Document:

Exhibit 4.2

 

REGISTRATION RIGHTS AGREEMENT

 

SOUTHWEST CASINO CORPORATION, a Minnesota corporation (“Southwest”), and                                                                   
(“Investor”) enter into this Registration Rights Agreement (“Agreement”) effective October 20, 2005 (Investor and each
other Investor listed on Schedule 1 to this Agreement are referred to
collectively as the “Investors”).

 

BACKGROUND

 

A.            Southwest and Investor have entered into a
Subscription Agreement and Letter of Investment Intent dated                               ,
2005 (the “Subscription Agreement”), under which Investor has subscribed to purchase
warrants (the “Warrants”)  acquire shares of Southwest common stock, par
value $0.001 (the “Common Stock”)
by participating in the guarantee of a bank loan to Southwest.

 

B.            As a condition to the obligations of
the Investors under the Subscription Agreement, Southwest has agreed to grant
the registration rights with respect to the shares of Common Stock issuable
upon exercise of the Warrants on the terms and conditions stated in this
Agreement.

 

AGREEMENT

 

NOW, THEREFORE,
in consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Southwest and the Holders hereby agree as follows.

 

Section 1.              Definitions.
The following terms have the
following meanings in this Agreement:

 

1.1           “Holders” means the (a) the
Investors, each of whom is a party to this Agreement, and (b) any subsequent
legal or beneficial owner of the Warrants or shares of Common Stock issued upon
exercise of the Warrants, who has become a party to this Agreement in
accordance with Section 11.9 of this Agreement.

 

1.2           
“Person” means an individual,
partnership, limited partnership, corporation, business trust, limited
liability company, association, joint stock company, trust, unincorporated
organization, joint venture or other entity of whatever nature.

 

1.3           
“Registrable Common” means (a) any
shares of Common Stock issued or issuable upon exercise of the Warrants, and
(b) any share of Common Stock issued as a dividend, stock split,
reclassification, recapitalization or other distribution with respect to or in
exchange for or replacement of the Warrants or any shares of Common Stock
issuable upon exercise of the Warrants. 
Registrable Common does not include shares of Common Stock (x) that have
been effectively registered under the Securities Act and sold by a Holder in
accordance with that registration, (y) that have been sold by a Holder under
Rule 144, or (z) for which registration under the Securities Act is no
longer required for the immediate public distribution of as a result of the
provisions of Rule 144.

 

1.4           “Register,” “registered” and “registration” refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of that registration statement.

 

1.5           
“Rule 144” means Rule 144
promulgated by the Commission under the Securities Act, as the rule may be
amended from time to time, or any successor to Rule 144.

 

E-1

 

1.6           “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
from time to time under the Securities Act.

 

Section 2.              Registration
Rights.

 

2.1           If
Southwest determines to prepare and file a registration statement under the
Securities Act (other than a registration on a Form S-8 or similar form, or a
registration on a form that does not permit the inclusion of shares by its
security holders), then Southwest must give written notice of its determination
to all record Holders of Registrable Common (a “Participation
Notice”) at least 30 days before filing that registration statement.
 Upon the written request of a Holder of
Registrable Common given within 15 days after receipt of a Participation
Notice, Southwest will, except as provided in this Agreement, include in that
registration statement all shares of Registrable Common for which a Holder
requests registration.  If any
registration under this Section 2.1 is underwritten in whole or in part,
Southwest may require that the Registrable Common requested for inclusion in
the registration statement under this Section 2.1 be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters.

 

2.2           Nothing in
this Agreement prevents Southwest from, at any time, abandoning or delaying any
registration Southwest initiates. 
Southwest must bear all expenses related to the abandonment or delay of
a registration.

 

2.3           If, in the
judgment of Southwest’s managing underwriter of an underwritten registration,
the inclusion of any or all of the Registrable Common requested for inclusion
in the registration under this Section 2 would interfere with the successful
marketing of the shares of Common Stock offered by Southwest or would
negatively impact the trading market of the Common Stock, then the number of
Registrable Common included in the registration under this Section 2 may be
reduced pro rata (by number of
shares) among the Holders and any other shareholder with pari passu registration rights requesting
inclusion in the registration, or eliminated completely.

 

2.4           The right
of any Holder to include Registrable Common in any underwritten registration
under this Agreement is conditioned upon Holder’s full participation in the
underwriting and the inclusion of Holder’s Registrable Common in the
underwriting.  All Holders proposing to
distribute their securities through the underwriting must (together with
Southwest and any other selling shareholders) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected.

 

2.5           Southwest
is not obligated to effect or take any action to effect, any registration under
Section 2.1 more than 2 times.

 

2.6           Nothing in
this Agreement restricts Southwest from, at any time, granting registration
rights on the same or different terms to any other holder or acquirer of
Southwest securities.

 

Section 3.              Registration
Procedures.  Subject to the terms
of this Agreement, if Southwest is required by the terms of this Agreement to
include shares of Registrable Common in a registration under the Securities
Act, Southwest will do the following:

 

3.1           Filing.  Prepare and file with the United States
Securites and Exchange Commission (the “Commission”)
a registration statement that includes the shares of Registrable Common to be
included in the registration in accordance with Section 2, and use its
commercially reasonable efforts to cause the registration statement to become
and remain effective for a period as may be reasonably necessary to effect the
sale of such securities, not to exceed 6 months;

 

2

 

3.2           Period of Effectiveness.  Prepare and file with the Commission any
amendments to the registration statement or supplements to the prospectus in
the registration statement that may be necessary to keep the registration
statement effective for a period as may be reasonably necessary to effect the
sale of the Registrable Common, not to exceed 6 months;

 

3.3           Copies.  Furnish to the Holders participating in the
registration and to the underwriters of the securities being registered a
reasonable number of copies of the registration statement, preliminary
prospectus, formal prospectus and other documents as the Holders and
underwriters may reasonably request in order to facilitate the public offering
of the Regsitrable Common included in the registration;

 

3.4           Blue Sky.  Use its commercially reasonable efforts to
register or qualify the Registrable Common covered by the registration
statement under the state securities or blue sky laws of those jurisdictions
that participating Holders reasonably request in writing within 20 days after
the original filing of the registration statement, except that Southwest will
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any jurisdiction
where it is not so qualified;

 

3.5           Notification.  Notify the Holders participating in the
registration, promptly after Southwest receives notice, of the time when the
registration statement becomes effective or a supplement to any prospectus forming
a part of the registration statement has been filed;

 

3.6           Amendment Notice.  Notify the Holders participating in the
registration promptly of any request by the Commission for the amending or
supplementing of the registration statement or prospectus or for additional
information;

 

3.7           Update.  Prepare and promptly file with the Commission
and promptly notify the Holders of the filing of any amendment or supplement to
the registration statement or prospectus as necessary to correct any statements
or omissions if, at the time when a prospectus relating to the securities is
required to be delivered under the Securities Act, any event has occurred that
causes the prospectus or any other prospectus then in effect to include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements in the prospectus, in light of the
circumstances in which they were made, not misleading;

 

3.8           Stop Orders.  Advise the Holders participating in the
registration, promptly after Southwest receives notice or otherwise becomes
aware, of the issuance of any stop order by the Commission suspending the
effectiveness of the registration statement or the initiation or threatening of
any proceeding for that purpose. 
Southwest must then promptly use its best efforts to prevent the
issuance of any stop order or to obtain the withdrawal of any stop order that
has been issued; and

 

3.9           Compliance Issues.  Southwest must provide to Holders
participating in the registration a copy of any amendment or supplement at
least 2 business days before filing. 
Southwest must not file any amendment or supplement to the registration
statement or prospectus to which a majority in interest of the Holders
participating in the registration have reasonably objected on the grounds that
the amendment or supplement does not comply in all material respects with the
requirements of the Securities Act unless, in the opinion of counsel for
Southwest, the filing of the amendment or supplement is reasonably necessary to
protect Southwest from any liabilities under any applicable federal or state
law and the filing will not violate applicable law.

 

Section 4.              Furnish Information.  It is a condition precedent
to the obligations of Southwest to include any Holders shares of Registrable
Common in a registration that the Holder must furnish to

 

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Southwest any information regarding itself, the
Registrable Common held by the Holder, and the intended method of disposition
of the Registrable Common as required to effect the registration of the Holder’s
Registrable Common.

 

Section 5.              Expenses.  With respect to the inclusion of Registrable
Common in a registration as requested under Section 2.1 of this Agreement
(except as otherwise provided in Section 2), Southwest will bear the following
fees, costs and expenses: all registration, filing and NASD (or exchange) fees,
printing expenses, fees and disbursements of counsel and accountants for
Southwest, fees and disbursements of counsel for the underwriter or
underwriters of the securities included in the registration (if Southwest or
selling security Holders are required to bear these fees and disbursements),
all internal Company expenses, all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance against
liability (if any) arising out of the public offering.  All fees and disbursements of any legal
counsel, accountants or advisors for the selling security Holders, underwriting
discounts and commissions and transfer taxes relating to the shares included in
the offering by the selling security Holders, and any other expenses incurred
by the selling security Holders not expressly included above, must be borne by
the selling security Holders.

 

Section 6.              Delay of Registration. 
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.

 

Section 7.              Indemnification.  In the event that any Registrable Common is
included in a registration statement in accarodance with Section 2 of this
Agreement:

 

7.1           Indemnification by Company.  To the fullest extent permitted by law,
Southwest will indemnify and hold harmless each Holder of Registrable Common
that is included in a registration statement under the provisions of this
Agreement, the Holder’s directors, officers, partners, shareholders and legal
counsel and any underwriter (as defined in the Securities Act) for the Holder
and each Person, if any, who controls the Holder or the underwriter within the
meaning of the Securities Act, from and against, and will reimburse the Holder
and the underwriter and controlling Person with respect to, any and all loss,
damage, claims or liability (collectively, “Losses”),
joint or several, to which any of them may become subject under the Securities
Act, state securities laws or otherwise, and Southwest will pay to each Holder,
director, officer, partner, shareholder, legal counsel, underwriter or
controlling person any legal or other costs or expenses reasonably incurred by
that person in connection with investigating or defending any Loss, insofar as
the Losses are caused by any untrue or alleged untrue statement of any material
fact in the registration statement, any prospectus in the registration statement
or any amendment or supplement to the registration statement, or arise out of
or are based upon the omission or the alleged omission to state in the
registration statement a material fact required to be stated in the
registration statement or necessary to make the statements in the registration
statement, in light of the circumstances in which they were made, not
misleading; provided, however, that Southwest will not be liable to the extent
that any Loss arises out of or is based upon an untrue statement or omission so
made in conformity with information furnished by the Holder, director, officer,
partner, shareholder, legal counsel, underwriter or controlling Person;
provided further, however, that the indemnity agreement in this Section 7.1
will not apply to amounts paid in settlement of any Loss if the settlement is
effected without the consent of Southwest, which consent Southwest will not
withhold unreasonably.  With respect to
any preliminary prospectus, the foregoing indemnity obligation will not inure
to the benefit of any Holder on account of any Loss whatsoever arising from the
sale of any Registrable Common by the Holder to any person if (A) a copy of the
prospectus (as amended or supplemented if amendments or supplements have been
furnished to the Holder before the confirmation of the sale involved) was not
sent or given by or on behalf of the Holder to that person, if required by law,
with or prior to the written confirmation of the sale

 

4

 

involved, and (B) the untrue statement or omission of
a material fact in the preliminary prospectus from which the Loss arose was
corrected in the prospectus (as amended or supplemented if the amendments or
supplements have been furnished as aforesaid).

 

7.2           Indemnification by Holders.  Each Holder of Registrable Common that is
included in a registration statement under the provisions of this Agreement
will indemnify and hold harmless Southwest, its directors and officers, each
Person, if any, who controls Southwest within the meaning of the Securities
Act, any other Holder selling securities under the registration statement, any
controlling Person of any selling Holder, any underwriter and any controlling
Person of any underwriter (each, an “Indemnitee”)
from and against, and will reimburse any Indemnitee with respect to, any and
all Losses to which Indemnitee may become subject under the Securities Act,
state securities laws or otherwise, and the Holder will pay to each Indemnitee
any legal or other costs or expenses reasonably incurred by that person in
connection with investigating or defending any Losses, insofar as the Losses
are caused by any untrue or alleged untrue statement of any material fact in
the registration statement, any prospectus in the registration statement or any
amendment or supplement to the registration statement, or arise out of or are
based upon the omission or the alleged omission to state in the registration
statement, prospectus, amendment or supplement a material fact required to be stated
in the registration statement, prospectus, amendment or supplement or necessary
to make the statements in the registration statement, prospectus, amendment or
supplement, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished in writing by the
Holder to Southwest specifically for use in the preparation of the registration
statement, prospectus, amendment or supplement, and provided, however, that the
indemnity agreement in this Section 7.2 does not apply to amounts paid in
settlement of any Loss if the settlement is effected without the consent of the
indemnifying Holder, which consent the indemnifying Holder must not withhold
unreasonably.  With respect to any
preliminary prospectus, the foregoing indemnity obligation will not inure to
the benefit of Southwest on account of any Loss arising from the sale of any
Registrable Common by a Holder to any person if (A) a copy of the
prospectus (as amended or supplemented if the amendments or supplements are
furnished to a Holder before the confirmation of the sale involved) was not sent
or given by or on behalf of a Holder to the person, if required by law, with or
prior to the written confirmation of the sale involved, and (B) the
indemnifying Holder corrected the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact in the prospectus (as
amended or supplemented if the amendments or supplements were furnished as
aforesaid).  The indemnification
obligations of each Holder under this Section 7.2 are limited to an amount
equal to the net proceeds received by each Holder of Registrable Common sold as
contemplated in this Agreement.

 

7.3           Indemnification Procedures.  Promptly after receipt by a party entitled to
indemnification under this Section 7 (each, an “Indemnified
Party”) of notice of the commencement of any action involving the
subject matter of the foregoing indemnity provisions, the Indemnified Party
will, if a claim is to be made against the party obligated to provide
indemnification under this Section 7 (each, an “Indemnifying
Party”), promptly notify the Indemnifying Party of the commencement
of the action.  The failure to provide
such notice will not relieve the Indemnifying Party from any liability under
this Agreement, except to the extent that the delay in giving, or failing to
give, notice has a material adverse effect upon the ability of the Indemnifying
Party to defend against the claim.  In
case an action is brought against an Indemnified Party, the Indemnifying Party
has the right to participate in and, at the Indemnifying Party’s option, to
assume the defense of the action, singly or jointly with any other Indemnifying
Party similarly notified, with counsel satisfactory to the Indemnified Party;
provided, however, that if the defendants in any action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party
reasonably concludes that there may be legal defenses available to any
Indemnified Parties that are different from or additional to those available to
the Indemnifying Party, or if there is a conflict of interest which would
prevent counsel for the Indemnifying Party from also 

 

5

 

representing the Indemnified Party, the Indemnified
Party will have the right to select counsel to participate in the defense of the
action on behalf of the Indemnified Party at the expense of the Indemnifying
Party; provided that if there is more than one Indemnified Party, the
Indemnifying Party will be responsible for the expense of only one special
counsel selected jointly by the Indemnified Parties.  After notice from an Indemnifying Party to
any Indemnified Party of the Indemnifying Party’s election to assume the
defense of the action, the Indemnifying Party will not be liable to the
Indemnified Party under this Section 7 for any legal or other expense
subsequently incurred by the Indemnified Party in connection with the defense
of the action other than reasonable costs of investigation, unless (i) the
Indemnified Party employed separate counsel in accordance with the proviso of the
preceding sentence, or (ii) the Indemnifying Party does not employ counsel
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after the notice of the commencement of the action, or (iii)
the Indemnifying Party has authorized the employment of counsel for the
Indemnified Party at the expense of the Indemnifying Party.

 

Section 8.              Exceptions
to and Termination of Registration Obligations.  Southwest is not obligated to honor a request
under Section 2 to include Registrable Common in a registration statement if
the Registrable Common is otherwise eligible for immediate sale by the Holder
under Rule 144.  This Agreement, and the
registration rights stated in this Agreement, terminate on the earlier to occur
of (a) 2 years after the date of this Agreement or (b) at any time after
the date of this Agreement that all Holders are able to sell their entire
holdings during any 90 day period under Rule 144(k).

 

Section 9.              Cooperation.  Any Holder whose Registrable Common are to be
included in a registration statement filed by Southwest agrees to cooperate
with all reasonable requests by Southwest necessary to effectuate the purposes
of this Agreement, including by timely providing Southwest with all information
necessary to file a registration statement.

 

Section 10.            “Lock-Out” Agreement.  Each Holder hereby agrees that, for a period
of 180 days after the effective date of any registration statement for
Southwest securities (the “Lock-Out Period”),
Holder will not sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of any securities of Southwest held by Holder, directly or
indirectly, whether through trade in the public securities markets, OTCBB or
private transactions or through any other means, except transfers to donees who
agree to be similarly bound.  Each Holder
acknowledges and agrees that Southwest may impose stop-transfer
instructions during the Lock-Out Period with respect to the securities of each
Holder subject to this restriction if necessary to enforce such restrictions.

 

Section 11.            Miscellaneous.

 

11.1         Waivers, Amendments and Approvals.  In each case in which the approval of the
Holders is required by the terms of this Agreement, that requirement will be
satisfied by a vote or the written action of Holders of at least a majority of the Registrable
Common.  Any term or provision of this
Agreement requiring performance by or binding upon Southwest or Holders may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by Southwest and the Holders of at
least a majority of the then outstanding Registrable Common.  Any amendment or waiver affected in
accordance with this Section shall be binding upon the Holders (including
permitted assigns under Section 11.9 of this Agreement).  The waiver by a party of any breach of this
Agreement or default in payment of any amount due under this Agreement or
default in the performance of this Agreement will not be deemed to constitute a
waiver of any other default or succeeding breach or default.  Written notice of any waiver, consent or
agreement of amendment, modification or supplement will be given to the record
Holders of Registrable Common who did not give written consent to the waiver,
consent, agreement or amendment.

 

6

 

11.2         Written Changes, Waivers, Etc.  Neither this Agreement nor any provision of
this Agreement may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by Southwest and approved by the Holders
as provided in Section 11.1.

 

11.3         Notices.  All notices, demands or other communications
to be given or delivered under this Agreement must be in writing and will be
deemed given when delivered personally to the recipient, sent to the recipient
by reputable overnight courier service (charges prepaid), mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, or transmitted by facsimile or electronic mail (with request for
immediate confirmation of receipt in a manner customary for electronic mail and
with physical delivery of the communication being made by one of the other
means specified in this section promptly thereafter), as follows:

 

	
  11.3.1

  	
   

  	
  To a Holder, addressed to the Holder at the
  address(es) stated on Schedule 1.

  
	
   

  	
   

  	
   

  
	
  11.3.2

  	
   

  	
  To Southwest, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Southwest Casino
  Corporation

  
	
   

  	
   

  	
  Attention: Thomas E.
  Fox, President

  
	
   

  	
   

  	
  2001 Killebrew Drive,
  Suite 350

  
	
   

  	
   

  	
  Minneapolis, MN 55425

  
	
   

  	
   

  	
  Facsimile: 952-853-9991

  
	
   

  	
   

  	
  Telephone: 952-853-9990

  

 

Any party may
change its address for such communications by giving notice of the change to
the other parties in conformity with this Section.

 

11.4         Delays or Omissions.  Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any party under this Agreement will impair that right, power or remedy nor
will it be construed as a waiver of any breach or default, or an acquiescence
to a breach or default, or of a similar breach of default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default.  Any waiver,
permit, consent or approval of any kind or character of any breach or default
under this Agreement, or any waiver of any provisions or conditions of this
Agreement, must be in writing and will be effective only to the extent
specifically stated in that writing.

 

11.5         Other Remedies.  Any and all remedies in this Agreement
expressly conferred upon a party will be deemed cumulative with, and not
exclusive of, any other remedy conferred by this Agreement or by law on that
party, and the exercise of any one remedy will not preclude the exercise of any
other.

 

11.6         Attorneys’ Fees.  If suit is brought to enforce or interpret
any part of this Agreement, the prevailing party is entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys’ fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any appeal).  The prevailing party is
the party entitled to recover its costs of suit, regardless of whether the suit
proceeds to final judgment.  A party not
entitled to recover its costs is not entitled to recover attorneys’ fees.  No sum for attorneys’ fees will be counted in
calculating the amount of a judgment for purposes of determining if a party is
entitled to recover costs or attorneys’ fees.

 

11.7         Entire Agreement.  This Agreement, the schedules to this
Agreement, the documents referenced in this Agreement and the exhibits to those
documents, constitute the entire understanding and agreement of the parties to
this Agreement with respect to the subject matter of this Agreement and 

 

7

 

supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter of this Agreement.  The express terms of this Agreement control
and supersede any course of performance or usage of the trade inconsistent with
any of the terms of this Agreement.

 

11.8         Severability.  If any provision of this Agreement or of any
agreement entered into under this Agreement is determined to be illegal or
unenforceable, all other provisions of this Agreement and of each other
agreement entered into under this Agreement, will be given effect separately
from the provision or provisions determined to be illegal or unenforceable and
will not be affected by that determination.

 

11.9         Successors and Assigns.  The terms and conditions of this Agreement
inure to the benefit of, and bind and are enforceable by, the respective heirs,
successors and assigns of the parties to this Agreement; provided, however,
that the rights of a Holder under this Agreement may be assigned only (a) to a
partner or retired partner of the assigning Holder if that assigning Holder is
a partnership or to any Affiliate of an assigning Holder which is also an
accredited investor within the meaning of the Securities Act, (b) to any family
member of, or trust for the benefit of, the assigning Holder, (c) to any affiliated
entities of the assigning Holder if the affiliated entities are managed by the
same manager or managing partner or management company, or managed by an entity
controlling, controlled by or under common control with that manager, managing
partner or management company, or (d) concurrent with the sale or transfer to
an assignee of at least 25,000 shares
(subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of Southwest) of Registrable Common then held
by the Holder.  No transfer of rights
under this Agreement will be effective unless the transferee of such rights
executes and agrees to be bound by the terms of this Agreement.  Any Holder making an assignment in connection
with the sale or transfer of only a portion of its shares will retain its
rights under this Agreement for the shares not sold or transferred.  Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties to this
Agreement or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. 
Notwithstanding any provision contained elsewhere in this Agreement,
upon the transfer of shares by any of the parties to this Agreement, no claims
or causes of action arising out of or related to this Agreement existing as of
the transfer date may be transferred to any respective heir, successor, assign
or permitted transferee, provided that the transfer of shares will not be
deemed a waiver by the transferring party of any claim or cause of action.  “Affiliate”
means any Person which controls, is controlled by or is under common control
with any other Person or Persons.  For
the purposes of this definition, “control” has the meaning specified as of the
date of this Agreement for that word in Rule 405 promulgated by the Commission
under the Securities Act.

 

11.10       Governing Law.  This Agreement is governed by and construed
under the laws of the State of Minnesota.

 

11.11       Counterparts. This Agreement may be
executed concurrently in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.  Signatures delivered by facsimile
will have the same legal force and effect as original signatures.

 

Remainder of page intentionally blank.

Signatures on next page.

 

8

 

In witness of this
Registration Rights Agreement, Southwest and Investor have executed this
instrument as of the date first written above. 

 

	
  SOUTHWEST CASINO CORPORATION

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  James B. Druck, CEO

  	
  Its:

  	
   

  
				

 

9Exhibit 10.1

 

REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

Dated as of October 20, 2005

 

Southwest
Casino and Hotel Corp., a Minnesota corporation (the “Borrower”), and Crown
Bank, a Minnesota state banking corporation (the “Lender”), hereby agree as
follows:

 

ARTICLE I.

 

Definitions

 

Section 1.1.            Definitions.  For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

 

(a)           the terms
defined in this Article have the meanings assigned to them in this Article,
and include the plural as well as the singular; and

 

(b)           all
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP.

 

“Accounts” means all of the Borrower’s accounts, as
such term is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the Borrower
arising out of the sale or lease of goods or rendition of services by the
Borrower on an open account or deferred payment basis.

 

“Advance” has the meaning given in Section 2.1.

 

“Affiliate” or “Affiliates” means any Person
controlled by, controlling or under common control with any Borrower or any of
the Guarantors, including (without limitation) any Subsidiary of any Borrower
or any of the Guarantors.  For purposes
of this definition, “control,” when used with respect to any specified Person,
means direct or indirect ownership of ten percent (10%) or more of any class of
voting stock of the controlled Person, or the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Revolving Credit and Term Loan
Agreement, as amended, supplemented or restated from time to time.

 

“Banking Day” means any day (other than a Saturday or
Sunday) on which commercial banks are open for business in Minneapolis,
Minnesota.

 

“Capital Expenditures” means, at any date of
determination, any expenditure of money for the lease, purchase or other
acquisition of any capital asset, or for the lease of any other asset whether
payable currently or in the future.

 

“Casino Management Agreement” means, the Third Amended
and Restated Gaming Management Agreement dated June 16, 1995 by and
between the Borrower and

 

 

the
Cheyenne and Arapaho Tribes of Oklahoma, a federally recognized Indian tribe,
as amended from time to time.

 

“Collateral” means all of the Borrower’s assets
including, without limitation, all of the Borrower’s accounts, chattel paper (including,
without limitation, electronic chattel paper and tangible chattel paper),
deposit accounts, documents, Equipment, General Intangibles, goods,
instruments, Inventory, Investment Property, letter-of-credit rights, letters
of credit, patents, patent rights, copyrights, trademarks, trade names,
goodwill, royalty rights, franchise rights, license rights, software, payment
intangibles, and Receivables; together with (i) all substitutions and
replacements for and products of any of the foregoing; (ii) proceeds of
any and all of the foregoing; (iii) in the case of all tangible goods, all
accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
tangible goods; (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods; (vi) all
collateral subject to the lien of any Security Document; (vii) any money,
or other assets of the Borrower, that now or hereafter come into the
possession, custody or control of the Lender; (viii) all supporting
obligations; and (ix) all rights.

 

“Commitment” means the Lender’s commitment to make
Advances and make the Term Loan to or for the Borrower’s account pursuant to Article II.

 

“Corporate Guarantor” means Southwest Casino
Corporation, a Nevada corporation.

 

“Corporate Guarantor Security Agreement” means the
Third Party Security Agreement of even date herewith executed by the Corporate
Guarantor in favor of the Lender, as the same may hereafter be amended,
supplemented, or restated from time to time.

 

“Corporate Guarantor Stock Pledge Agreement” means the
Stock Pledge Agreement of even date herewith executed by the Corporate
Guarantor in favor of the Lender pursuant to which the Corporate Guarantor has
granted the Lender a security interest in the stock of the Borrower owned by
the Corporate Guarantor, as the same may hereafter be amended, supplemented or
restated from time to time.

 

“Corporate Guaranty” means the Corporate Guaranty of
even date herewith executed by the Corporate Guarantor in favor of the Lender,
as the same may hereafter be amended, supplements, or restated from time to
time.

 

“Debt” of any Person means all items of indebtedness
or liability which in accordance with GAAP would be included in determining
total liabilities as shown on the liabilities side of a balance sheet of that
Person as at the date as of which Debt is to be determined.  For purposes of determining a Person’s
aggregate Debt at any time, “Debt” shall also include the aggregate payments
required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.

 

2

 

“Default” means an event that with the giving of
notice or the passage of time or both would constitute an Event of Default.

 

“Default Period” means any period of time beginning on
the day on which an Event of Default has occurred and ending on the date the
Lender notifies the Borrower in writing that such Event of Default has been
cured or waived.

 

“Default Rate” means an annual rate equal to three
percent (3.00%) over the Floating Rate, which rate shall change when and as the
Floating Rate changes.

 

“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended.

 

“Environmental Laws” has the meaning specified in Section 4.12.

 

“Equipment” means all of the Borrower’s equipment, as
such term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery, vehicles,
furniture, fixtures, manufacturing equipment, shop equipment, office and
recordkeeping equipment, parts, tools, supplies, and including specifically
(without limitation) the goods described in any equipment schedule or list
herewith or hereafter furnished to the Lender by the Borrower.

 

“Event of Default” has the meaning specified in Section 7.1.

 

“Floating Rate” means an annual rate equal to one
percent (1.00%) in excess of the Prime Rate of Interest, as the same changes
from time to time, with such rate to be adjusted on and effective as of the
same day the Prime Rate of Interest changes.

 

“Funding Date” has the meaning given in Section 2.1.

 

“GAAP” means generally accepted accounting principles
at the time in the United States.

 

“General Intangibles” means all of the Borrower’s
general intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower’s name, and
the goodwill of the Borrower’s business.

 

“Guarantors” means collectively, the Personal Guarantors,
the Trust Guarantor and the Corporate Guarantor.

 

“Hazardous Substances” has the meaning given in Section 4.12.

 

“Inventory” means all of the Borrower’s inventory, as
such term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, finished goods, raw materials, spare parts
or components, supplies or materials, whether

 

3

 

acquired,
held or furnished for sale, for lease or under service contracts or for manufacture
or processing, and wherever located.

 

“Investment Property” means all of the Borrower’s
investment property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity accounts,
stocks, bonds, mutual fund shares, money market shares and U.S. Government
securities.

 

“Loan Documents” means this Agreement, the Notes, the
Security Documents and any other document from time to time executed in
connection herewith or related hereto, as the same may be amended, supplemented
or restated from time to time.

 

“Material Adverse Effect” means any of the following:

 

(i)            a
material adverse effect on the business, operations, results of operations,
prospects, assets, liabilities or financial condition of the Borrower or any
Guarantor;

 

(ii)           a material
adverse effect on the ability of the Borrower or any Guarantor to perform its
obligations under the Loan Documents;

 

(iii)          a
material adverse effect on the ability of the Lender to enforce the Obligations
or to realize the intended benefits of the Security Documents, including a
material adverse effect on the validity or enforceability of any Loan Document
or of any rights against any guarantor, or on the status, existence,
perfection, priority (subject to Permitted Liens) or enforceability of any lien
securing payment or performance of the Obligations; or

 

(iv)          any claim
against the Borrower or the Corporate Guarantor which if determined adversely
to the Borrower or such Guarantor would cause the Borrower or such Guarantor to
be liable to pay an amount exceeding $50,000 or would be an event described in
clauses (i), (ii) and (iii) above.

 

“Maturity Date” means April 30, 2007, unless the
same is extended pursuant to Section 2.14 in which case it shall mean the
date established pursuant to Section 2.14.

 

“Maximum Line” means $450,000, unless said amount is
reduced pursuant to Section 2.7, in which event it means the amount to
which said amount is reduced.

 

“Membership Interest Pledge Agreements” means,
collectively, the North Metro Membership Interest Pledge Agreement and the
Subsidiary Membership Interest Pledge Agreement.

 

“MRC Statement” means the letter dated October 19,
2005 issued by the Minnesota Racing Commission pursuant to which the Minnesota
Racing Commission states and confirms that its approval of the pledge of the
membership interest of North Metro owned by the Borrower to the Lender pursuant
to the Membership Interest Pledge

 

4

 

Agreement
executed by the Borrower with respect to the membership interest owned by the
Borrower in North Metro is not required.

 

“MTR Gaming” means MTR Gaming Group, Inc., a
Delaware corporation

 

“MTR-Harness” means collectively, MTR-Harness, Inc.,
a Minnesota corporation.

 

“MTR-Harness Consent” means the Consent to Pledge
dated October 20, 2005 issued by MTR-Harness and MTR Gaming pursuant to
which MTR-Harness and MTR Gaming consent to the pledge of the membership
interest of North Metro owned by the Borrower to the Lender pursuant to the
Membership Interest Pledge Agreement executed by the Borrower with respect to
the membership interest owned by the Borrower in North Metro.

 

“North Metro” means North
Metro Harness Initiative, LLC, a Minnesota limited liability company.

 

“North Metro Member Control
Agreement” means the Member Control Agreement of North Metro Harness
Initiative, LLC, a Minnesota limited liability company dated June 8, 2004
and executed by the Borrower and MTR-Harness.

 

“North Metro Membership
Pledge Agreement” means the Membership Interest Pledge Agreement of even date
herewith executed by the Borrower in favor of the Lender pursuant to which the
Borrower has pledged to the Lender the membership interest owned by the
Borrower and North Metro, as the same may hereafter be amended, supplemented or
restated from time to time.

 

“Notes” means, collectively,
the Revolving Note and the Term Note.

 

“Obligations” means the Notes and each and every other
debt, liability and obligation of every type and description which the Borrower
may now or at any time hereafter owe to the Lender, whether such debt,
liability or obligation now exists or is hereafter created or incurred, whether
it arises in a transaction involving the Lender, alone or in a transaction
involving other creditors of the Borrower, and whether it is direct or
indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several, and
including specifically, but not limited to, all indebtedness of the Borrower
arising under this Agreement, the Notes, the Entity Guaranties, or any other
loan or credit agreement between the Borrower and the Lender, whether now in effect
or hereafter entered into.

 

“Permitted Liens” has the meaning given in Section 6.1.

 

“Person” means any individual, corporation,
partnership, joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.

 

5

 

“Personal Guaranties” means, collectively, the
Personal Guaranties of even date herewith executed by the Personal Guarantors
in favor of the Lender, as the same may hereafter be amended, supplemented or
restated from time to time.

 

“Personal Guarantors” means, collectively, the
individuals stated on the signature pages to the Personal Guaranties.

 

“Plan” means an employee benefit plan or other plan
maintained for the Borrower’s employees and covered by Title IV of ERISA.

 

“Premises” means all premises where the Borrower
conducts its business and has any rights of possession, including without
limitation the premises described in Exhibit D attached hereto.

 

“Prime Rate of Interest” means the prime rate of
interest ( or equivalent successor rate published in the Midwest edition of the
Wall Street Journal as a basis
for determining the rate of interest on commercial borrowing, whether or not
the Lender makes loans to other borrowers at, above or below said rate.

 

“Receivables” means each and every right of the
Borrower to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale, lease or
other disposition of goods or other property, out of a rendering of services,
out of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to payment
is created, generated or earned by the Borrower or by some other person who
subsequently transfers such person’s interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which the Borrower may at any time
have by law or agreement against any account debtor or other obligor obligated
to make any such payment or against any property of such account debtor or
other obligor; all including but not limited to all present and future
accounts, contract rights, loans and obligations receivable, chattel papers,
bonds, notes and other debt instruments, tax refunds and rights to payment in
the nature of general intangibles.

 

“Reportable Event” has the meaning assigned to that
term in Title IV of ERISA.

 

“Revolving Credit Facility” means the revolving credit
facility being made available to the Borrower by the Lender pursuant to Article II.

 

“Revolving Note” means the Revolving Note of even date
herewith executed by the Borrower and payable to the order of the Lender in the
original principal amount of $450,000, which note is in substantially the form
of Exhibit A hereto, and any note or notes issued in substitution
therefor, as any of the same may hereafter be amended, supplemented or restated
from time to time.

 

6

 

“Security Agreement” means the Security Agreement of
even date herewith executed by the Borrower in favor of the Lender and
encumbering the Collateral, as the same may hereafter be amended, supplemented
or restated from time to time.

 

“Security Documents” means any document delivered to
the Lender from time to time to secure or guarantee the Obligations including,
without limitation, the Personal Guaranties, the Corporate Guaranty, the Trust
Guaranty, the Membership Interest Pledge Agreements, the Stock Pledge
Agreement, the Corporate Guarantor Security Agreement, the Corporate Guarantor
Stock Pledge Agreement and the Security Agreement, as the same may hereafter be
amended, supplemented or restated from time to time.

 

“Security Interest” means the security interests
and/or liens granted by the Borrower to the Lender pursuant to the Security Documents.

 

“Stock Pledge Agreement” means the Stock Pledge
Agreement of even date herewith executed by the Borrower in favor of the Lender
pursuant to which the Borrower has pledged the stock owned by the Borrower in
Southwest Entertainment, Inc. to the Lender as collateral, as the same may
hereafter be amended, supplemented or restated from time to time.

 

“Subordinated Debt” means,
at any date of determination, the aggregate outstanding principal balance of
liabilities appearing on the Borrower’s balance sheet at such date which is
subordinated in right of payment to the Obligations on terms acceptable to the
Lender in its discretion.

 

“Subsidiary” means any corporation or limited
liability company of which more than fifty percent (50%) of the outstanding shares
of capital stock or membership interests having general voting power under
ordinary circumstances to elect a majority of the board of directors or
governors, as the case may be of such corporation or limited liability company,
as the case may be, irrespective of whether or not at the time stock or
membership interests of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the time
directly or indirectly owned by the Borrower, by the Borrower and one or more
other Subsidiaries, or by one or more other Subsidiaries.

 

“Subsidiary Membership Interest Pledge Agreement”
means the Membership Interest Pledge Agreement of even date herewith executed
by the Borrower in favor of the Lender pursuant to which the Borrower has
pledged to the Lender the membership interest owned by the Borrower and Gold
Rush I, LLC, Southwest Casino Deadwood, LLC, and SW Missouri, LLC, as the same
may hereafter be amended, supplemented or restated from time to time.

 

“Term Loan” has the meaning given in Section 2.2.

 

“Term Note” means the Term Note of even date herewith
executed by the Borrower and payable to the order of the Lender in the original
principal amount of $2,500,000 which note is in substantially the form of Exhibit B
hereto, and any note or

 

7

 

notes
issued in substitution therefor, as the same may hereafter be amended,
supplemented or restated from time to time.

 

“Termination Date” means the earliest of (i) the
Maturity Date, (ii) the date the Borrower terminates the Revolving Credit
Facility, or (iii) the date the Lender demands payment of the Obligations
after an Event of Default pursuant to Section 7.2.

 

“Trust Guarantor” means the trust stated on the signature
pages to the Trust Guaranty.

 

“Trust Guaranty” means the Trust Guaranty of even date
herewith executed by the Trust Guarantor in favor of the Lender, as the same
may hereafter be amended, supplemented or restated from time to time.

 

“UCC” means the Uniform Commercial Code as in effect
from time to time in the state designated in Section 8.13 as the state
whose laws shall govern this Agreement, or in any other state whose laws are
held to govern this Agreement or any portion hereof.

 

Section 1.2.            Cross
References.  All references in this
Agreement to Articles, Sections and subsections, shall be to Articles, Sections
and subsections of this Agreement unless otherwise explicitly specified.

 

ARTICLE II.

 

Amount and Terms of the Revolving Credit Facility and Term Loan

 

Section 2.1.            Advances.  The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower as
specified by the Borrower (each an “Advance” and collectively, the “Advances”)
from time to time from the date all of the conditions set forth in Section 3.1
are satisfied (the “Funding Date”) to the Termination Date, on the terms and
subject to the conditions herein set forth. 
All Advances shall be in a minimum amount of $5,000.00.  The Lender shall have no obligation to make
an Advance to the Borrower if, after giving effect to such requested Advance,
the sum of the outstanding and unpaid Advances to the Borrower under this Section or
otherwise would exceed the original principal amount of the Revolving Note.  The Borrower’s obligation to pay the Advances
shall be evidenced by the Revolving Note and shall be secured by the
Collateral.  Within the limits set forth
in this Section, the Borrower may borrow, prepay pursuant to Section 2.7
and reborrow.  The Borrower agrees to
comply with the following procedures in requesting Advances under this Section:

 

(a)           The
Borrower shall make each request for an Advance to the Lender before 11:00 a.m.
(Minneapolis time) of the day of the requested Advance.  Requests may be made in writing, by facsimile
or by telephone, specifying the date of the requested Advance and the amount
thereof.  Each request shall be by (i) any
officer of the Borrower; or (ii) any person designated as the Borrower’s
agent by any officer of the Borrower in a writing delivered to the Lender; or (iii) any
person whom the Lender reasonably believes to be an officer of the Borrower or
such a designated agent.

 

8

 

(b)           Upon
fulfillment of the applicable conditions set forth in Article III, the
Lender shall disburse the proceeds of the requested Advance by crediting the
same to any Borrower’s demand deposit account maintained at the Lender as
specified by the Borrower unless the Lender and the Borrower shall agree in
writing to another manner of disbursement. 
Upon the Lender’s request, the Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an appropriate
confirmation certificate to the Lender. 
The Borrower shall repay all Advances even if the Lender does not
receive such confirmation and even if the person requesting an Advance was not
in fact authorized to do so.  Any request
for an Advance, whether written or telephonic, shall be deemed to be a
representation by the Borrower that the conditions set forth in Section 3.2
have been satisfied as of the time of the request.

 

Section 2.2.            Term
Loan.  The Lender agrees, on the
terms and subject to the conditions hereinafter set forth, to make the term
loan to the Borrower in an amount equal to $2,500,000 respectively (the “Term
Loan”).  The Term Loan shall be evidenced
by and repayable with interest in accordance with the Term Note and secured by
the Collateral.

 

Section 2.3.            Interest;
Default Interest; Participations; Usury. 
Interest accruing on the Notes shall be due and payable in arrears on
the first day of each month.

 

(a)           Notes. 
Except as set forth in subsections (b) and (d) below, the
outstanding principal balance of the Notes shall bear interest at the Floating
Rate.  Notwithstanding anything to the
contrary contained herein or in the Notes, the interest rate on the Notes will
not be less than seven and one-half percent (7.50%) per annum.  The Lender’s internal records of applicable
interest rates shall be determinative in the absence of manifest error.

 

(b)           Default Interest Rate.  At any time during any Default Period, in
the Lender’s sole discretion and without waiving any of its other rights and
remedies, the principal amount outstanding from time to time on the Notes shall
bear interest at the Default Rate, effective for any portion of that Default
Period designated by the Lender from time to time during that Default Period.

 

(c)           Participations.  If any Person shall acquire a participation
in the Advances or the Term Loan under this Agreement, the Borrower shall be
obligated to the Lender to pay the full amount of all interest calculated
under, along with all other fees, charges and other amounts due under this
Agreement, regardless if such Person elects to accept interest with respect to
its participation at a lower rate than the Floating Rate, or otherwise elects
to accept less than its prorata share of such fees, charges and other amounts
due under this Agreement.

 

(d)           Usury. 
In any event no rate change shall be put into effect which would
result in a rate greater than the highest rate permitted by law.  Notwithstanding anything to the contrary
contained in any Loan Document, all agreements which either now are or which
shall become agreements between the Borrower and the Lender are hereby limited
so that in no contingency or event whatsoever shall the total liability for
payments in the nature of interest, additional interest and other charges
exceed the applicable limits

 

9

 

imposed
by any applicable usury laws.  If any
payments in the nature of interest, additional interest and other charges made
under any Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total liability
for payments in the nature of interest, additional interest and other charges
shall not exceed the applicable limits imposed by any applicable usury laws, in
compliance with the desires of the Borrower and the Lender.  This provision shall never be superseded or
waived and shall control every other provision of the Loan Documents and all
agreements between the Borrower and the Lender, or their successors and
assigns.

 

Section 2.4.            Fees.

 

(a)           Origination Fee.  The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $25,000.00, due and
payable upon the execution of this Agreement.

 

(b)           Audit Fees. The Borrower hereby
agrees to pay the Lender, on demand, audit fees in connection with audits or
inspections conducted by the Lender of any Collateral or the Borrower’s
operations or business, at the rates established from time to time by the
Lender as its audit fees together with all actual out-of-pocket costs and
expenses incurred in conducting such audits or inspections.  The Borrower shall at all times reimburse the
Lender for all costs and expenses.

 

Section 2.5.            Computation
of Interest and Fees; When Interest Due and Payable.  Interest accruing on the outstanding
principal balance of the Notes and fees hereunder outstanding from time to time
shall be computed on the basis of actual number of days elapsed in a year of
360 days.  Interest shall be payable in
arrears on the first day of each calendar month and on the Termination Date.

 

Section 2.6.            Capital
Adequacy; Increased Costs and Reduced Return.  If any Related Lender determines at any time
that its Return has been reduced as a result of any Rule Change, such
Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule Change.  For purposes of this Section:

 

(a)           “Capital
Adequacy Rule” means any law, rule, regulation, guideline, directive,
requirement or request regarding capital adequacy, or the interpretation or
administration thereof by any governmental or regulatory authority, central
bank or comparable agency, whether or not having the force of law, that applies
to any Related Lender.  Such rules include
rules requiring financial institutions to maintain total capital in
amounts based upon percentages of outstanding loans, binding loan commitments
and letters of credit.

 

(b)           “Return”,
for any period, means the return as determined by such Related Lender on the
Advances based upon its total capital requirements and a reasonable attribution
formula that takes account of the Capital Adequacy Rules then in effect.

 

10

 

Return
may be calculated for each calendar quarter and for the shorter period between
the end of a calendar quarter and the date of termination in whole of this
Agreement.

 

(c)           “Rule Change”
means any change in any Capital Adequacy Rule occurring after the date of
this Agreement, but the term does not include any changes in applicable
requirements that at the closing date are scheduled to take place under the
existing Capital Adequacy Rules or any increases in the capital that any
Related Lender is required to maintain to the extent that the increases are
required due to a regulatory authority’s assessment of the financial condition
of such Related Lender.

 

(d)           “Related
Lender” includes (but is not limited to) the Lender, any parent corporation of
the Lender and any assignee of any interest of the Lender hereunder and any
participant in the loans made hereunder.

 

Certificates of any
Related Lender sent to the Borrower from time to time claiming compensation
under this Section, stating the reason therefor and setting forth in reasonable
detail the calculation of the additional amount or amounts to be paid to the
Related Lender hereunder to restore its Return shall be conclusive absent
manifest error.  In determining such
amounts, the Related Lender may use any reasonable averaging and attribution
methods.

 

Section 2.7.            Voluntary
Prepayment; Reduction of the Maximum Line; Termination of the Revolving Credit
Facility by the Borrower.  Except as
otherwise provided herein, the Borrower may prepay the Advances in whole at any
time or from time to time in part.  The
Borrower may prepay the Term Note, terminate the Revolving Credit Facility or
reduce the Maximum Line at any time if it gives the Lender at least 30 days’
prior written notice.  Any prepayment of
the Term Note or reduction in the Maximum Line must be in an amount not less
than $5,000.00 or an integral multiple thereof. 
If the Borrower reduces the Maximum Line to zero or terminates the
Revolving Credit Facility, all Obligations shall be immediately due and
payable.  Any partial prepayments of the
Term Note shall be applied to principal payments due and owing in inverse order
of their maturities.  Upon termination of
the Revolving Credit Facility and payment and performance of all Obligations,
the Lender shall release or terminate the Security Interest and the Security
Documents to which the Borrower is entitled by law.

 

Section 2.8.            [Intentionally
Omitted.]

 

Section 2.9.            Mandatory
Prepayment.  The Obligations are
subject to mandatory prepayment in an amount equal to any dividends or
distributions to which the Lender is entitled pursuant to the terms of the
Membership Interest Pledge Agreements. 
Any payment received under this Section or under Section 2.10
at a time when no Default Period exists shall be applied to the Obligations, in
such order and in such amounts as the Borrower, in its discretion, may from
time to time determine.  Any payment
received under this Section or under Section 2.10 during any Default
Period may be applied to the Obligations, in such order and in such amounts as
the Lender, in its discretion, may from time to time determine.

 

Section 2.10.          Payment.  Notwithstanding anything to the contrary
contained herein or in the Notes, the Borrower shall make payments of interest
on and principal of the Notes and all payment to the Lender with respect to the
payment of other fees, costs and

 

11

 

expenses payable under
any of the Loan Documents in immediately available funds to the Lender at its
address set forth herein without setoff or counterclaim.  The Borrower authorizes the Lender to charge
from time to time against the Borrower’s account with the Lender any such
payments when due and the Lender will use its reasonable efforts to notify the
Borrower of such charges. 
Notwithstanding anything to the contrary in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower’s request and even if the conditions set
forth in Section 3.2 would not be satisfied, to make an Advance in an
amount equal to the portion of the Obligations from time to time due and
payable and unpaid for a period of time greater than five (5) days.

 

Section 2.11.          Payment
on Non-Banking Days.  Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Banking Day, such payment may be made on the next succeeding Banking Day, and
such extension of time shall in such case be included in the computation of
interest on the Advances, the Term Loan or the fees hereunder, as the case may
be.

 

Section 2.12.          Use
of Proceeds.  The Borrower shall use
the proceeds of the Revolving Note to refinance certain existing indebtedness
of the Borrower and for ordinary working capital purposes.  The Borrower shall use the proceeds of the
Term Note to make capital contributions to North Metro and for ordinary working
capital purposes.

 

Section 2.13.          Liability
Records.  The Lender may maintain
from time to time, at its discretion, liability records as to the
Obligations.  All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary.  Upon the Lender’s demand, the
Borrower will admit and certify in writing the exact principal balance of the
Obligations that the Borrower then asserts to be outstanding.  Any billing statement or accounting rendered
by the Lender shall be conclusive and fully binding on the Borrower unless the
Borrower gives the Lender specific written notice of exception within thirty
(30) days after receipt.

 

Section 2.14.          Extension
of Maturity Date.  The Casino
Management Agreement as in effect as of the date of this Agreement, expires on May 19,
2007.  In the event the Borrower is able
to negotiate an extension of the Casino Management Agreement so that the Casino
Management Agreement continues on terms and conditions reasonably acceptable to
the Lender until at least June 30, 2008, and so long as no Default Period
has occurred and is continuing, the Lender will, upon the written request of
the Borrower, extend the Maturity Date to May 31, 2008, so long as the
Borrower and the Guarantors execute any and all documents required by the
Lender as a condition to such extension of the Maturity Date, and otherwise
comply with any and all other conditions precedent established by the Lender as
a condition to such extension of the Maturity Date, so long as such documents
and conditions are reasonably consistent with the documents required and the
conditions established by the Lender in connection with this Agreement, the
Loan Documents and the Loan contemplated hereby.

 

12

 

ARTICLE III.

 

Conditions of Lending

 

Section 3.1.            Conditions
Precedent to the Initial Advance and the Term Loan.  The Lender’s obligation to make the initial
Advance and the Term Loan shall be subject to the condition precedent that the
Lender shall have received all of the following, each in form and substance
satisfactory to the Lender:

 

(a)           This
Agreement, properly executed by the Borrower.

 

(b)           The Notes,
properly executed by the Borrower.

 

(c)           The other
Loan Documents, properly executed by the parties thereto.

 

(d)           The
original stock certificate or certificates evidencing all of the stock of the
Borrower owned by the Corporate Guarantor, together with a stock power or stock
powers with respect thereto, duly executed by the Corporate Guarantor.

 

(e)           The
original stock certificate or certificates evidencing all of the stock of
Southwest Entertainment, Inc. owned by the Borrower, together with a stock
power or stock powers with respect thereto, duly executed by the Borrower.

 

(f)            The MRC
Statement, properly executed by the Minnesota Racing Commission.

 

(g)           The
MTR-Harness Consent, properly executed by MTR-Harness.

 

(h)           Current
searches of appropriate filing offices showing that (i) no state or
federal tax liens have been filed and remain in effect against the Borrower, (ii) no
financing statements or assignments of patents, trademarks or copyrights have
been filed and remain in effect against the Borrower except those financing
statements and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing that
upon receipt of proceeds of the Notes, they will deliver UCC releases and/or
terminations and releases of such assignments of patents, trademarks or
copyrights satisfactory to the Lender, and (iii) the Lender has duly filed
all financing statements necessary to perfect the Security Interest, to the
extent the Security Interest is capable of being perfected by filing.

 

(i)            A
certificate of an officer of the Borrower certifying as to (i) the
resolutions of the Borrower’s directors and, if required, shareholders
authorizing the execution, delivery and performance of the Loan Documents, (ii) the
Borrower’s articles of incorporation and bylaws, and (iii) the signatures
of the Borrower’s officers or agents authorized to execute and deliver the Loan
Documents, and other instruments, agreements and certificates, including
Advance requests, on the Borrower’s behalf.

 

(j)            A
certificate of an officer of the Corporate Guarantor, certifying as to (i) the
resolutions of the Corporate Guarantor’s directors of, and, if required,
shareholders

 

13

 

of
each such entity, authorizing the execution, delivery and performance of the
Loan Documents executed by the Corporate Guarantor, (ii) the Corporate
Guarantor’s articles of incorporation and bylaws, and (iii) the signatures
of the Corporate Guarantor’s officers or agents authorized to execute and
deliver the Loan Documents executed by the Corporate Guarantor on the Corporate
Guarantor’s behalf.

 

(k)           Current
certificates issued by the Secretary of State of Minnesota certifying that the
Borrower and the Corporate Guarantor are in compliance with all applicable
organizational and/or registration requirements of the State of Minnesota.

 

(l)            Evidence
that the Borrower and the Corporate Guarantor are duly licensed or qualified to
transact business in all jurisdictions where the failure to be so licensed
would have a Material Adverse Effect on the Borrower or the Corporate
Guarantor, as the case may be.

 

(m)          A certified
copy of the Trust Agreement for the Trust.

 

(n)           A
certificate of a trustee of the Trust certifying as to:  (i) the resolutions of the Trustees of
the Trust authorizing the execution, delivery, and performance of the Trust
Guaranty, (ii) the Trust Agreement, and (iii) signatures of the
trustees of the Trust authorized to execute the Trust Guaranty on the Trust’s
behalf.

 

(o)           A
certified copy of the Member Control Agreement for North Metro.

 

(p)           A
certified copy of the Casino Management Agreement.

 

(q)           Payoff
letter(s) from all appropriate lenders.

 

(r)            An
opinion of counsel to the Borrower and the Trust addressed to the Lender.

 

(s)           Certificates
of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in the Lender’s favor and with all liability
insurance naming the Lender as an additional insured.

 

(t)            Financial
statements for each Borrower and each Guarantor.

 

(u)           Projected
balance sheets, statements of cash flow and income statements for the remainder
of the Borrower’s current fiscal year, each in reasonable detail, representing
the Borrower’s good faith projections and certified by the Borrower’s chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning purposes,
together with such supporting schedules and information as the Lender may in
its discretion require.

 

(v)           Evidence
that the Borrower has established all of its operating accounts at the Lender.

 

14

 

(w)          Payment of
the fees and commissions due through the date of the initial Advance under Section 2.4
and expenses incurred by the Lender through such date and required to be paid
by the Borrower under Section 8.6, including all legal expenses incurred
through the date of this Agreement.

 

(x)            Such
other documents as the Lender may reasonably require.

 

Section 3.2.            Conditions
Precedent to All Advances.  The
Lender’s obligation to make each Advance shall be subject to the further
conditions precedent that on such date:

 

(a)           the
representations and warranties contained in Article IV are correct on and
as of the date of such Advance as though made on and as of such date, except to
the extent that such representations and warranties relate solely to an earlier
date; and

 

(b)           no event
has occurred and is continuing, or would result from such Advance, which
constitutes a Default or an Event of Default.

 

(c)           The
Borrower shall have delivered to the Lender the Borrowing Base Certificate
required in connection with such Advances as set forth in Section 5.1(d).

 

ARTICLE IV.

 

Representations and Warranties

 

The
Borrower represents and warrants to the Lender as follows:

 

Section 4.1.            Existence
and Power; Name; Chief Executive Office; Organizational Identification Number.
 The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and is duly licensed or qualified to transact business in all
jurisdictions where the failure to be so licensed or qualified would have a
Material Adverse Effect on the Borrower. 
The Borrower has all requisite power and authority, as a corporation or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents to
which it is a party.  During its
existence, the Borrower has done business solely under the names set forth in Schedule 4.1.  The Borrower’s chief executive office and
principal place of business is located at the address set forth in Schedule 4.1,
and all of the Borrower’s records relating to its business or the Collateral
are kept at that location.  The Borrower’s
organizational identification number is 7I-208 and tax identification number is
41-1721968.

 

Section 4.2.            Authorization
of Borrowing; No Conflict as to Law or Agreements.  The execution, delivery and performance by
the Borrower of the Loan Documents and the borrowings from time to time
hereunder have been duly authorized by all necessary company action and do not
and will not (i) require any consent or approval of the Borrower’s
stockholders; (ii) require any authorization, consent or approval by, or
registration, declaration or filing with, or notice to, any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof and which would not have a Material Adverse Effect;
(iii) violate any

 

15

 

provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or decree
presently in effect having applicability to the Borrower or of the Borrower’s
articles of incorporation or bylaws; (iv) result in a material breach of
or constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interest) upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower.

 

Section 4.3.            Legal
Agreements.  This Agreement
constitutes and, upon due execution by the Borrower, the other Loan Documents
will constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms
(subject, as to enforceability, to limitations resulting from bankruptcy, insolvency
and other similar laws affecting creditors’ rights generally).

 

Section 4.4.            Subsidiaries.  Except as set forth in Schedule 4.4, the
Borrower has no Subsidiaries.

 

Section 4.5.            Financial
Condition; No Adverse Change.  The
Borrower has heretofore furnished to the Lender its audited financial
statements for its fiscal year ending December 31, 2004 and its unaudited
financial statements for the fiscal year to date period ended June 30,
2005 and those statements fairly present the Borrower’s financial condition on
the dates thereof and the results of its operations and cash flows for the
periods then ended and were prepared in accordance with GAAP.  Since the date of the most recent financial
statements, and except for the “Pending Litigation” as defined in Section 4.6,
there has been no material adverse change in the Borrower’s business,
properties or condition (financial or otherwise) which would have a Material
Adverse Effect on the Borrower.

 

Section 4.6.            Litigation.  Except as set forth on Schedule 4.6,
(the “Pending Litigation”), there are no actions, suits or proceedings pending
or, to the Borrower’s knowledge, threatened against or affecting the Borrower,
any of its Affiliates or, to the best of the Borrower’s knowledge, any of the
Guarantors, or the properties of the Borrower, any of its Affiliates or, to the
best of the Borrower’s knowledge, any of the Guarantors before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to the Borrower, any of its
Affiliates or any of the Guarantors, would have a Material Adverse Effect on
the Borrower, any of its Affiliates or any of the Guarantors.

 

Section 4.7.            Regulation U.  The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

 

Section 4.8.            Taxes.  The Borrower and its Affiliates have paid or
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them.  The Borrower and its Affiliates have filed
all federal, state and local tax returns

 

16

 

which to the knowledge of
the officers of the Borrower or any Affiliate, as the case may be, are required
to be filed, and the Borrower and its Affiliates have paid or caused to be paid
to the respective taxing authorities all taxes as shown on said returns or on
any assessment received by any of them to the extent such taxes have become
due.

 

Section 4.9.            Titles
and Liens.  The Borrower has good and
absolute title to all Collateral described in the collateral reports provided
to the Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 4.5 and all proceeds
thereof, free and clear of all mortgages, security interests, liens and
encumbrances, except for Permitted Liens. 
No financing statement naming the Borrower as debtor is on file in any
office except to perfect only Permitted Liens.

 

Section 4.10.          Plans.  Except as set forth on Schedule 4.10,
neither the Borrower nor any of its Affiliates maintains or has maintained any
Plan.  Neither the Borrower nor any
Affiliate has received any notice or has any knowledge to the effect that it is
not in full compliance with any of the requirements of ERISA.  No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan’s tax qualified
status exists in connection with any Plan. 
Neither the Borrower nor any of its Affiliates has:

 

(a)           Any
accumulated funding deficiency within the meaning of ERISA; or

 

(b)           Any
liability or knows of any fact or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than accrued benefits which or which may become payable to participants
or beneficiaries of any such Plan).

 

Section 4.11.          Default.  The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or
default of which could have a Material Adverse Effect on the Borrower.

 

Section 4.12.          Environmental
Matters.

 

(a)           Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

(i)            “Environmental
Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.

 

(ii)           “Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.

 

(b)           To the
Borrower’s best knowledge, there are not present in, on or under the Premises
any Hazardous Substances in such form or quantity as to create any liability

 

17

 

or
obligation for either the Borrower or the Lender under common law of any
jurisdiction or under any Environmental Law, and no Hazardous Substances have
ever been stored, buried, spilled, leaked, discharged, emitted or released in,
on or under the Premises in such a way as to create any such liability.

 

(c)           To the
Borrower’s best knowledge, the Borrower has not disposed of Hazardous
Substances in such a manner as to create any liability under any Environmental
Law.

 

(d)           To the
Borrower’s best knowledge, there are not and there never have been any
requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the Borrower,
alleging liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant thereto.  To the Borrower’s best knowledge, no such
matter is threatened or impending.

 

(e)           To the
Borrower’s best knowledge, the Borrower’s businesses are and have in the past
always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower’s possession and are in full force and
effect.  No permit required under any
Environmental Law is scheduled to expire within twelve (12) months and there is
no threat that any such permit will be withdrawn, terminated, limited or
materially changed.

 

(f)            To the
Borrower’s best knowledge, the Premises are not and never have been listed on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state or
local list, schedule, log, inventory or database.

 

(g)           The
Borrower has delivered to Lender all environmental assessments, audits,
reports, permits, licenses and other documents describing or relating in any
way to the Premises or Borrower’s businesses.

 

Section 4.13.          Submissions
to Lender.  All financial and other
information provided to the Lender by or on behalf of the Borrower in
connection with the Borrower’s request for the Revolving Credit Facility and
the Term Loans contemplated hereby is true and correct in all material respects
and, as to projections, valuations or proforma financial statements, present a
good faith opinion as to such projections, valuations and proforma condition
and results.

 

Section 4.14.          Financing
Statements.  The Borrower has
authorized the Lender to file financing statements sufficient when filed to
perfect the Security Interest and the other security interests created by the
Security Documents to the extent the Security Interest is capable of being
perfected by filing.  When such financing
statements are filed in the offices noted therein, the Lender will have a valid
and perfected first priority security interest (subject to Permitted Liens) in
all Collateral and all other collateral described in the Security Documents
which is capable of being perfected by filing financing statements.  None of the Collateral or 

 

18

 

other collateral covered
by the Security Documents is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.

 

Section 4.15.          Rights
to Payment.  Each right to payment
and each instrument, document, chattel paper and other agreement constituting
or evidencing Collateral or other collateral covered by the Security Documents
is (or, in the case of all future Collateral or such other collateral, will be
when arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower’s records pertaining thereto as being
obligated to pay such obligation.

 

Section 4.16.          Financial
Solvency.  Both before and after
giving effect to the transactions contemplated in the Loan Documents, none of
the Borrower, its Affiliates, the Corporate Guarantor, or the Personal
Guarantors consisting of Jeffrey S. Halpern, James B. Druck, or Thomas E. Fox,
or to the best of the Borrower’s knowledge, the Personal Guarantors other than
Jeffrey S. Halpern, James B. Druck, or Thomas E. Fox, or the Trust Guarantor:

 

(a)           was or
will be insolvent, as that term is used and defined in Section 101(32) of
the United States Bankruptcy Code and Section 2 of the Uniform Fraudulent
Transfer Act;

 

(b)           has
unreasonably small capital or is engaged or about to engage in a business or a
transaction for which any remaining assets of the Borrower, such Affiliate or
any of the Guarantors are unreasonably small;

 

(c)           by
executing, delivering or performing its obligations under the Loan Documents or
other documents to which it or he is a party or by taking any action with
respect thereto, intends to, nor believes that it or he will, incur debts
beyond its or his ability to pay them as they mature;

 

(d)           by
executing, delivering or performing its or his obligations under the Loan
Documents or other documents to which it or he is a party or by taking any
action with respect thereto, intends to hinder, delay or defraud either its or
his present or future creditors; and

 

(e)           at this
time contemplates filing a petition in bankruptcy or for an arrangement or
reorganization or similar proceeding under any law any jurisdiction, nor, to
the best knowledge of the Borrower, is the subject of any actual, pending or
threatened bankruptcy, insolvency or similar proceedings under any law of any
jurisdiction.

 

Section 4.17.          Licenses,
Etc.  The Borrower has and possesses
adequate licenses, certificates, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to own and operate its business
as presently conducted.

 

19

 

ARTICLE V.

 

Borrower’s Affirmative Covenants

 

So
long as the Obligations shall remain unpaid, or the Revolving Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:

 

Section 5.1.            Reporting
Requirements.  The Borrower will
deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender:

 

(a)           as soon as
available, and in any event within ninety (90) days after the end of each
fiscal year of the Borrower, the Borrower’s audited financial statements
prepared by an independent certified public accountant selected by the Borrower
and acceptable to the Lender, which annual financial statements shall include
the Borrower’s balance sheet as at the end of such fiscal year and the related
statements of the Borrower’s income, retained earnings and cash flows for the
fiscal year then ended, prepared on a consolidating and consolidated basis to
include any Affiliates, all in reasonable detail and prepared in accordance
with GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that in
making the investigations necessary for said opinion they obtained no
knowledge, except as specifically stated, of any Default or Event of Default
hereunder and all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Section 5.12; and (iii) a certificate of an
officer of the Borrower stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has knowledge
of the occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;

 

(b)           as soon as
available and in any event within forty-five (45) days after the end of each
fiscal quarter of the Borrower, an unaudited/internal balance sheet and
statements of income, cash flow and retained earnings of the Borrower as at the
end of and for such quarter and for the year to date period then ended,
prepared on a consolidating and consolidated basis to include any Affiliates,
in reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, that are complete and
correct in all respects and fairly present the financial condition of the
Borrower at the dates of such statements and the results of its operations for
the period ended on such date; and accompanied by a certificate of an officer
of the Borrower, substantially in the form of Exhibit C hereto
stating (i) that such financial statements are complete and correct in all
respects and fairly present the financial condition of the Borrower at the
dates of such statements and the results of its operations for the period ended
on such date, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto, and (iii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Section 5.12;

 

20

 

(c)           at least
thirty (30) days before the beginning of each fiscal year of the Borrower, the
projected balance sheets, income statements and statements of cash flow for
each month of such year, in reasonable detail, representing the Borrower’s good
faith projections and certified by an officer of the Borrower as being the most
accurate projections available and identical to the projections used by the
Borrower for internal planning purposes, together with supporting schedules
(including underlying assumptions) and information as the Lender may in its
discretion require;

 

(d)           Intentionally
omitted

 

(e)           as soon as possible, and in any event by not later than April 30th
of each year, copies of the state and federal tax returns and all schedules
thereto for the Borrower and each of the Guarantors, an updated personal
financial statement of each of the Personal Guarantors;

 

(f)            Intentionally omitted;

 

(g)           immediately
after the commencement thereof, notice in writing of all litigation and of all
proceedings before any governmental or regulatory agency affecting the Borrower
or any of the Guarantors of the type described in Section 4.12 or which
seek a monetary recovery against the Borrower or either of the Guarantors in
excess of $50,000;

 

(h)           as
promptly as practicable (but in any event not later than five business days)
after an officer of the Borrower obtains knowledge of the occurrence of any
breach, default or event of default under any Loan Document or any event which
constitutes a Default or Event of Default hereunder, notice of such occurrence,
together with a detailed statement by a responsible officer of the Borrower of
the steps being taken by the Borrower to cure the effect of such breach,
default or event;

 

(i)            as soon
as possible and in any event within thirty (30) days after the Borrower knows
or has reason to know that any Reportable Event with respect to any Plan has
occurred, the statement of an officer of the Borrower setting forth details as
to such Reportable Event and the action which the Borrower proposes to take
with respect thereto, together with a copy of the notice of such Reportable Event
to the Pension Benefit Guaranty Corporation;

 

(j)            as soon
as possible, and in any event within ten (10) days after the Borrower
fails to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of the Borrower’s chief financial officer setting forth details as to
such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;

 

(k)           promptly
upon knowledge thereof, notice of any loss of or material damage to any
Collateral or other collateral covered by any Loan Document or of any

 

21

 

substantial
adverse change in any Collateral or such other collateral or the prospect of
payment thereof;

 

(l)            promptly
upon knowledge thereof, notice of the Borrower’s violation of any law, rule or
regulation, the non-compliance with which could have a Material Adverse Effect;
and

 

(m)          from time
to time, with reasonable promptness, any and all receivables schedules,
collection reports, deposit records, equipment schedules, copies of invoices to
account debtors, shipment documents and delivery receipts for goods sold, and
such other material, reports, records or information as the Lender may
reasonably request.

 

Section 5.2.            Books
and Records; Inspection and Examination. 
The Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to the Borrower’s business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender’s request and reasonable notice, will permit any officer,
employee, attorney or accountant for the Lender to audit, review, make extracts
from or copy any and all corporate and financial books and records of the
Borrower at all times during ordinary business hours, to send and discuss with
account debtors and other obligors requests for verification of amounts owed to
the Borrower, and to discuss the Borrower’s affairs with any of its directors,
officers, employees or agents.  The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.

 

Section 5.3.            Account
Verification.  The Lender may at any
time and from time to time send or require the Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors.  The Lender may also at any
time and from time to time telephone account debtors and other obligors to
verify accounts.

 

Section 5.4.            Compliance
with Laws.

 

(a)           The
Borrower will (i) comply with the requirements of applicable laws and
regulations, the non-compliance with which would have a Material Adverse Effect
on the Borrower and (ii) use and keep the Collateral, and require that
others use and keep the Collateral, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance.

 

(b)           Without
limiting the foregoing undertakings, the Borrower specifically agrees that it
will comply with all applicable Environmental Laws and obtain and comply with
all permits, licenses and similar approvals required by any Environmental Laws,
and will not generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any material liability or material
obligation under the common law of any jurisdiction or any Environmental Law.

 

Section 5.5.            Payment
of Taxes and Other Claims.  The
Borrower will pay or discharge, when due, (a) all taxes, assessments and
governmental charges levied or imposed

 

22

 

upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower; provided, that the Borrower shall not be required
to pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.

 

Section 5.6.            Maintenance
of Properties.

 

(a)           The
Borrower will keep and maintain the Collateral, the other collateral covered by
the Loan Documents and all of its other properties necessary or useful in its
business in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn, defective or
broken parts; provided, however, that nothing in this Section shall
prevent the Borrower from discontinuing the operation and maintenance of any of
its properties if such discontinuance is desirable in the conduct of the
Borrower’s business and not disadvantageous in any material respect to the
Lender.

 

(b)           The
Borrower will defend the Collateral against all claims or demands of all
persons (other than the Lender) claiming the Collateral or any interest
therein.

 

(c)           The
Borrower will keep all Collateral and other collateral covered by the Loan
Documents free and clear of all security interests, liens and encumbrances
except Permitted Liens.

 

Section 5.7.            Insurance.  The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such
risks as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower
operates.  Without limiting the
generality of the foregoing, the Borrower will at all times maintain business
interruption insurance including coverage for force majeure and keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender’s loss payable endorsement for the
Lender’s benefit acceptable to the Lender. 
All policies of liability insurance required hereunder shall name the
Lender as an additional insured.

 

Section 5.8.            Preservation
of Existence.  The Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.

 

23

 

Section 5.9.            Delivery
of Instruments, etc.  Upon request by
the Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly
endorsed or assigned by the Borrower.

 

Section 5.10.          Collection
Rights.  Intentionally Omitted.

 

Section 5.11.          Performance
by the Lender.  If the Borrower at
any time fails to perform or observe any of the foregoing covenants contained
in this Article V or elsewhere herein, and if such failure shall continue
for a period of ten (10) calendar days after the Lender gives the Borrower
written notice thereof (or in the case of the agreements contained in
Sections 5.5 and 5.7, immediately upon the occurrence of such failure,
without notice or lapse of time), the Lender may, but need not, perform or
observe such covenant on behalf and in the name, place and stead of the
Borrower (or, at the Lender’s option, in the Lender’s name) and may, but need
not, take any and all other actions which the Lender may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments); and the Borrower shall thereupon pay to the Lender on demand
the amount of all monies expended and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) incurred by the Lender in
connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Default Rate.  To facilitate the Lender’s performance or
observance of such covenants of the Borrower, the Borrower hereby irrevocably
appoints the Lender, or the Lender’s delegate, acting alone, as the Borrower’s
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of the Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrower under this Section.

 

Section 5.12.          Minimum
Revenues from Casino Management Agreement. 
The Borrower shall receive at least $950,000 per calendar quarter in
management fees in consideration for management services provided by the
Borrower under the Casino Management Agreement.

 

ARTICLE VI.

 

Negative Covenants

 

So
long as the Obligations shall remain unpaid, or the Revolving Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender’s prior
written consent:

 

Section 6.1.            Liens.  The Borrower will not create, incur or suffer
to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
the foregoing, the following (collectively, “Permitted Liens”):

 

24

 

(a)           in the
case of any of the Borrower’s property which is not Collateral or other
collateral described in the Security Documents, covenants, restrictions,
rights, easements and minor irregularities in title which do not materially
interfere with the Borrower’s business or operations as presently conducted;

 

(b)           mortgages,
deeds of trust, pledges, liens, security interests and assignments in existence
on the date hereof and listed in Schedule 6.1, securing indebtedness for
borrowed money permitted under Section 6.2;

 

(c)           the
Security Interest and liens and security interests created by the Security
Documents;

 

(d)           purchase
money security interests relating to the acquisition of machinery and equipment
of the Borrower not exceeding the lesser of cost or fair market value thereof
and so long as no Default Period is then in existence and none would exist
immediately after such acquisition;

 

(e)           liens for
taxes or assessments or other governmental charges not yet due or being
contested in good faith pursuant to Section 5.5;

 

(f)            materialmen’s,
merchants’, carriers’, workmen’s, repairmen’s, or other like liens arising in
the ordinary course of business which secure amounts not overdue for a period
of more than 60 days or which are being contested in good faith by appropriate
proceedings and for which proper reserves have been made; and

 

(g)           pledges or
deposits to secure obligations under worker’s compensation laws, unemployment
insurance and social security laws, or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds, in any case in the ordinary
course of business.

 

Section 6.2.            Indebtedness.  The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
the Borrower’s behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:

 

(a)           indebtedness
arising hereunder;

 

(b)           indebtedness
of the Borrower in existence on the date hereof and listed in Schedule 6.2;

 

(c)           indebtedness
relating to liens permitted in accordance with Section 6.1; and

 

(d)           approved
Subordinated Debt.

 

25

 

Section 6.3.            Guaranties.  The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:

 

(a)           the
endorsement of negotiable instruments by the Borrower for deposit or collection
or similar transactions in the ordinary course of business; and

 

(b)           guaranties,
endorsements and other direct or contingent liabilities in connection with the
obligations of other Persons, in existence on the date hereof and listed in Schedule 6.2.

 

Section 6.4.            Investments
and Subsidiaries.

 

(a)           The
Borrower will not purchase or hold beneficially any stock or other securities
or evidences of indebtedness of, make or permit to exist any loans or advances
to, or make any investment or acquire any interest whatsoever in, any other
Person, including specifically but without limitation any partnership, limited
liability company or joint venture, except:

 

(i)            investments
in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America having a maturity of one year or
less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
Standard & Poors Corporation or “P-1” or “P-2” by Moody’s Investors
Service or certificates of deposit or bankers’ acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of deposit or bankers’
acceptances are fully insured by the Federal Deposit Insurance Corporation);

 

(ii)           advances
in the form of progress payments, prepaid rent not exceeding one (1) month
or security deposits.

 

(b)           The
Borrower will not create or permit to exist any Subsidiary, other than the
Subsidiar(y)(ies) in existence on the date hereof and listed in Schedule 4.4.

 

Section 6.5.            Dividends .  The Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of the Borrower) on any
class of its stock or make any payment on account of the purchase, redemption
or other retirement of any shares of such stock or make any distribution in
respect thereof, either directly or indirectly.

 

Section 6.6.            Sale
or Transfer of Assets; Suspension of Business Operations.  The Borrower will not sell, lease, assign,
transfer or otherwise dispose of (i) the stock or membership interests of
any Subsidiary, (ii) all or a substantial part of its assets, or (iii) any
Collateral or any interest therein (whether in one transaction or in a series
of transactions) to any other Person other than the sale of Inventory or
obsolete, worn or damaged equipment in the ordinary course of business
(provided such equipment is replaced with equipment of equal or greater value)
and will not liquidate, dissolve or suspend business operations provided,
however, that nothing in this Section shall prevent the Borrower from
discontinuing the operation and

 

26

 

maintenance of any of its
properties if such discontinuance is desirable in the conduct of the Borrower’s
business and not disadvantageous in any material respect to the Lender.  The Borrower will not in any manner transfer
any property without prior or present receipt of full and adequate
consideration.

 

Section 6.7.            Consolidation
and Merger; Asset Acquisitions.  The
Borrower will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person.

 

Section 6.8.            Sale
and Leaseback.  The Borrower will not
enter into any arrangement, directly or indirectly, with any other Person
whereby the Borrower shall sell or transfer any real or personal property,
whether now owned or hereafter acquired, and then or thereafter rent or lease
as lessee such property or any part thereof or any other property which the
Borrower intends to use for substantially the same purpose or purposes as the
property being sold or transferred.

 

Section 6.9.            Restrictions
on Nature of Business.  The Borrower
will not engage in any line of business materially different from that
presently engaged in by the Borrower and will not purchase, lease or otherwise
acquire assets not related to its business.

 

Section 6.10.          Accounting.  The Borrower will not adopt any material change
in accounting principles other than as required or permitted by GAAP.  The Borrower will not adopt, permit or
consent to any change in its fiscal year.

 

Section 6.11.          Discounts,
etc.  The Borrower will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrower or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate any obligation of any account debtor or other obligor of the
Borrower.

 

Section 6.12.          Defined
Benefit Pension Plans.  The Borrower
will not adopt, create, assume or become a party to any defined benefit pension
plan, unless disclosed to the Lender pursuant to Section 4.10.

 

Section 6.13.          Other
Defaults.  The Borrower will not
permit any material breach or default or event of default to occur under any
note, loan agreement, indenture, lease, mortgage, contract for deed, security
agreement or other contractual obligation binding upon the Borrower.

 

Section 6.14.          Place
of Business; Name.  The Borrower will
not transfer its chief executive office or principal place of business, or
move, relocate, close or sell any business location.  The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest.  The Borrower will not change its name.

 

27

 

Section 6.15.          Organizational
Documents; Tax Status.  The Borrower
will not amend its articles of incorporation or bylaws, or change its tax
status as a “C” corporation.

 

Section 6.16.          Change
in Ownership.  The Borrower will not
issue or sell any stock so as to change the percentage of stock owned by each
of such Borrower’s shareholders, and such Borrower will not permit or suffer to
occur the sale, transfer, assignment, pledge or other disposition of any or all
of the issued and outstanding shares of stock of such Borrower.  Without limiting the generality of the
foregoing, the Corporate Guarantor shall at all times own, with power to vote, all
of the issued and outstanding stock of the Borrower.

 

Section 6.17.          Salaries.  The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; to director, officer or consultant, or any member of their
families.

 

Section 6.18.          Additional
Gaming Development Projects.  The
Borrower agrees that it will not, either directly in the Borrower or indirectly
through any Subsidiary, pursue any additional gaming development projects or
concepts without the Lender’s prior written approval, which approval may be
granted or withheld in the Lender’s sole discretion; provided, however, that so
long as no Default Period exists, the Borrower may incur up to $75,000 in
out-of-pocket costs and expenses in evaluating and considering any additional
gaming development projects or concepts without first obtaining the Lender’s
prior written approval.

 

ARTICLE VII.

 

Events of Default, Rights and Remedies

 

Section 7.1.            Events
of Default. “Event of Default”, wherever used herein, means any one of the
following events:

 

(a)           Default in
the payment of any of the Obligations when they become due and payable;

 

(b)           Default in
the payment of any fees, commissions, costs or expenses required to be paid by
the Borrower under this Agreement;

 

(c)           Default in
the performance, or breach, of any covenant or agreement of the Borrower or any
Guarantor contained in this Agreement or in any of the Loan Documents;

 

(d)           The
Borrower or any of the Guarantors shall be or become insolvent, or admit in
writing its or his inability to pay its or his debts as they mature, or make an
assignment for the benefit of creditors; or the Borrower or any of the
Guarantors shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any substantial part of
its or his property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Borrower or any of the
Guarantors; or the Borrower or any of the Guarantors shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency,

 

28

 

reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it or him under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against the Borrower or any of the Guarantors; or any judgment, writ, warrant
of attachment or execution or similar process shall be issued or levied against
a substantial part of the property of the Borrower or any of the Guarantors;

 

(e)           A petition
shall be filed by or against the Borrower or any of the Guarantors under the
United States Bankruptcy Code naming the Borrower or any of the Guarantors as
debtor which petition shall not be discharged within sixty (60) days after the
filing thereof;

 

(f)            Any
change shall occur in the condition (financial or otherwise), business or
property of the Borrower, the Corporate Guarantor, or the Personal Guarantors
consisting of Jeffrey S. Halpergn, James B. Druck or Thomas E. Fox which could
have a Material Adverse Effect or any Personal Guarantor shall die;

 

(g)           Any
representation or warranty made by the Borrower in this Agreement, or by the
Borrower or any of the Guarantors (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such representation or warranty shall prove to have been incorrect in any
material respect when deemed to be effective;

 

(h)           The
rendering against the Borrower, the Corporate Guarantor or Jeffrey S. Halpern,
James B. Druck or Thomas E. Fox of a final judgment, or decree in excess of
$50,000 and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of thirty (30) consecutive days without a stay of
execution;

 

(i)            A default
under any bond, debenture, note or other evidence of indebtedness of the
Borrower or Jeffrey S. Halpern, James B. Druck or Thomas E. Fox owed to any
Person other than the Lender, or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration of the
applicable period of grace, if any, specified in such evidence of indebtedness,
indenture, other instrument or lease;

 

(j)            Any
Reportable Event, which the Lender determines in good faith might constitute
grounds for the termination of any Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Plan,
shall have occurred and be continuing thirty (30) days after written notice to
such effect shall have been given to the Borrower by the Lender; or a trustee
shall have been appointed by an appropriate United States District Court to
administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress
termination of any Plan under Title IV of ERISA; or the Borrower shall have
failed to make any quarterly contribution required with respect to any Plan
under Section 412(m)

 

29

 

of the
Internal Revenue Code of 1986, as amended, which the Lender determines in good
faith may by itself, or in combination with any such failures that the Lender
may determine are likely to occur in the future, result in the imposition of a
lien on the Borrower’s assets in favor of the Plan;

 

(k)           An event
of default shall occur under any of the other Loan Documents or under any other
security agreement, mortgage, deed of trust, assignment or other instrument or
agreement securing any obligations of the Borrower hereunder or under any note;

 

(l)            The
Borrower, the Corporate Guarantor or the Trust Guarantor shall liquidate,
dissolve, terminate or suspend its business operations or otherwise fail to
operate its business in the ordinary course, or sell all or substantially all
of its assets, without the Lender’s prior written consent;

 

(m)          The
Borrower or any Guarantor shall fail to pay, withhold, collect or remit any tax
or tax deficiency when assessed or due (other than any tax deficiency which is
being contested in good faith and by proper proceedings and for which it shall
have set aside on its books adequate reserves therefor) or notice of any state
or federal tax liens shall be filed or issued;

 

(n)           Default in
the payment of any amount owed by the Borrower or any of the Guarantors to the
Lender other than any indebtedness arising hereunder;

 

(o)           A Default
shall occur under the Casino Management Agreement or the Casino Management
Agreement shall be terminated for any reason;

 

(p)           A Default
shall occur under the North Metro Member Control Agreement or the North Metro
Member Control Agreement shall be terminated or amended in any respect without
the prior written consent of the Lender;

 

(q)           Any event
or circumstance with respect to the Borrower or any of the Guarantors shall
occur such that the Lender shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by the
Borrower or any of the Guarantors under the Loan Documents is impaired;

 

(r)            The
rendering against the Borrower or North Metro of any final judgment, decree or
order in connection with the Pending Litigation which has a Material Adverse
Effect on the Borrower, North Metro, or North Metro’s ability to proceed with
the development of a harness horse race track and gaming facility on the “Real
Property” as defined in the North Metro Member Control Agreement.

 

(s)           Any
breach, default or event of default by or attributable to any Affiliate under
any agreement between such Affiliate and the Lender.

 

Section 7.2.            Rights
and Remedies.  During any Default
Period, the Lender may exercise any or all of the following rights and
remedies:

 

30

 

(a)           the Lender
may, by notice to the Borrower, declare the Revolving Credit Facility to be
terminated, whereupon the same shall forthwith terminate;

 

(b)           the Lender
may, by notice to the Borrower, declare the Obligations to be forthwith due and
payable, whereupon all Obligations shall become and be forthwith due and
payable, without presentment, notice of dishonor, protest or further notice of
any kind, all of which the Borrower hereby expressly waives;

 

(c)           the Lender
may, without notice to the Borrower and without further action, apply any and
all money owing by the Lender to the Borrower to the payment of the
Obligations;

 

(d)           the Lender
may exercise and enforce any and all rights and remedies available upon default
to a secured party under the UCC, including, without limitation, the right to
take possession of Collateral, or any evidence thereof, proceeding without
judicial process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to sell,
lease or otherwise dispose of any or all of the Collateral, and, in connection
therewith, the Borrower will on demand assemble the Collateral and make it
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties;

 

(e)           the Lender
may exercise and enforce its rights and remedies under the Loan Documents; and

 

(f)            the
Lender may exercise any other rights and remedies available to it by law or
agreement.

 

Notwithstanding the
foregoing, upon the occurrence of an Event of Default described in subsections (d) or (e) of
Section 7.1, the Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.

 

Section 7.3.            Certain
Notices.  If notice to the Borrower
of any intended disposition of Collateral or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section 8.3)
at least ten (10) calendar days before the date of intended disposition or
other action.

 

ARTICLE VIII.

 

Miscellaneous

 

Section 8.1.            No
Waiver; Cumulative Remedies.  No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents.  The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.

 

31

 

Section 8.2.            Amendments,
Etc.  No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. 
No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.

 

Section 8.3.            Addresses
for Notices, Etc.  Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or (d) transmitted
by facsimile, in each case addressed or faxed to the party to whom notice is
being given at its address or facsimile number as set forth below:

 

If to
the Borrower:

 

Southwest
Casino and Hotel Corp.

2001
Killebrew Drive

Suite 350

Minneapolis,
MN  55425

Facsimile
No.:  (952) 853-99914

Attention:  Thomas E. Fox

 

If to
the Lender:

 

Crown
Bank

601
Marquette Avenue South

Suite 125

Minneapolis,
MN 55402

Facsimile
No.:  (612) 746-5055

Attention:  Mr. Mark
W. Lucke

 

With
copies to (which shall not be deemed to be notice):

 

Winthrop &
Weinstine, P.A.

Suite 3500,
225 South Sixth Street

Minneapolis,
MN 55402-4629

Facsimile
No.:  (612) 604-6800

Attention:  David
E. Moran, Esq.

 

or, as to each party, at
such other address or facsimile number as may hereafter be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section.  All such notices,
requests, demands and other communications shall be deemed to have been given
on (a) the date received if personally delivered, (b) when deposited
in the mail if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if

 

32

 

delivered by facsimile,
except that notices or requests to the Lender pursuant to any of the provisions
of Article II shall not be effective until received by the Lender.

 

Section 8.4.            Further
Documents.  The Borrower will from
time to time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender’s
rights under the Loan Documents (but any failure to request or assure that the
Borrower executes, delivers or endorses any such item shall not affect or
impair the validity, sufficiency or enforceability of the Loan Documents and
the Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).

 

Section 8.5.            Collateral.  Neither this Agreement nor the Security
Agreement contemplates a sale of accounts, contract rights or chattel paper,
and, as provided by law, the Borrower is entitled to any surplus and shall
remain liable for any deficiency.  The
Lender’s duty of care with respect to Collateral in its possession (as imposed
by law) shall be deemed fulfilled if it exercises reasonable care in physically
keeping such Collateral, or in the case of Collateral in the custody or
possession of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral.  The Lender shall not be obligated to preserve
any rights the Borrower may have against prior parties, to realize on the
Collateral at all or in any particular manner or order or to apply any cash
proceeds of the Collateral in any particular order of application.

 

Section 8.6.            Costs
and Expenses.  The Borrower agrees to
pay on demand all costs and expenses, including (without limitation) reasonable
attorneys’ fees, incurred by the Lender in connection with the Obligations,
this Agreement, the other Loan Documents and any other document or agreement
related hereto or thereto, and the transactions contemplated hereby, including
without limitation all such costs, expenses and fees incurred in connection
with the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Obligations and all such
documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.

 

Section 8.7.            Indemnity.  In addition to the payment of expenses
pursuant to Section 8.6, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the “Indemnitees”) from and against any of the following
(collectively, “Indemnified Liabilities”):

 

(i)            any and
all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan
Documents or the making of the Advances;

 

(ii)           any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 4.12 proves to be
incorrect in any respect or as a result of any violation of the covenant
contained in

 

33

 

Section 5.4(b) unless
the Lender has participated in management after foreclosure and, as a result,
loses any otherwise available exemption under federal or state environmental
laws, rules or regulations; and

 

(iii)          any
and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party
thereto, which may be imposed on, incurred by or asserted against any such
Indemnitee, in any manner related to or arising out of or in connection with
the making of the Advances, the Term Loan and the Loan Documents or the use or
intended use of the proceeds of the Notes.

 

If any investigative,
judicial or administrative proceeding arising from any of the foregoing is
brought against any Indemnitee, upon such Indemnitee’s request, the Borrower,
or counsel designated by the Borrower and reasonably satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the
extent and in the manner directed by the Indemnitee, at the Borrower’s sole
costs and expense.  Each Indemnitee will
use its best efforts to cooperate in the defense of any such action, suit or
proceeding.  If the foregoing undertaking
to indemnify, defend and hold harmless may be held to be unenforceable because
it violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.  The Borrower’s obligation under this Section shall
survive the termination of this Agreement and the discharge of the Borrower’s
other obligations hereunder.

 

Section 8.8.            Participants.  The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.  All rights and powers specifically conferred
upon the Lender may be transferred or delegated to any of the Lender’s
participants, successors or assigns.

 

Section 8.9.            Execution
in Counterparts.  This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.

 

Section 8.10.          Binding
Effect; Assignment; Complete Agreement; Exchanging Information.  The Loan Documents shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights thereunder or any interest therein without the Lender’s prior
written consent.  This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.  Without limiting the Lender’s right to share
information regarding the Borrower, its Affiliates and the Guarantors with the
Lender’s participants, accountants, lawyers and other advisors, the Lender, may
exchange any and all information they may have in their possession regarding
the Borrower, its Affiliates and 

 

34

 

the Guarantors with the
Lender’s participants, accountants, lawyers and other advisors, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.

 

Section 8.11.          Severability
of Provisions.  Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.

 

Section 8.12.          Headings.  Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.

 

Section 8.13.          Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial.  The Loan Documents shall be governed by and
construed in accordance with the substantive laws (other than conflict laws) of
the State of Minnesota.  This Agreement
shall be governed by and construed in accordance with the substantive laws
(other than conflict laws) of the State of Minnesota.  The parties hereto hereby (i) consent to
the personal jurisdiction of the state and federal courts located in the State of
Minnesota in connection with any controversy related to this Agreement; (ii) waives
any argument that venue in any such forum is not convenient, (iii) agrees
that any litigation initiated by the Lender or the Borrower in connection with
this Agreement or the other Loan Documents shall be venued in either the
District Court of Hennepin County, Minnesota, or the United States District
Court, District of Minnesota, Fourth Division; and (iv) agrees that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS.

 

Section 8.14.          U.S. Patriot Act Notification.  The
following notification is provided to Borrower pursuant to Section 326 of
the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

 

IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACOUNT.  To help the government fight the funding of
terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial
services product.  What this means for
Borrower:  When Borrower opens an account,
if Borrower is an individual, Lender will ask for Borrower’s name, taxpayer
identification number, residential address, date of birth, and other
information that will allow Lender to identify Borrower, and, if Borrower is
not an individual, Lender will ask for Borrower’s name, taxpayer identification
number, business address, and other information that will allow Lender to
identify Borrower. Lender may also ask, if Borrower is an individual, to see
Borrower’s driver’s license or other identifying documents, and, if Borrower is
not an individual, to see Borrower’s legal organizational documents or other
identifying documents.

 

35

 

SIGNATURE PAGE TO REVOLVING CREDIT
AND TERM LOAN AGREEMENT

BY AND BETWEEN

SOUTHWEST CASINO AND HOTEL CORP. AND

CROWN BANK

 

IN
WITNESS WHEREOF, the parties hereto have caused this Revolving Credit and Term
Loan Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.

 

 

	
   

  	
  Southwest Casino
  and Hotel Corp. 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas E. Fox

  	
   

  
	
   

  	
   

  	
  Thomas E. Fox 

  	
   

  
	
   

  	
   

  	
  Its: President
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Crown Bank 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Mark W. Lucke 

  
	
   

  	
   

  	
  Mark W. Lucke 

  	
   

  
	
   

  	
   

  	
  Its: Vice
  President

  	
   

  
					

 

 

Exhibit A to Revolving Credit and Term Loan Agreement

 

Revolving Note

 

	
  $450,000.00

  	
   

  	
  Minneapolis, Minnesota

  
	
   

  	
   

  	
  October        ,
  2005

  

 

1.             For
value received, the undersigned, Southwest Casino and Hotel Corp., a Minnesota
corporation (the “Borrower”), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of Crown Bank, a
Minnesota banking corporation, its successors and assigns (the “Lender”), at
its office in Minneapolis, Minnesota, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of Four Hundred Fifty
Thousand and 00/100 Dollars ($450,000.00) or, if less, the aggregate unpaid
principal amount of all Advances made by the Lender to the Borrower under the
Credit Agreement (as defined below) together with interest on the principal
amount hereunder remaining unpaid from time to time, computed on the basis of
the actual number of days elapsed and a 360-day year, from the date hereof
until this Note is fully paid at the rate from time to time in effect under the
Revolving Credit and Term Loan Agreement of even date herewith (as the same may
hereafter be amended, supplemented or restated from time to time, the “Credit
Agreement”) by and between the Lender and the Borrower.  Interest accruing hereon shall be due and
payable as provided in the Credit Agreement. 
This Note may be prepaid only in accordance with the Credit
Agreement.  This Note is subject to
mandatory prepayment in accordance with the Credit Agreement.

 

2.             This
Note is issued pursuant, and is subject, to the Credit Agreement, which
provides, among other things, for acceleration hereof.  This Note is the Revolving Note referred to
in the Credit Agreement.  This Note is
secured, among other things, pursuant to the Credit Agreement and the Loan
Documents as therein defined, and may now or hereafter be secured by one or
more other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.

 

3.             The
Borrower hereby agrees to pay all costs of collection, including reasonable
attorneys’ fees and legal expenses, in the event this Note is not paid when
due, whether or not legal proceedings are commenced.

 

4.             Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

 

5.             If
any installment of principal or interest on this Note is not paid within ten (10) days
of the due date thereof, the Borrower shall pay to the Lender a late charge
equal to five percent (5.00%) of the amount of such installment.

 

6.             All
payments and prepayments shall, at the option of the Lender, be applied first
to any costs of collection, second to any late charges, third to accrued
interest on this Note and lastly to installments of principal in the inverse
order of maturity.

 

 

7.             Upon
the occurrence of an Event of Default or any time thereafter, the Lender shall
have the right to set off any and all amounts due hereunder by the Borrower to
the Lender against any indebtedness or obligation of the Lender to the
Borrower.

 

8.             Upon
the occurrence of an Event of Default or any time thereafter, the outstanding
principal balance hereof and accrued interest and all other amounts due hereon
shall, at the option of the Lender, become immediately due and payable, without
notice or demand.

 

9.             This
Note shall be governed by and construed in accordance with the laws of the
State of Minnesota without giving effect to the choice of law provisions
thereof.

 

10.           Unless
otherwise defined herein, Capitalized terms used herein shall have meanings
assigned thereto in the Credit Agreement.

 

 

	
   

  	
  SOUTHWEST CASINO
  AND HOTEL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Thomas E. Fox

  
	
   

  	
   

  	
  Its: President
  and Chief Financial Officer

  

 

 

Exhibit B to Revolving Credit and Term Loan Agreement

 

Term Note

 

	
  $2,500,000.00

  	
   

  	
  Minneapolis, Minnesota

  
	
   

  	
   

  	
  October        ,
  2005

  

 

1.             FOR
VALUE RECEIVED, Southwest Casino and Hotel Corp., a Minnesota corporation (the “Borrower”),
hereby promises to pay to the order of Crown Bank, a Minnesota state banking
corporation, its successors and assigns (the “Lender”), at its office in
Minneapolis, Minnesota, the principal sum of Two Million Five Hundred Thousand
and 00/100 Dollars ($2,500,000.00), which amount has been advanced to or for
the benefit of the Borrower pursuant to that certain Revolving Credit and Term
Loan Agreement of even date herewith (the “Credit Agreement”), by and between
the Borrower and the Lender, in lawful money of the United States and
immediately available funds, together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year from the date hereof until
this Note is fully paid at the rate from time to time in effect under the
Credit Agreement.

 

2.             Principal
on this Note shall be due and payable in arrears in consecutive equal monthly
installments of $                        
each commencing on April 1, 2006, and continuing on the first (1st) day of
each calendar month thereafter until this Note is paid in full.  Accrued interest on this Note shall be due
and payable in arrears on the first (1st) day of each month
commencing on November 1, 2005, and continuing on the first (1st)
day of each calendar month thereafter until the Maturity Date (as defined
below).  The full amount of principal
plus accrued interest hereon shall, if not sooner paid in full, be due and
payable on April 30, 2007 (the original “Maturity Date” as defined in the
Credit Agreement).  Notwithstanding the
foregoing, the Maturity Date may be extended to May 31, 2008 (the “Extended
Maturity Date”) pursuant to Section 2.14 of the Credit Agreement.  In the event of such an extension, as of the
date of such extension (the “Extension Date”), the then unpaid principal
balance of this Note shall be amortized, and paid, in equal monthly
installments from the Extension Date through and including the Extended
Maturity Date.  Such adjusted payments
shall continue to be due and payable on the first (1st) day of each
calendar month from and after the Extension Date, and the full amount of
principal plus accrued interest hereon shall; if not sooner paid in full, be
due and payable on the Extended Maturity Date.

 

3.             In
all cases interest on this Note shall be calculated on the basis of a 360 day
year but charged for actual days principal is unpaid.

 

4.             The
outstanding principal balance of this Note may be prepaid in whole or in part
in accordance with Section 2.7 of the Credit Agreement.  All prepayments shall be applied pursuant to
paragraph 6 hereof and shall not reduce the amount or change the due dates of
the regular installments provided for above. 
This Note is subject to mandatory prepayment in accordance with Section 2.9
of the Credit Agreement.

 

 

5.             If
any installment of principal or interest on this Note is not paid within ten (10) days
of the due date thereof, the Borrower shall pay to the Lender a late charge
equal to five percent (5.00%) of the amount of such installment.

 

6.             All
payments and prepayments shall, at the option of the Lender, be applied first
to any costs of collection, second to any late charges, third to accrued
interest on this Note and lastly to installments of principal in the inverse
order of maturity.

 

7.             The
Borrower hereby agrees to pay all costs of collection, including reasonable
attorneys’ fees and legal expenses, in the event this Note is not paid when
due, whether or not legal proceedings are commenced.

 

8.             Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

 

9.             Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Credit Agreement.

 

10.           Upon
the occurrence of an Event of Default or any time thereafter, the Lender shall
have the right to set off any and all amounts due hereunder by the Borrower to
the Lender against any indebtedness or obligation of the Lender to the
Borrower.

 

11.           Upon
the occurrence of an Event of Default or at any time thereafter, the
outstanding principal balance hereof and accrued interest and all other amounts
due hereon shall, at the option of the Lender, become immediately due and
payable, without notice or demand.

 

12.           This
Note shall be governed by and construed in accordance with the laws of the
State of Minnesota without giving effect to the choice of law provisions
thereof.

 

 

	
   

  	
  SOUTHWEST CASINO
  AND HOTEL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Thomas E. Fox

  
	
   

  	
   

  	
  Its:  President and Chief Financial Officer

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