Document:

Warrant to Purchase Common Stock

 Exhibit 10.3 
  
 EXECUTION COPY 
  
 THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS
OF ANY JURISDICTION OF THE UNITED STATES. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL TO THE COMPANY
OR OTHER COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE EXEMPTION FROM THE REGISTRATION. 
  
 WARRANT TO PURCHASE COMMON STOCK 
  

			
	Holder:	  	David R. Belding
	Company:	  	The Sands Regent, a Nevada corporation
	Class of Stock:	  	Common Stock
	Exercise Price:	  	$7.82 per share
	Issue Date:	  	March 25, 2004
	Expiration Date:	  	March 25, 2009
	Number of Shares:	  	100,000

  
 THIS WARRANT CERTIFIES
THAT, for acknowledged good and valuable consideration, David R. Belding, an individual and each transferee and assignee (collectively, the “Holder”) is entitled to purchase the number of fully paid and nonassessable shares, as
stated in Section 1.2 below, of the above specified Class of Stock of The Sands Regent, a Nevada corporation (the “Company”) at the exercise price per share of $7.82 (the “Warrant Exercise Price”) and as adjusted
pursuant to Article 1 and Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. This Warrant is being issued pursuant to that certain Stock Purchase Agreement dated as of March 25, 2004 by
and among the Company and Holder. 
  
 ARTICLE 1. 
 EXERCISE PRICE 
  
 Section 1.1. Commencement of Warrant Exercise Period and Price. Except as set forth in Section 1.2, this Warrant is exercisable until the
Expiration Date and shall entitle the Holder to purchase shares of common stock, par value $0.10 per share, of the Company (the “Common Stock”). March 25, 2004 is the “Effective Date.” The period beginning on the
Effective Date and through the Expiration Date is the “Exercise Period.” 
  
 Section 1.2. Number of Shares. The Holder shall be entitled to purchase one hundred thousand (100,000) shares of Common Stock under this Warrant; provided, however, that the Holder shall not be entitled to
exercise this Warrant, and purchase any shares of Common Stock hereunder, if, after giving effect to such exercise and purchase, the Holder would beneficially own greater than 9.9% of the outstanding shares of Common Stock or any other series of
capital stock of the Company. 
  

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 EXECUTION COPY 
  
 Section 1.3. Method of Exercise. During the Exercise Period, Holder may exercise this Warrant by delivering to the
principal office of the Company a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1. Holder shall also deliver to the Company a check for the Warrant Exercise Price multiplied by the number of shares of
Common Stock to be received. In lieu of delivering a check to the Company for the Warrant Exercise Price, the Holder may elect to surrender shares of the Common Stock then issuable upon exercise of the Warrant having a Fair Market Value (as defined
below) on the date of Warrant exercise equal to the aggregate exercise price of the Warrant or exercised portion thereof. 
  
 Section 1.4. Exchange of Warrant. In lieu of exercising this Warrant in the manner provided above in Section 1.3, the Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal to the value of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the Company, together with notice of such election, at the
principal executive offices of the Company. Thereupon, the Company shall issue to the Holder the shares of Common Stock computed using the following formula: 
  
 X=Y(A-B) 
           A 
  
 where:
X = the number of shares of Common Stock to be issued to the Holder. 
  
 Y = the number of shares of Common Stock covered by this Warrant in respect of which the exchange election is made pursuant to this Section 1.4 (not to exceed the number of shares of Common Stock then issuable upon exercise of this
Warrant). 
  
 A = the fair market value of a share of Common
Stock, as determined in accordance with the provisions of this Section 1.4. 
  
 B = the Exercise Price in effect under this Warrant at the time the exchange election is made pursuant to this Section 1.4. 
  
 For the purposes of this Section 1.4, the “fair market value” per share of Common Stock shall mean: 
  
 (i) If the Common Stock is traded on a national securities exchange or
admitted to unlisted trading privileges on such an exchange, or is listed on the Nasdaq or other over-the-counter quotation system, the fair market value shall be the last reported sale price of the Common Stock on such exchange or on the Nasdaq on
the last business day before the effective date of exercise of this Warrant or if no such sale is made on such day; and 
  
 (ii) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and ask prices are not reported, the fair market value shall
be the price per share which the Company could obtain from a willing buyer for shares sold by the Company from authorized but unissued shares, as such price shall be determined by the Company’s Board of Directors acting in good faith.

  

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 EXECUTION COPY 
  
 Section 1.5. Delivery of Certificate and New Warrant. Promptly after Holder exercises this Warrant, the Company shall
deliver to Holder a certificate or certificates representing the shares of Common Stock acquired and, if this Warrant has not been fully exercised and has not expired, a new Warrant exercisable into the remaining shares of Common Stock not so
acquired. 
  
 Section 1.6. Replacement of Warrants. On
receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of and in substitution for this Warrant, a new warrant of like tenor. The original Warrant so
replaced shall thereupon be null and void, and of no force or effect. 
  
 ARTICLE 2. 
 ADJUSTMENTS TO THE SHARES. 
  
 Section 2.1. Stock Dividends. If at any time while this Warrant remains outstanding and unexpired, the Company pays a
dividend or makes a distribution with respect to Common Stock, then lawful provision shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, during the period specified in this Warrant and upon
payment of the Warrant Exercise Price then in effect, without payment of additional consideration other than the Warrant Exercise Price, that number of shares of Common Stock or other securities resulting from such dividend or distribution to which
a holder of the securities deliverable upon exercise of this Warrant would have been entitled if this Warrant had been exercised immediately prior to such dividend or distribution. Appropriate adjustment should be made in the application of the
provisions of this Warrant with respect to the rights and interests of the Holder after the dividend or distribution to the end that the provisions of this Warrant shall be applicable after such dividend or distribution, as near as reasonably may
be, in relation to any shares deliverable after the dividend or distribution upon exercise of this Warrant. 
  
 Section 2.2. Mergers or Consolidations. If at any time while this Warrant remains outstanding and unexpired, there shall be a capital
reorganization of the shares of the Company’s capital stock (other than a combination, reclassification, exchange or subdivision otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation in
which the Company is not the surviving corporation (collectively, a “Corporate Transaction”), then lawful provision shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such Corporate Transaction to which a holder of
the securities deliverable upon exercise of this Warrant would have been entitled under the provisions of the agreement in such Corporate Transaction if this Warrant had been exercised immediately prior to such Corporate Transaction. Appropriate
adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the Corporate Transaction to the end
that the provisions of this Warrant shall be applicable after the Corporate Transaction, as near as reasonably may be, in relation to any shares or other property deliverable after the Corporate Transaction upon exercise of this Warrant. 

 

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 EXECUTION COPY 
  
 Section 2.3. Reclassification, Subdivision or Combination of Shares. If the Company at any time shall, by
subdivision, combination or reclassification or securities or otherwise, change any of the securities issuable under this Warrant into the same or a different number of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have been issuable as a result of such change with respect to the securities issuable under this Warrant immediately prior to such subdivision, combination, reclassification
or other change. 
  
 Section 2.4. Fractional Shares. No
fractional shares of Common Stock shall be issued in connection with any exercise of this Warrant. In lieu of the issuance of such fractional share, the Company shall make a cash payment equal to the then fair market value of such fractional share
as determined by Section 1.4. 
  
 Section 2.5. Notice of
Adjustments. Whenever the number of securities purchasable under the terms of this Warrant at that Warrant Exercise Price shall be adjusted pursuant to Section 2 hereof, the Company shall promptly notify the Warrantholder in writing of such
adjustment, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors
made any determination hereunder), and the number of shares of Warrant Stock or other securities purchasable at that Exercise Price after giving effect to such adjustment. 
  
 ARTICLE 3. 
 REPRESENTATIONS AND COVENANTS OF THE COMPANY. 
  
 Section 3.1 Authority; Enforceability. This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors’ rights 
  
 Section 3.2. Representation Concerning Securities. The Company hereby represents and warrants to Holder that all the shares of Common Stock which
may be issued upon exercise of the right to purchase represented by this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free of any liens and encumbrances except for restrictions provided herein or
under applicable federal and state securities laws. During the Exercise Period, the Company at all times will have authorized, and reserved for the purpose of the issue upon the exercise of the purchase rights evidenced by this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. 
  
 Section 3.3. Shareholder Rights. Upon exercising the Warrant, Holder shall be entitled to the same rights, preferences, privileges and restrictions
granted to any other holders of Common Stock. 
  
 Section 3.4
Impairment. The Company shall not, by amendment or alteration of its corporate documents or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant 
  

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 EXECUTION COPY 
  
 by the Company, but shall at all times in good faith assist in carrying out of all the terms of this Warrant and in taking all such action
as may be necessary or appropriate to protect Holder’s rights under this Article against impairment. 
  
 ARTICLE 4. 
 REPRESENTATIONS AND WARRANTIES OF HOLDER 
  
 Section 4.1. Purchase for Own Account. Holder represents and warrants
that it is acquiring the Warrant and the Common Stock (collectively, the “Securities”) solely for its own account for investment and not with a view to, or for resale in connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended (the “Securities Act”). Holder further represents that it does not have any present intention of selling, offering to sell or otherwise disposing of or distributing the Securities or any
portion thereof and that the entire legal and beneficial interest of the Securities it is acquiring is being acquired for, and will be held for the account of, Holder only and neither in whole nor in part for any other person. 
  
 Section 4.2. Accredited Investor; Informed and Knowledgeable Decision.
Holder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Holder hereby agrees, represents and warrants that it is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Holder further represents and warrants that it has discussed the Company and its plans, operations and financial condition
with its officers, has received all such information as he deems necessary and appropriate to enable it to evaluate the financial risk inherent in making an investment in the Securities. 
  
 Section 4.3. Company Disclosure. Holder hereby agrees, represents and warrants that the Company has disclosed to
Holder that the Securities have not been registered under the Securities Act or under any state securities laws and must be held indefinitely unless a transfer of it is subsequently registered under the Securities Act or an exemption from such
registration is available. 
  
 Section 4.4. Rule 144. The
Holder hereby agrees, represents and warrants that the Holder is aware of the provisions of Rule 144, promulgated under the Securities Act. 
  
 ARTICLE 5. 
 MISCELLANEOUS. 

 
 Section 5.1. Term. This Warrant is exercisable, in whole or in
part, at any time during the Exercise Period. 
  
 Section 5.2.
Legends. This Warrant and the certificate(s) representing shares of Common Stock issuable upon exercise of this Warrant shall be imprinted with a legend in substantially the following form: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER  
  

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 EXECUTION COPY 
  
 THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION OF THE
UNITED STATES. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.  
  
 Section 5.3. Registration. Pursuant to the terms of the Stock Purchase Agreement by and between the Holder and the
Company entered into as of the date hereof, the Company shall prepare and file a registration statement under the Act covering the resale of the shares issuable upon exercise of this Warrant by the Holder. 
  
 Section 5.4. Compliance with Securities Laws on Transfer. The
Securities may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation
letters and legal opinions of both transferor and transferee reasonably satisfactory to the Company, as reasonably requested by the Company). 
  
 Section 5.5. Transfer Restrictions. Holder may not transfer or assign this Warrant in whole or in part without the prior written consent of the
Company. 
  
 Section 5.6. Notices. All notices and other
communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when a fax is received, when given personally or 5 days after mailing by first-class registered or certified mail, postage prepaid, at such address and
fax number as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or Holder from time to time. 
  
 Section 5.7. Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or termination is sought. 
  
 Section 5.9. Costs and Expenses. If any party to this Agreement brings an action to enforce its rights under this Agreement, the prevailing party
shall be entitled to recover its reasonable out-of-pocket costs and expenses, including without limitation reasonable attorneys’ fees, incurred in connection with such action, including any appeal of such action. 
  
 Section 5.10. Dispute. Any provision of this Warrant which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction. This Warrant shall not 
  

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 EXECUTION COPY 
  
 be construed so as to confer any right or benefit upon any person other than the Company and the Holder and each of their respective
successors and permitted assigns. This Warrant contains the whole and entire agreement of the parties with respect to the subject matter contained herein, superseding any and all prior or contemporaneous agreements or understandings. 
  
 Section 5.11. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Nevada, without giving effect to its principles regarding conflicts of law. 
  

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 EXECUTION COPY 
  

			
	COMPANY:
	
	 THE SANDS REGENT,
 a Nevada corporation

		
	 By:
	 	 /s/    FERENC B. SZONY

	 	 	 Ferenc B. Szony

	 	 	 President and Chief Executive Officer

  
 SIGNATURE PAGE
TO THE SANDS REGENT WARRANT 

 EXECUTION COPY 
  
 APPENDIX 1 
  
 NOTICE OF EXERCISE 
  
 1. The undersigned hereby elects to purchase              shares of the Common Stock of
The Sands Regent pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate purchase price (by check or, if applicable, by shares of Common Stock, on the terms specified in the Warrant) of such shares in full.

  
 2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name, and such legal title as is specified below: 
  

					
	 	  	
	 	 
	 	  	(Name)	 	 
			
	 	  	
	 	 
	 	  	
	 	 
	 	  	
	 	 
	 	  	(Address)	 	 
	 	  	 	 	 

  
 3. The undersigned
represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws. 
  

	
	

	 (Signature)

  

	
	

	(Date)Security Agreement

 Exhibit 10.4 
  
 EXECUTION COPY 
  
 SECURITY AGREEMENT 
  
 This Security Agreement (this “Agreement”) is entered into as of March 25, 2004, by and between THE SANDS REGENT, a Nevada corporation
(“Sands”), whose address is 345 North Arlington Avenue, Reno, Nevada 89501, LAST CHANCE, INC., a Nevada corporation (“Last Chance”, and together with Sands the “Borrowers”), whose address is I-80
West Exit 2, Gold Ranch Road, Verdi, Nevada 89439 and DAVID R. BELDING, an individual (“Secured Party”), whose address is Gold Strike Hotel, c/o Bruce Hampton, P.O. Box 19278, Jean, Nevada 89019. 
  
 Recitals 
  
 A. Sands has executed that certain Secured Promissory Note, dated March 25, 2004 (as amended, modified and supplemented from
time to time, the “Promissory Note”), in the original principal amount of $1,604,000, payable to Secured Party. 
  
 B. As a condition precedent to advancing funds under the Promissory Note, Secured Party has required the Borrowers to execute and deliver this Agreement.

  
 C. This Agreement is subject to the laws of Nevada, including,
but not limited to, the Nevada Gaming Control Act, Chapter 463 of the Nevada Revised Statutes (the, “Act”) and the regulations of the Nevada Gaming Commission and the State Gaming Control Board (the, “Regulations”),
in their current form and as they may hereafter be amended from time to time. 
  
 Agreement 
  
 NOW,
THEREFORE, in consideration of the above recitals and the mutual covenants hereinafter set forth, the parties hereto agree as follows: 
  
 1. Creation of Security Interest. In order to secure the payment and performance of the Secured Obligations (as defined below), Borrowers hereby
assign, pledge and grant to Secured Party, a security interest in all of Borrowers’ right, title and interest in and to the following property of the Borrowers, in each case whether now owned or hereafter at any time acquired by the Borrowers
and wherever located (collectively, the “Collateral”): 
  
 (a) Equipment. All “equipment,” as such term is defined in Article 9 of the Uniform Commercial Code as in effect in the state of Nevada (the “Code”), now owned or hereafter acquired
by the Borrowers, which is used in connection with the operation of that certain property located in the County of Washoe, State of Nevada, described on Schedule 1 attached hereto (collectively, the “Property”) or is located
thereon or therein (and any and all accessions, appurtenances, betterments, additions, substitutions and replacements of any of the foregoing) (collectively, the “Equipment”); 
  

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 (b) Fixtures. All Equipment now owned, or the ownership of which is hereafter
acquired, by the Borrowers which is affixed or attached to the Property that it is deemed fixtures or real property under the law of the particular state in which the Equipment is located, including, without limitation, all building or construction
materials intended for construction, reconstruction, alteration or repair of or installation on the Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now or hereafter attached
to, installed in or used in connection with (temporarily or permanently) the operation of the Property, together with all accessions, appurtenances, additions, replacements, betterments and substitutions for any of the foregoing (collectively, the
“Fixtures”); 
  
 (c)
Proceeds. All proceeds from the Equipment and Fixtures. As used herein, the term “Proceeds” means all “proceeds,” as such term is defined in Section 9-306(1) of the Code and includes, without limitation, the
following at any time whatsoever arising or receivable: (i) whatever is received upon any collection, exchange, sale, rental, lease or other disposition of any of the Equipment and/or Fixtures, and any property into which any of the Equipment and/or
Fixtures are converted, whether cash or non-cash proceeds, (ii) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Borrowers from time to time with respect to any of the Equipment and/or Fixtures, (iii) any and all
payments (in any form whatsoever) made or due and payable to the Borrowers from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Equipment and/or Fixtures by any
governmental body, authority, bureau or agency (or any person acting under color or governmental authority), and (iv) any and all other amounts from time to time paid or payable under or in connection with any of the Equipment and/or Fixtures.

  
 2. Secured Obligations. For purposes of this Agreement,
“Secured Obligations” shall mean any and all indebtedness, obligations and liabilities of the Borrowers to Secured Party, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, under the
Promissory Note and this Agreement. 
  
 3. Perfection of
Security Interests. Borrowers authorize Secured Party to file financing statements describing the Collateral. 
  
 4. Representation and Warranties. Borrowers represent and warrant as follows: 
  
 (a) Title to Collateral. Other than listed on Schedule 2 attached hereto, and subject to that
certain Credit Agreement dated March 25, 2004 by an among the Company, Last Chance and Zante, Inc., a Nevada corporation, each of the financial institutions from time to time listed in Schedule I thereto and Wells Fargo Bank, National Association, a
national banking association, Borrowers have right in or the power to transfer the Collateral and its title to the Collateral is free of all adverse claims, liens, security interests and restrictions on transfer or pledge except as created by this
Agreement. 
  

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 (b) Location of Collateral. All of the Collateral, including without limitation
the books and records related thereto, are located at the addresses set forth in Schedule 3 hereto. 
  
 (c) Location of Borrowers. Each Borrower is a corporation with the exact legal name set forth in the first paragraph hereof, and
is organized and registered under the law of the state of Nevada. 
  
 (d) No Conflict. The execution, delivery and performance of this Agreement by the Borrowers and the consummation of the transactions contemplated hereby will not: (i) conflict with or result in a breach of any
of the terms and provisions of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under, any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or
other document to which the Borrowers are a party; or (ii) conflict with any law, order, rule or regulation of any court or any federal or state government, regulatory body or administrative agency, or any other governmental body having jurisdiction
over each Borrower or its properties, except as may be required by Nevada Revised Statute 463.650(3). 
  
 5. Covenants. Borrowers covenant and agree as follows: 
  
 (a) Location of Collateral. Borrowers shall keep all of the Collateral, including without limitation the books and records related
thereto, at the locations set forth in Schedule 1 hereto; provided that Borrowers may keep Collateral at any new location so long as the Borrowers provide Secured Party with 30 days prior written notice of any such location. 
  
 (b) No Transfer. Except for sales of inventory in the
ordinary course of the Borrowers’ business, Secured Party does not authorize and the Borrowers agree not to (i) make any sales or leases of any of the Collateral; (ii) license any of the Collateral; or (iii) grant a security interest or lien in
any of the Collateral, without the prior written consent of the Secured Party. 
  
 6. Right to Enter. Secured Party shall have, at all times, with or without notice, the right to enter into and upon any premises where any of the Collateral or records with respect thereto are located for the
purpose of inspecting the same, performing an audit, making copies of records, observing the use of any part of the Collateral, protecting Secured Party’s security interest in the Collateral, or otherwise determining whether the Borrowers are
in compliance with the terms of this Agreement. 
  
 7. Further
Assurances. Borrowers shall promptly execute and deliver any further instrument, document or notice as may be necessary or which Secured Party may reasonably require in order to create, perfect and preserve the perfection and the priority of the
security interests granted or purported to be granted under this Agreement. 
  
 8. Defaults. Borrowers shall be in default under this Agreement (an “Event of Default”) upon the happening of any one or more of the following events: 
  
 (a) Payments. Borrowers shall fail to make any
payment required under this Agreement, or there shall have occurred an Event of Default under the Promissory Note (as such term is defined therein) and such default is not cured by the Borrowers within five (5) days after the Secured Party has given
the Borrowers written notice of such default; 
  

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 (b) Representations and Warranties. Any representation or warranty made by the
Borrowers in this Agreement shall prove to have been untrue, incorrect or misleading in any material respect when made; 
  
 (c) Covenants. Borrowers shall fail duly to observe or perform any covenant or agreement contained in this Agreement in any
material respect; 
  
 (d) Collateral. Any
judgment or levy of any attachment, execution or other process against any all or any portion of the Collateral shall be entered and such judgment shall not be satisfied, or such levy, execution or other process shall not be removed within thirty
(30) calendar days after the entry or levy thereof, or at least five (5) calendar days prior to the time of any proposed sale under any such judgment or levy; 
  

(e) Insolvency. The Borrowers, pursuant to or within the meaning of any Bankruptcy Law, (i) file a voluntary petition in
bankruptcy or a petition or answer seeking reorganization, to effect a plan or other arrangement with creditors or any other relief; (ii) consent to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consent to
the appointment of a Custodian of it or for all or substantially all of its assets; or (iv) make a general assignment for the benefit of its creditors; or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i)
is for relief against the Borrowers in an involuntary case; (ii) appoint a Custodian of the Borrowers for all, or substantially all its property; or (iii) order the liquidation of the company, and in any such case the order or decree remains in
effect for ninety (90) days. 
  
 For purposes of this Section 8,
“Bankruptcy Law” shall mean Title 11, U.S. Code or any similar Federal or state law for the relief of debtors, and “Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any
Bankruptcy Law. 
  
 If an Event of Default (other than an Event of
Default specified in Section 8(e)) occurs and is continuing, the Secured Party may, by written notice to the Borrowers (provided that such notice may not be made during the five (5) day cure period provided for in Section 8(a)), declare all Secured
Obligations to immediately due and payable. If an Event of Default specified in clause Section 8(e) occurs, such Secured Obligations shall become immediately due and payable without presentment, demand, protest and notice of any kind or of dishonor,
all of which are hereby expressly waived. 
  
 9. Foreclosure
Procedures. 
  
 (a) Delay; Waiver. No
delay in enforcing or failing to enforce any right under this Agreement by Secured Party shall constitute a waiver by Secured Party of such right. No waiver by Secured Party of any default hereunder shall be effective unless in writing, nor shall
any waiver operate as a waiver of any other default or of the same default on a future occasion. 
  

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 (b) Notices. Secured Party shall give the Borrowers such notice of any private or
public sales as may be required by the Code. 
  
 (c) Warranties. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to
affect the commercial reasonableness of any sale of the Collateral. 
  
 (d) No Marshaling. Secured Party has no obligation to marshal any asset in favor of the Borrowers, or against or in payment of any of the Security Obligations or any other obligation owed by the Borrowers to
Secured Party. 
  
 10. Right of Set Off. In addition to and
not in limitation of any other right or remedy hereunder, Secured Party shall have, at any time, the right to set off any indebtedness or obligation of the Borrowers against any indebtedness or obligation of Secured Party to the Borrowers, without
notice to or demand upon the Borrowers, any guarantor of any such indebtedness or obligation or any other person, whether or not such obligation or indebtedness is liquidated, contingent or mature at the time of such offset and however such
indebtedness or obligations were created or incurred. 
  
 11.
Certain Remedies. Upon the occurrence and during the continuance of an Event of Default, Secured Party shall have, in addition to all other rights and remedies that Secured Party may have under applicable law or in equity or under this
Agreement or under the Promissory Note, all rights and remedies of a secured party under the Code. 
  
 12. Costs and Expenses. Upon the occurrence of an Event of Default, Borrowers agree to pay to Secured Party all reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Secured Party in the enforcement or attempted enforcement of this Agreement, whether or not an action is filed in connection therewith, and in
connection with any waiver or amendment of any term or provision hereof for the benefit of the Borrowers. All advances, charges, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by Secured Party in
exercising any right, privilege, power or remedy conferred by this Agreement, or in the enforcement or attempted enforcement thereof, shall be secured hereby and shall become a part of the Secured Obligations and shall be paid to Secured Party by
the Borrowers, immediately upon demand, together with interest thereon at the Default Rate (as such term is defined in the Promissory Note). 
  
 13. Notices. All notices, requests and other communications required or permitted to be made hereunder shall, except as otherwise provided, be in
writing and may be delivered personally or sent by telecopy, overnight courier or certified mail, postage prepaid, to the parties addressed as set forth in the first paragraph hereof. Such notices, requests and other communications sent shall be
effective upon receipt, unless sent by (i) overnight courier, in which case they shall be effective exactly one (1) business day after deposit with such overnight 
  

 5 

 courier, or (ii) mail, in which case they shall be effective exactly three (3) business days after deposit in the United
States mail. Either party may change its address or other information by giving notice thereof to the other party hereto in conformity with this section. 
  
 14. Gaming Approval. The exercise of all remedies involving gaming equipment available to Secured Party hereunder shall be subject to the
acquisition of all approvals and licenses required by the Act and the Regulations. 
  
 15. Termination of Security Agreement. This Security Agreement and the security interest hereunder shall terminate upon the full and final payment in cash and performance of all the Secured Obligations.
Notwithstanding anything to the contrary herein, this Security Agreement (including all representations, warranties and covenants contained herein) shall continue to be effective or be reinstated, as the case may be, if at any time any amount
received by Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by Secured Party upon or in connection with an Insolvency Proceeding of the Borrowers or otherwise, all as though such payment had
not been made. 
  
 16. Headings. The various headings in
this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. 
  
 17. Amendments. This Agreement or any provision hereof may be changed, waived, or terminated only by a statement in writing signed by the party
against which such change, waiver or termination is sought to be enforced, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 
  
 18. Entire Agreement. This Agreement and the Promissory Note are
intended by the parties as a final expression of their agreement and is intended as a complete and exclusive statement of the terms and conditions thereof. Acceptance of or acquiescence in a course of performance rendered under this Agreement shall
not be relevant to determine the meaning of this Agreement even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. 
  
 19. Severability. If any provision or obligation of this Agreement should be found to be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions and obligations or any other agreement executed in connection herewith, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby and shall nonetheless remain in full force and effect to the maximum extent permitted by law. 
  
 20. Successors and Assigns. Neither Secured Party nor the Borrowers shall assign any of its interest under this Agreement without the prior written
consent of the other party. Any purported assignment inconsistent with this provision shall be null and void. All rights of a party hereunder shall inure to the benefit of its successor and assigns. 
  
 21. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, except to the extent that the UCC provides for the application of a law of another state as it relates to perfection of security interests. 
  

 6 

 22. Counterparts. This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original, but all of which shall together constitute one and the same agreement. 
  
 [remainder of page intentionally blank] 
  

 7 

 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and
delivered by their respective officers as of the date first above written. 
  

			
	 LAST CHANCE, INC.,

	 a Nevada Corporation

		
	 	 	 /s/    FERENC B. SZONY

	 	 	 Ferenc B. Szony

	 	 	 President

	
	 THE SANDS REGENT,

	 a Nevada Corporation

		
	 	 	 /s/    FERENC B. SZONY

	 	 	 Ferenc B. Szony

	 	 	 President and Chief Executive Officer

	
	 SECURED PARTY

		
	 	 	 /s/    DAVID R. BELDING

	 	 	 David R. Belding

  

 S-1 

 Schedule 1 
  

Description of Property 
  

 2 

 Schedule 2 
  

List of Collateral for which the Borrowers do not have the right to Transfer 
  

 3 

 Schedule 3 
  

List of Locations of Collateral 
  

 4

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