations; and

 

(b)   exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Lender in
connection with all or any of the Secured 

 

7

 

Obligations; all in such manner and upon such terms as Lender
may deem proper, and without notice to or further assent from Pledgor, it being
hereby agreed that Pledgor shall be and remain bound upon this Agreement,
irrespective of the value or condition of any of the Collateral, and
notwithstanding any such change, exchange, settlement, compromise, surrender,
release, renewal or extension, and notwithstanding also that the Secured
Obligations may, at any time, exceed the aggregate principal amount thereof set
forth in the Credit Agreement, or any other agreement governing any Secured
Obligations.  Pledgor hereby waives
notice of acceptance of this Agreement, and also presentment, demand, protest
and notice of dishonor of any and all of the Secured Obligations, and promptness
in commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon Pledgor.  No act or omission of any kind on Lender’s
part shall in any event affect or impair this Agreement.

 

14.   Reinstatement.  This
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against Pledgor or any Pledged Entity for
liquidation or reorganization, should Pledgor or any Pledged Entity become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Pledgor’s
or a Pledged Entity’s assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

 

15.   Miscellaneous.

 

(a)   Lender may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.

 

(b)   Pledgor agrees to promptly reimburse Lender for actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred by Lender in connection with the administration and enforcement of
this Agreement.

 

(c)   Neither Lender, nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any action lawfully
taken or omitted to be taken by it or them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.

 

(d)   THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF PLEDGOR AND ITS SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR IN
POSSESSION ON BEHALF OF PLEDGOR), AND SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF, AND BE

 

8

 

ENFORCEABLE BY, LENDER AND ITS SUCCESSORS AND ASSIGNS, AND
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF MINNESOTA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE.

 

16.   Severability.  If for any
reason any provision or provisions hereof are determined to be invalid and
contrary to any existing or future law, such invalidity shall not impair the
operation of or effect those portions of this Agreement which are valid.

 

17.           Notices.  Except as
otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give and serve upon any other party any
communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be given in the manner, and deemed received, as provided for
in the Credit Agreement.

 

18.   Section Titles. 
The Section titles contained in this Agreement are and shall be
without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.

 

19.   Counterparts.  This
Agreement may be executed in any number of counterparts, which shall,
collectively and separately, constitute one agreement.

 

20.   Benefit of Lender.  All security
interests granted or contemplated hereby shall be for the benefit of the
Lender, and all proceeds or payments realized from the Pledged Collateral in
accordance herewith shall be applied to the Obligations in accordance with the
terms of the Credit Agreement.

 

21.   Amendment.  If a Pledged
Entity issues any Stock to
Pledgor after the date hereof, this Agreement may be amended by the execution
of a Pledge Amendment in the form of Schedule II hereto, without
the consent or approval of Pledgor.  All
other amendments, modifications and waivers with respect to this Agreement
shall be effective only if they are in writing and executed by Lender and the
Pledgor with an interest of the Pledged Collateral.

 

[Signature
Page Follows]

 

9

 

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

 

 

	
   

  	
  SOUTHWEST
  CASINO AND HOTEL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas E. Fox

  
	
   

  	
   

  	
  Its:

  	
    President

  
	
   

  	
   

  	
   

  
	
   

  	
  CROWN
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Mark W. Lucke

  
	
   

  	
   

  	
  Mark W. Lucke

  
	
   

  	
   

  	
  Its: Vice
  President

  

 

 

[Signature Page to Stock Pledge Agreement]

 

 

SCHEDULE I

 

PLEDGED INTERESTS

 

	
  Name and Address of Pledgor

  	
   

  	
  Pledged Entity

  	
   

  	
  Certificate

  No.

  	
   

  	
  Number

  of

  Shares

  	
   

  	
  Percentage

  of

  Outstanding

  Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Southwest Casino
  and Hotel Corp.

  	
   

  	
  Southwest
  Entertainment Inc.

  	
   

  	
  1

  	
   

  	
  10,000

  	
   

  	
  100

  	
  %

  
	
  2001 Killebrew
  Drive, Suite 350

  Minneapolis, MN 55425

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-1Exhibit 10.9

 

 

PERSONAL GUARANTY

 

BY

 

 

TO

 

CROWN BANK

 

 

Dated:  October 20, 2005

 

 

This instrument was drafted by:

 

David E. Moran, Esq.

WINTHROP & WEINSTINE, P.A.

Suite 3500

225 South Sixth Street

Minneapolis, Minnesota 55402

(612) 604-6400

 

 

PERSONAL GUARANTY

 

In consideration of and in order to induce Crown Bank, a Minnesota
state banking corporation, with its banking house located in Minneapolis,
Minnesota (the “Lender”), to extend financial accommodations to Southwest
Casino and Hotel Corp., a Minnesota corporation, (the “Borrower”), pursuant to
that certain Revolving Credit and Term Loan Agreement of even date herewith by
and between the Lender and the Borrower (the “Credit Agreement”), and as
evidenced by the Notes (as defined in the Credit Agreement) the undersigned
(the “Guarantor”) hereby:

 

1.             Unconditionally and
absolutely guarantees to the Lender:

 

a.             the full
and prompt payment, when due, whether at the maturity dates specified therein
or theretofore upon acceleration of maturity pursuant to the provisions
thereof, of principal, accrued interest and late charges, if any, on the Notes,
and any and all renewals thereof including notes taken in substitution
therefor; and

 

b.             the
payment and performance by the Borrower of all of its obligations under and
pursuant to the Notes, the Credit Agreement, the other Loan Documents and any
and all documents related thereto;

 

(the Notes, the Credit Agreement, the other Loan Documents and such
other liability, indebtedness and obligations are herein collectively referred
to as the “Obligations”); together with the full and prompt payment of any and
all costs and expenses of and incidental to the collection of the Obligations
for the enforcement of this Guaranty, including, without limitation, reasonable
attorneys’ fees.  All capitalized terms
not otherwise defined herein shall have the meaning assigned thereto in the
Credit Agreement.

 

2.             Agrees that the
Lender may demand payment from the Guarantor of any installment (or portion
thereof) of principal or interest on either or both of the Notes, when due and
unpaid, and the Guarantor shall immediately pay the same to the Lender, and the
Lender may demand payment or performance of any or all of the other
Obligations, when such payment or performance is due or required (subject to
any applicable grace period), and the Guarantor shall immediately pay or
perform the same, whether or not the Lender has (i) declared an Event of
Default (as defined in the Credit Agreement), or (ii) accelerated payment
of either or both of the Notes, or (iii) commenced repossession of, or
foreclosure of any security interest, mortgage or other lien in, any or all of
the collateral securing either or both of the Notes, or (iv) otherwise
exercised its rights and remedies hereunder or under either or both of the
Notes, the documents related thereto or applicable law.

 

3.             Waives
(i) presentment, demand, notice of nonpayment, protest and notice of
protest and dishonor on the Obligations; (ii) notice of acceptance of this
Guaranty by the Lender; and (iii) notice of the creation or incurrence of
the Obligations by the Borrower.

 

4.             Agrees that the
Lender may from time to time, without notice to the Guarantor, which notice is
hereby waived by the Guarantor, extend, modify, renew or compromise the Obligations,

 

 

in whole or in part, without releasing, extinguishing or affecting in
any manner whatsoever the liability of the Guarantor hereunder, the foregoing
acts being hereby consented to by the Guarantor.

 

5.             Agrees that the
Lender shall not be required to first resort for payment to the Borrower or any
other person, corporation or entity, or their properties or estates, or any
other right or remedy whatsoever, prior to enforcing this Guaranty.

 

6.             Agrees that this
Guaranty shall be construed as a continuing, absolute, and unconditional
guaranty without regard to (i) the validity, regularity or enforceability
of the Obligations or the disaffirmance thereof in any insolvency or bankruptcy
proceeding relating to the Borrower, or (ii) any event or any conduct or
action of the Borrower or the Lender or any other party which might otherwise
constitute a legal or equitable discharge of a surety or guarantor but for this
provision.

 

7.             Agrees that this
Guaranty shall remain in full force and effect and be binding upon the
Guarantor until the Obligations are paid in full.

 

8.             Agrees that the
Lender is expressly authorized to forward or deliver any or all collateral and
security which may at any time be placed with it by the Borrower, the Guarantor
or any other person, directly to the Borrower for collection and remittance or
for credit, or to collect the same in any other manner and to renew, extend,
compromise, exchange, release, surrender or modify the installments of, any or
all of such collateral and security with or without consideration and without
notice to the Guarantor and without in any manner affecting the absolute
liability of the Guarantor hereunder; and that the liability of the Guarantor
hereunder shall not be affected or impaired by any failure, neglect or omission
on the part of the Lender to realize upon the Obligations, or upon any
collateral or security therefor, nor by the taking by the Lender of any other
guaranty or guaranties to secure the Obligations or any other indebtedness of
the Borrower to the Lender, nor by the taking by the Lender of collateral or
security of any kind nor by any act or failure to act whatsoever which, but for
this provision, might or could in law or in equity act to release or reduce the
Guarantor’s liability hereunder.

 

9.             Waives any right that
the Guarantor may have to collect or seek to collect from the Borrower the
claim, if any, by subrogation or otherwise, acquired by the Guarantor through
payment of any part or all of the Obligations until the Obligations have been
paid in full.

 

10.           Agrees that the
liability of the Guarantor hereunder shall not be affected or impaired by the
existence or creation from time to time, with or without notice to the
Guarantor, which notice is hereby waived, of indebtedness from the Borrower to
the Lender in addition to the indebtedness evidenced by the Notes; the creation
or existence of such additional indebtedness being hereby consented to by the
Guarantor.

 

11.           Agrees that the
possession of this instrument of guaranty by the Lender shall be conclusive
evidence of due execution and delivery hereof by the Guarantor.

 

12.           Agrees that this
Guaranty shall be binding upon the legal representatives, successors and
assigns of the Guarantor, and shall inure to the benefit of the Lender and its
successors, assigns and legal representatives; that notwithstanding the
foregoing, the Guarantor shall not have the 

 

2

 

right to assign or otherwise transfer his rights and obligations under
this Guaranty to any third party without the prior written consent of the
Lender; and that any such assignment or transfer shall not release or affect
the liability of the Guarantor hereunder in any manner whatsoever.

 

13.           Agrees that the
Guarantor may be joined in any action or proceeding commenced against the
Borrower in connection with or based upon the Obligations and recovery may be
had against the Guarantor in any such action or proceeding or in any
independent action or proceeding against the Guarantor should the Borrower fail
to duly and punctually pay any of the principal of or interest on the
Obligations without any requirement that the Lender first assert, prosecute or
exhaust any remedy or claim against the Borrower.

 

14.           Agrees that upon the
occurrence at any time of an Event of Default, the Lender shall have the right
to set off any and all amounts due hereunder by the Guarantor to the Lender
against any indebtedness or obligation of the Lender to the Guarantor.

 

15.           Agrees that the
Guarantor shall be liable to the Lender for any deficiency remaining after
foreclosure of any mortgage in real estate or any security interest in personal
property granted by the Borrower, the Guarantor or any third party to the
Lender to secure repayment of the Obligations and the subsequent sale by the
Lender of the property subject thereto to a third party (whether at a
foreclosure sale or at a sale thereafter by the Lender in the event the Lender
purchases said property at the foreclosure sale) notwithstanding any provision of
applicable law which may prevent the Lender from obtaining a deficiency
judgment against, or otherwise collecting a deficiency from, the Borrower
including, without limitation, Minnesota Statutes Section 582.30.

 

16.           Agrees that this
Guaranty shall be deemed a contract made under and pursuant to the laws of the
State of Minnesota and shall be governed by and construed under the laws of
such state without giving effect to the choice of law provisions thereof; and
that, wherever possible, each provision of this Guaranty shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of the Guaranty.

 

17.           Agrees that no failure
on the part of the Lender to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as or constitute a waiver thereof; nor shall any
single or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right or remedy
granted hereby or by any related document or by law.

 

18.           Waives any and all
claims against the Lender and defenses to performance and payment hereunder
relating in any way, directly or indirectly, to the performance of the Lender’s
obligations or exercise of any of its rights under the Notes and the documents
related thereto.

 

19.           Warrants and represents
to the Lender as follows:

 

a.             Enforceability.  This Guaranty
constitutes the legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms (subject, as to enforceability, to

 

3

 

limitations resulting from bankruptcy, insolvency or
other similar laws affecting creditors’ rights generally).

 

b.             Litigation.  There is no action,
suit or proceeding pending or, to the knowledge of the Guarantor, threatened
against or affecting the Guarantor which, if adversely determined, would have a
Material Adverse Effect (as defined in the Credit Agreement) on the Guarantor,
or which would question the validity of this Guaranty or any instrument,
document or other agreement related hereto or required hereby, or impair the
ability of the Guarantor to perform his obligations hereunder or thereunder.

 

c.             Default.  The Guarantor is not in
default of a material provision under any material agreement, instrument,
decree or order to which he is a party or by which he or his property is bound
or affected.

 

d.             Consents.  To the Guarantor’s
knowledge, no consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any governmental authority or any
third party is required in connection with the execution and delivery of this
Guaranty or any of the agreements or instruments herein mentioned to which the
Guarantor is a party or the carrying out or performance of any of the
transactions required or contemplated hereby or thereby or, if required, such
consent, approval, order or authorization has been obtained or such
registration, declaration or filing has been accomplished or such notice has
been given prior to the date hereof.

 

e.             Taxes.  The Guarantor has filed all
tax returns required to be filed and has paid all taxes shown thereon to be
due, including interest and penalties, which are not being contested in good
faith and by appropriate proceedings and has no information or knowledge of any
objections to or claims for additional taxes in respect of federal income or
excess profits tax returns for prior years.

 

20.           Agrees that the
liability of the Guarantor and any other guarantor of the Obligations shall be
joint and several.  The Lender
acknowledges that certain of the guarantors have guarantied only the Term Note
and interest and costs and expenses related thereto.  Nothing in this Paragraph 20 shall be
construed to extend the guaranty of such guarantors to include the Revolving
Note or interest or costs and expenses related thereto.

 

21.           Agrees to deliver to
the Lender financial information and related documents as set forth in
Section 5.1 of the Credit Agreement with respect to the Guarantor.

 

22.           Agrees that (i) the
Guarantor will indirectly benefit by and from the making of the loans by the
Lender to the Borrower evidenced by the Notes; (ii) the Guarantor has
received legal and adequate consideration for the execution of this Guaranty
and has executed and delivered this Guaranty to the Lender in good faith in
exchange for reasonably equivalent value (including, without limitation,
receiving warrants issued by the Borrower in consideration and exchange for the
execution of this Guaranty); (iii) the Guarantor is not presently
insolvent and will not be rendered insolvent by virtue of the execution and
delivery of this Guaranty; (iv) the Guarantor has not executed or
delivered this Guaranty with actual intent to hinder, delay or defraud the

 

4

 

Guarantor’s creditors; and (v) the Lender has agreed to make such
loans in reliance upon this Guaranty.

 

23.           Agrees that if, at any
time, all or any part of any payment previously applied by the Lender to any of
the Obligations must be returned by the Lender for any reason, whether by court
order, administrative order or settlement, the Guarantor shall remain liable
for the full amount returned as if said amount had never been received by the
Lender, notwithstanding any term of this Guaranty or the cancellation or return
of any note or other agreement evidencing the Obligations.

 

24.           Irrevocably submits to
the jurisdiction of any Minnesota state court or federal court over any action
or proceeding arising out of or relating to this Guaranty, the Notes and any
instrument, agreement or document related thereto; agrees that all claims in
respect of such action or proceeding may be heard and determined in such
Minnesota state or federal court; irrevocably waives, to the fullest extent he
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding; irrevocably consents to the service of copies of
the summons and complaint and any other process which may be served in any such
action or proceeding by the mailing by United States certified mail, return
receipt requested, of copies of such process to the Guarantor’s last known
address; and agrees that judgment final by appeal, or expiration of time to
appeal without an appeal being taken, in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdictions by suit on the
judgment or in any other manner provided by law; provided that nothing in this
paragraph shall affect the right of the Lender to serve legal process in any
other manner permitted by law or affect the right of Lender to bring any action
or proceeding against the Guarantor or his property in the courts of any other
jurisdiction to the extent permitted by law.

 

25.           THE
GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED ON OR PERTAINING TO THIS
GUARANTY.

 

26.           Notwithstanding the aggregate amount of the Obligations which may from
time to time be outstanding, the Guarantor’s liability hereunder shall be
limited to $100,000.00 plus all attorney’s fees, collection costs and
enforcement expenses incurred in connection with the enforcement of this
Guaranty.  The Obligations may be created
and continued in any amount, whether or not in excess of such amount, without
affecting or impairing the Guarantor’s liability hereunder, and the Lender may
pay (or allow for the payment of) the excess out of any sums received by or
available to the Lender on account of the Obligations from the Borrower or any
other person (except the Guarantor) from their properties, out of any
collateral security, or from any other source, and such payment (or allowance)
shall not reduce, affect, or impair the Guarantor’s liability hereunder.  Any payment made by the Guarantor under this
Guaranty shall be effective to reduce or discharge such liability only if
accompanied by a written transmittal document, received by the Lender, advising
the Lender that such payment is made under this Guaranty for such purpose.

 

5

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

Dated as of this      day of October, 2005.

 

 

	
  STATE OF MINNESOTA

  	
  )

  	
   

  
	
   

  	
  ) ss

  	
   

  
	
  COUNTY OF                              

  	
  )

  	
   

  

 

The foregoing instrument was acknowledged before me this             
day of                       ,
2005, by                                      ,
a                               
individual.

 

 

	
   

  	
   

  
	
   

  	
  Notary Public

  

 

6

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