Document:

exv10w8

 

Exhibit 10.8

EXHIBIT E

SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of March 31, 2006 (this “Agreement”), among Las Vegas
Gaming, Inc., a Nevada corporation (the “Company”) and all of the Subsidiaries of the Company (such
subsidiaries, the “Guarantors”) (the Company and Guarantors are collectively referred to as
the “Debtors”) and the holder or holders of the Company’s Senior Secured Notes due January
1, 2008 in the original aggregate principal amount of $5,000,000 (the “Notes”), signatory
hereto, their endorsees, transferees and assigns (collectively referred to as, the “Secured
Parties”).

W I T N E S S E T H:

     WHEREAS, pursuant to the Notes, the Secured Parties have severally agreed to extend the loans
to the Company evidenced by the Notes;

     WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the date hereof (the
“Guaranty”), the Guarantors have jointly and severally agreed to guaranty and act as surety
for payment of such loans; and

     WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Notes,
each Debtor has agreed to execute and deliver to the Secured Parties this Agreement and to grant
the Secured Parties, pari passu with each other Secured Party, a perfected security interest in
certain property of such Debtor to secure the prompt payment, performance and discharge in full of
all of the Company’s obligations under the Notes and the other Debtors’ obligations under the
Guaranty.

     NOW, THEREFORE, in consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:

     1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings
set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”,
“deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective meanings given such terms in Article 9 of the
UCC.

     (a) “Collateral” means the collateral in which the Secured Parties are granted
a security interest by this Agreement and which shall include the following personal
property of the Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the Collateral and
of insurance covering the same and of any tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property (other than,
to the extent not legally permitted to be pledged, the jackpot amount) at any time and from
time to time acquired, receivable or otherwise distributed in respect of, or in exchange
for, any or all of the Pledged Securities (as defined below):

     (i) All goods, including, without limitations, (A) all machinery, equipment,
computers, motor vehicles (except for the one car and one truck currently subject to

 

 

operating leases), trucks, tanks, boats, ships, appliances, furniture, special
and general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of title
and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto (other than, to the extent not legally
permitted to be pledged, the plasma televisions to the extent pledged to the
sellers’ thereof); and (B) all inventory;

     (ii) All contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock or other
securities, rights under any of the Organizational Documents, agreements related to
the Pledged Securities, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any third party or developed by any
Debtor), computer software development rights, leases, franchises, customer lists,
quality control procedures, grants and rights, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, copyrights, Intellectual
Property, and income tax refunds;

     (iii) All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and all
right, title, security and guaranties with respect to each account, including any
right of stoppage in transit;

     (iv) All documents, letter-of-credit rights, instruments and chattel paper;

     (v) All commercial tort claims;

     (vi) All deposit accounts and all cash (whether or not deposited in such
deposit accounts), excluding that cash tied to jackpot requirements;

     (vii) All investment property;

     (viii) All supporting obligations;

     (ix) All files, records, books of account, business papers, and computer
programs; and

     (x) the products and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above.

     Without limiting the generality of the foregoing, the “Collateral”
shall include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation, the
 shares of capital stock and the other equity interests listed on Schedule H
hereto (as the same may be modified from time to time pursuant to the terms hereof),
and any other shares of capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the future, and, in each
case, all certificates representing such shares and/or equity interests and, in each
case, all rights, options, warrants, stock, other securities and/or equity interests
that may hereafter be received, receivable or distributed in respect of, or

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exchanged for, any of the foregoing (all of the foregoing being referred to
herein as the “Pledged Securities”) and all rights arising under or in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.

     Notwithstanding the foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment, becomes void by
operation of applicable law or the assignment of which is otherwise prohibited by
applicable law (in each case to the extent that such applicable law is not
overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by applicable law,
this Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.

     (b) “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether
in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political subdivision thereof,
or otherwise, and all common law rights related thereto, (iv) all trade secrets arising
under the laws of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action for infringement of the
foregoing.

     (c) “Majority in Interest” shall mean, at any time of determination, the
majority in interest (based on then-outstanding principal amounts of Notes at the time of
such determination) of the Secured Parties.

     (d) “Necessary Endorsement” shall mean undated stock powers endorsed in blank
or other proper instruments of assignment duly executed and such other instruments or
documents as the Secured Parties may reasonably request.

     (e) “Obligations” means all of the Debtors’ obligations under this Agreement,
the Notes, the Guaranty, the Advisory Services Letter and any other instruments, agreements
or other documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or indirectly from
any of the Secured Parties as a preference,

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fraudulent transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Notes, the Guaranty, the Advisory Services Letter and
any other instruments, agreements or other documents executed and/or delivered in connection
herewith or therewith; and (iii) all amounts (including but not limited to post-petition
interest) in respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Debtor.

     (f) “Organizational Documents” means with respect to any Debtor, the documents
by which such Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of preferred equity) and
which relate to the internal governance of such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).

     (g) “UCC” means the Uniform Commercial Code of the State of New York and or any
other applicable law of any state or states which has jurisdiction with respect to all, or
any portion of, the Collateral or this Agreement, from time to time. It is the intent of
the parties that defined terms in the UCC should be construed in their broadest sense so
that the term “Collateral” will be construed in its broadest sense. Accordingly if there
are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

     2. Grant of Perfected Security Interest. As an inducement for the Secured Parties to extend
the loans as evidenced by the Notes and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a
continuing and perfected security interest in and to, a lien upon and a right of set-off against
all of their respective right, title and interest of whatsoever kind and nature in and to, the
Collateral (the “Security Interest”).

     3. Delivery of Certain Collateral. Contemporaneously or prior to the execution of this
Agreement, each Debtor shall deliver or cause to be delivered to the Secured Parties (a) any and
all certificates and other instruments representing or evidencing the Pledged Securities, and (b)
any and all certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all Necessary Endorsements. The Debtors are,
contemporaneously with the execution hereof, delivering to the Secured Parties, or have previously
delivered to the Secured Parties, a true and correct copy of each Organizational Document governing
any of the Pledged Securities.

     4. Representations, Warranties, Covenants and Agreements of the Debtors. Each Debtor
represents and warrants to, and covenants and agrees with, the Secured Parties as follows:

     (a) Each Debtor has the requisite corporate, partnership, limited liability company
or other power and authority to enter into this Agreement and otherwise to carry out its
obligations hereunder. The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly authorized by all necessary
action on the part of such Debtor and no further action is required by such Debtor. This
Agreement has been duly executed

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by each Debtor. This Agreement constitutes the legal, valid and binding obligation of
each Debtor, enforceable against each Debtor in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general application relating to or affecting the rights and remedies of
creditors and by general principles of equity.

     (b) The Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located, except as set forth on
Schedule A attached hereto. Except as specifically set forth on Schedule A,
each Debtor is the record owner of the real property where such Collateral is located, and
there exist no mortgages or other liens on any such real property except for Permitted Liens
(as defined in the Notes). Except as disclosed on Schedule A, none of such
Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.

     (c) Except as set forth on Schedule B attached hereto, the Debtors are the sole
owner of the Collateral (except for non-exclusive licenses granted by any Debtor in the
ordinary course of business), free and clear of any liens, security interests, encumbrances,
rights or claims, and are fully authorized to grant the Security Interest. There is not on
file in any governmental or regulatory authority, agency or recording office an effective
financing statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that will be filed in favor of the Secured Parties pursuant to
this Agreement) covering or affecting any of the Collateral. So long as this Agreement
shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document or
instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant
to the terms of this Agreement).

     (d) No written claim has been received that any Collateral or Debtor’s use of any
Collateral violates the rights of any third party. There has been no adverse decision to any
Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending or, to the best knowledge
of any Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

     (e) Each Debtor shall at all times maintain its books of account and records relating
to the Collateral at its principal place of business and its Collateral at the locations set
forth on Schedule A attached hereto and may not relocate such books of account and
records or tangible Collateral unless it delivers to the Secured Parties at least 30 days
prior to such relocation (i) written notice of such relocation and the new location thereof
(which must be within the United States) and (ii) evidence that appropriate financing
statements under the UCC and other necessary documents have been filed and recorded and
other steps have been taken to perfect the Security Interest to create in favor of the
Secured Parties a valid, perfected and continuing perfected first priority lien in the
Collateral.

     (f) This Agreement creates in favor of the Secured Parties a valid, security interest
in the Collateral, securing the payment and performance of the Obligations. Upon making the
filings described in the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform Commercial Code
financing statements shall have been duly perfected. Except for the filing of the Uniform
Commercial Code financing statements referred to in the immediately following paragraph, the
recordation of the

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Intellectual Property Security Agreement (as defined below) with respect to copyrights
and copyright applications in the United States Copyright Office referred to in paragraph
(p), the execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and other instruments provided in Section 3,
no action is necessary to create, perfect or protect the security interests created
hereunder. Without limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property Security Agreement, and
the execution and delivery of said deposit account control agreements, no consent of any
third parties and no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the
Secured Parties hereunder.

     (g) Each Debtor hereby authorizes the Secured Parties, or any of them, to file one or
more financing statements under the UCC, with respect to the Security Interest with the
proper filing and recording agencies in any jurisdiction deemed proper by them.

     (h) The execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor or any
judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing any Debtor’s debt or otherwise) or other
understanding to which any Debtor is a party or by which any property or asset of any Debtor
is bound or affected. No consent (including, without limitation, from stockholders or
creditors of any Debtor) is required for any Debtor to enter into and perform its
obligations hereunder.

     (i) The capital stock and other equity interests listed on Schedule H hereto
represent all of the capital stock and other equity interests of the Guarantors, and
represent all capital stock and other equity interests owned, directly or indirectly, by the
Company. All of the Pledged Securities are validly issued, fully paid and nonassessable,
and the Company is the legal and beneficial owner of the Pledged Securities, free and clear
of any lien, security interest or other encumbrance except for the security interests
created by this Agreement.

     (j) The ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”) by their
express terms do not provide that they are securities governed by Article 8 of the UCC and
are not held in a securities account or by any financial intermediary.

     (k) Each Debtor shall at all times maintain the liens and Security Interest provided
for hereunder as valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor hereby agrees to
defend the same against the claims of any and all persons and entities. Each Debtor shall
safeguard and protect all Collateral for the account of the Secured Parties. At the
request of the Secured Parties, each Debtor will sign and deliver to the Secured Parties at
any time or from time to time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Secured Parties and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the

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Secured Parties to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, each Debtor shall pay
all fees, taxes and other amounts necessary to maintain the Collateral and the Security
Interest hereunder, and each Debtor shall obtain and furnish to the Secured Parties from
time to time, upon demand, such releases and/or subordinations of claims and liens which may
be required to maintain the priority of the Security Interest hereunder.

     (l) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by a Debtor in
its ordinary course of business and sales of inventory by a Debtor in its ordinary course of
business) without the prior written consent of a Majority in Interest.

     (m) Each Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate any such
Collateral (or cause to be operated or located) in any area excluded from insurance
coverage.

     (n) Each Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral against loss or damage of the kinds and in the amounts
customarily insured against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent for entities engaged in
similar businesses but in any event sufficient to cover the full replacement cost thereof.
Each Debtor shall cause each insurance policy issued in connection herewith to provide, and
the insurer issuing such policy to certify to the Secured Parties that (a) the Secured
Parties will be named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Secured Parties and such
cancellation or change shall not be effective as to the Secured Parties for at least thirty
(30) days after receipt by the Secured Parties of such notice, unless the effect of such
change is to extend or increase coverage under the policy; and (c) the Secured Parties will
have the right (but no obligation) at its election to remedy any default in the payment of
premiums within thirty (30) days of notice from the insurer of such default. If no Event of
Default (as defined in the Note) exists and if the proceeds arising out of any claim or
series of related claims do not exceed $50,000, loss payments in each instance will be
applied by the applicable Debtor to the repair and/or replacement of property with respect
to which the loss was incurred to the extent reasonably feasible, and any loss payments or
the balance thereof remaining, to the extent not so applied, shall be payable to the
applicable Debtor, provided, however, that payments received by any Debtor after an Event of
Default occurs and is continuing or in excess of $50,000 for any occurrence or series of
related occurrences shall be paid to the Secured Parties and, if received by such Debtor,
shall be held in trust for and immediately paid over to the Secured Parties unless otherwise
directed in writing by the Secured Parties. Copies of such policies or the related
certificates, in each case, naming the Secured Parties as lender loss payee and additional
insured shall be delivered to the Secured Parties at least annually and at the time any new
policy of insurance is issued.

     (o) Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any substantial change in the Collateral,
and of the occurrence of any event which would have a material adverse effect on the value
of the Collateral or on the Secured Parties’ security interest therein.

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     (p) Each Debtor shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action as the
Secured Parties may from time to time request and may in its sole discretion deem necessary
to perfect, protect or enforce its security interest in the Collateral including, without
limitation, if applicable, the execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property (“Intellectual Property Security
Agreement”) in which the Secured Parties have been granted a security interest
hereunder, substantially in a form acceptable to the Secured Parties, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject to all of the
terms and conditions hereof.

     (q) Each Debtor shall permit the Secured Parties and their representatives and agents
to inspect the Collateral at any time, and to make copies of records pertaining to the
Collateral as may be requested by a Secured Party from time to time.

     (r) Each Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.

     (s) Each Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process levied
against any Collateral and of any other information received by such Debtor that may
materially affect the value of the Collateral, the Security Interest or the rights and
remedies of the Secured Parties hereunder.

     (t) All information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is accurate and complete in all
material respects as of the date furnished.

     (u) The Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises material to its
business.

     (v) No Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate structure, or
identity, or add any new fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of such written notification,
such Debtor provides any financing statements or fixture filings necessary to perfect and
continue perfected the perfected security Interest granted and evidenced by this Agreement.

     (w) No Debtor may consign any of its Inventory or sell any of its Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale without the
consent of a Majority in Interest which shall not be unreasonably withheld, except to the
extent such consignment or sale does not exceed 15% of the total value of all of the
Company’s finished goods in Inventory.

     (x) No Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and so long as,
at the time of such written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the perfected security Interest
granted and evidenced by this Agreement.

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     (y) Each Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in the first paragraph of this Agreement. Schedule
D attached hereto sets forth each Debtor’s organizational identification number or, if
any Debtor does not have one, states that one does not exist.

     (z) (i) The actual name of each Debtor is the name set forth in the preamble above;
(ii) no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble hereto or
as set forth on Schedule E for the preceding five years; and (iv) no entity has
merged into any Debtor or been acquired by any Debtor within the past five years except as
set forth on Schedule E.

     (aa) At any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the secured
party to perfect the security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Secured Parties.

     (bb) Each Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of the Secured Parties regarding the Pledged Interests consistent
with the terms of this Agreement without the further consent of any Debtor as contemplated
by Section 8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it
shall not enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or entity.

     (cc) Each Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Secured Parties, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the security
interest created by this Agreement. To the extent that any Collateral consists of
electronic chattel paper, the applicable Debtor shall cause the underlying chattel paper to
be “marked” within the meaning of Section 9-105 of the UCC (or successor section thereto).

     (dd) If there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the applicable Debtor
shall cause such an account control agreement, in form and substance in each case
satisfactory to the Secured Parties, to be entered into and delivered to the Secured
Parties.

     (ee) To the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to consent to
an assignment of the proceeds thereof to the Secured Parties.

     (ff) To the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Parties in notifying such third party of the
Secured Parties’ security interest in such Collateral and shall use its best efforts to
obtain an acknowledgement and agreement from such third party with respect to the
Collateral, in form and substance satisfactory to the Secured Parties.

     (gg) If any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such Debtor of the
particulars thereof and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing
to be in form and substance satisfactory to the Secured Parties.

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     (hh) Each Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority and, to the
extent necessary to perfect or continue the perfected status of the Security Interest in
such accounts and proceeds thereof, shall execute and deliver to the Secured Parties an
assignment of claims for such accounts and cooperate with the Secured Parties in taking any
other steps required, in their judgment, under the Federal Assignment of Claims Act or any
similar federal, state or local statute or rule to perfect or continue the perfected status
of the Security Interest in such accounts and proceeds thereof.

     (ii) Each Debtor shall cause each subsidiary of such Debtor to immediately become a
party hereto (an “Additional Debtor”), by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply with the
provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor
shall deliver replacement schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement schedules shall supersede,
or supplements shall modify, the Schedules then in effect. The Additional Debtor shall also
deliver such opinions of counsel, authorizing resolutions, good standing certificates,
incumbency certificates, organizational documents, financing statements and other
information and documentation as the Secured Parties may reasonably request. Upon delivery
of the foregoing to the Secured Parties, the Additional Debtor shall be and become a party
to this Agreement with the same rights and obligations as the Debtors, for all purposes
hereof as fully and to the same extent as if it were an original signatory hereto and shall
be deemed to have made the representations, warranties and covenants set forth herein as of
the date of execution and delivery of such Additional Debtor Joinder, and all references
herein to the “Debtors” shall be deemed to include each Additional Debtor.

     (jj) Each Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Notes.

     (kk) Each Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities to
register the pledge of the applicable Pledged Securities in the name of the Secured Parties
on the books of such issuer. Further, except with respect to certificated securities
delivered to the Secured Parties, the applicable Debtor shall deliver to the Secured Parties
an acknowledgement of pledge (which, where appropriate, shall comply with the requirements
of the relevant UCC with respect to perfection by registration) signed by the issuer of the
applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has
registered the pledge on its books and records; and (b) at any time directed by the Secured
Parties during the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of the Secured Parties,
will take such steps as may be necessary to effect the transfer, and will comply with all
other instructions of the Secured Parties regarding such Pledged Securities without the
further consent of the applicable Debtor.

     (ll) In the event that, upon an occurrence of an Event of Default, the Secured Parties
shall sell all or any of the Pledged Securities to another party or parties (herein called
the “Transferee”) or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable: (i) deliver to the Secured Parties or the
Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock
certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of
indebtedness, books of account, financial records and all other Organizational Documents and
records of the Debtors and their direct and indirect subsidiaries; (ii) use its best efforts
to obtain resignations of the persons then serving as officers

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and directors of the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged Securities to the
Transferee or the purchase or retention of the Pledged Securities by the Secured Parties and
allow the Transferee or the Secured Parties to continue the business of the Debtors and
their direct and indirect subsidiaries.

     (mm) Without limiting the generality of the other obligations of the Debtors hereunder,
each Debtor shall promptly (i) cause to be registered at the United States Copyright Office
all of its material copyrights, (ii) cause the security interest contemplated hereby with
respect to all Intellectual Property registered at the United States Copyright Office or
United States Patent and Trademark Office to be duly recorded at the applicable office, and
(iii) give the Secured Parties notice whenever it acquires (whether absolutely or by
license) or creates any additional material Intellectual Property.

     (nn) Each Debtor will from time to time, at the joint and several expense of the
Debtors, promptly execute and deliver all such further instruments and documents, and take
all such further action as may be necessary or desirable, or as the Secured Parties may
reasonably request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Secured Parties to exercise and enforce
their rights and remedies hereunder and with respect to any Collateral or to otherwise carry
out the purposes of this Agreement.

     (oo) Schedule F attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names owned by any of
the Debtors as of the date hereof. Schedule F lists all material licenses in favor
of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the
date hereof. All material patents and trademarks of the Debtors have been duly recorded at
the United States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.

     (pp) Except as set forth on Schedule G attached hereto, none of the account
debtors or other persons or entities obligated on any of the Collateral is a governmental
authority covered by the Federal Assignment of Claims Act or any similar federal, state or
local statute or rule in respect of such Collateral.

     5. Effect of Pledge on Certain Rights. If any of the Collateral subject to this Agreement
consists of nonvoting equity or ownership interests (regardless of class, designation, preference
or rights) that may be converted into voting equity or ownership interests upon the occurrence of
certain events (including, without limitation, upon the transfer of all or any of the other stock
or assets of the issuer), it is agreed that the pledge of such equity or ownership interests
pursuant to this Agreement or the enforcement of any of the Secured Parties’ rights hereunder shall
not be deemed to be the type of event which would trigger such conversion rights notwithstanding
any provisions in the Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.

     6. Defaults. The following events shall be “Events of Default”:

     (a) The occurrence of an Event of Default (as defined in the Notes) under the Notes;

     (b) Any representation or warranty of any Debtor in this Agreement shall prove to
have been incorrect in any material respect when made;

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     (c) The failure by any Debtor to observe or perform any of its obligations hereunder
for five (5) days after delivery to such Debtor of notice of such failure by or on behalf of
a Secured Party unless such default is capable of cure but cannot be cured within such time
frame and such Debtor is using best efforts to cure same in a timely fashion; or

     (d) If any provision of this Agreement shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall be contested by any
Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority
having jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability
thereof, or any Debtor shall deny that any Debtor has any liability or obligation purported
to be created under this Agreement.

     7. Duty To Hold In Trust.

     (a) Upon the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the
Security Interest, whether payable pursuant to the Notes or otherwise, or of any check,
draft, note, trade acceptance or other instrument evidencing an obligation to pay any such
sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer
any such sums or instruments, or both, to the Secured Parties, pro-rata in proportion to
their initial purchases of Notes for application to the satisfaction of the Obligations (and
if any Debenture is not outstanding, pro-rata in proportion to the initial purchases of the
remaining Notes).

     (b) If any Debtor shall become entitled to receive or shall receive any securities or
other property (including, without limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or any options, warrants,
rights or other similar property or certificates representing a dividend, or any
distribution in connection with any recapitalization, reclassification or increase or
reduction of capital, or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise),
such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the
same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver
any and all certificates or instruments evidencing the same to the Secured Parties on or
before the close of business on the fifth business day following the receipt thereof by such
Debtor, in the exact form received together with the Necessary Endorsements, to be held by
the Secured Parties subject to the terms of this Agreement as Collateral.

     8. Rights and Remedies Upon Default.

     (a) Upon the occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through any agent appointed by them for such purpose, shall have the right
to exercise all of the remedies conferred hereunder and under the Notes, and the Secured
Parties shall have all the rights and remedies of a secured party under the UCC. Without
limitation, the Secured Parties shall have the following rights and powers:

     (i) The Secured Parties shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance of any person,
any premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral and make it available
to the Secured Parties at places which the Secured Parties shall reasonably select,
whether at such Debtor’s premises or elsewhere, and make available to the Secured
Parties, without rent, all of

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such Debtor’s respective premises and facilities for the purpose of the Secured
Parties taking possession of, removing or putting the Collateral in saleable or
disposable form.

     (ii) Upon notice to the Debtors by the Secured Parties, all rights of each
Debtor to exercise the voting and other consensual rights which it would otherwise
be entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall cease.
Upon such notice, the Secured Parties shall have the right to receive any interest,
cash dividends or other payments on the Collateral and, at the option oft, to
exercise in such the Secured Parties’ discretion all voting rights pertaining
thereto. Without limiting the generality of the foregoing, the Secured Parties
shall have the right (but not the obligation) to exercise all rights with respect to
the Collateral as it were the sole and absolute owners thereof, including, without
limitation, to vote and/or to exchange, at its sole discretion, any or all of the
Collateral in connection with a merger, reorganization, consolidation,
recapitalization or other readjustment concerning or involving the Collateral or any
Debtor or any of its direct or indirect subsidiaries.

     (iii) The Secured Parties shall have the right to operate the business of
each Debtor using the Collateral and shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such terms
and conditions as the Secured Parties may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption of a
Debtor, which are hereby expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Secured Parties may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims, right of redemption and
equities of any Debtor, which are hereby waived and released.

     (iv) The Secured Parties shall have the right (but not the obligation) to
notify any account debtors and any obligors under instruments or accounts to make
payments directly to the Secured Parties and to enforce the Debtors’ rights against
such account debtors and obligors.

     (v) The Secured Parties may (but are not obligated to) direct any financial
intermediary or any other person or entity holding any investment property to
transfer the same to the Secured Parties or their designee.

     (vi) The Secured Parties may (but are not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the name of the Secured
Parties or any designee or any purchaser of any Collateral.

     (b) The Secured Parties may comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral. The Secured Parties may sell the
Collateral without giving any warranties and may specifically disclaim such warranties. If
the Secured Parties sells any of the Collateral on credit, the Debtors will only be credited
with payments actually made by the purchaser. In addition, each Debtor waives any and all
rights that

13

 

it may have to a judicial hearing in advance of the enforcement of any of the Secured
Parties’ rights and remedies hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.

     (c) For the purpose of enabling the Secured Parties to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or applicable law, each
Debtor hereby grants to the Secured Parties an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such Debtor) to use,
license or sublicense following an Event of Default, any Intellectual Property now owned or
hereafter acquired by such Debtor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be recorded or
stored and to all computer software and programs used for the compilation or printout
thereof.

     9. Applications of Proceeds. The proceeds of any such sale, lease or other disposition of the
Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without limitation, any taxes,
fees and other costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Parties in enforcing their rights hereunder
and in connection with collecting, storing and disposing of the Collateral, and then to
satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Notes at the time of any such determination), and to the payment of any other
amounts required by applicable law, after which the Secured Parties shall pay to the applicable
Debtor any surplus proceeds. If, upon the sale, license or other disposition of the Collateral, the
proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest thereon, at the
rate of 18% per annum or the lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect such deficiency.
To the extent permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention or sale of the
Collateral, unless due solely to the gross negligence or willful misconduct of the Secured Parties
as determined by a final judgment (not subject to further appeal) of a court of competent
jurisdiction.

     10. Securities Law Provision. Each Debtor recognizes that the Secured Parties may be limited
in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of
certain prohibitions in the Securities Act of 1933, as amended, or other federal or state
securities laws (collectively, the “Securities Laws”), and may be compelled to resort to
one or more sales to a restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to the distribution or
resale thereof. Each Debtor agrees that sales so made may be at prices and on terms less favorable
than if the Pledged Securities were sold to the public, and that the Secured Parties has no
obligation to delay the sale of any Pledged Securities for the period of time necessary to register
the Pledged Securities for sale to the public under the Securities Laws. Each Debtor shall
cooperate with the Secured Parties in its attempt to satisfy any requirements under the Securities
Laws (including, without limitation, registration thereunder if requested by the Secured Parties)
applicable to the sale of the Pledged Securities by the Secured Parties.

     11. Costs and Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and
expenses incurred in connection with any filing required hereunder, including without limitation,
any financing statements pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches reasonably required by the
Secured Parties. The Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Secured Parties might prejudice, imperil or otherwise affect the Collateral or the
Security Interest therein. The

14

 

Debtors will also, upon demand, pay to the Secured Parties the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any experts and agents,
which the Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from, or other realization upon, any of
the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties
under the Notes. Until so paid, any fees payable hereunder shall be added to the principal amount
of the Notes and shall bear interest at the Default Rate.

     12. Responsibility for Collateral. The Debtors assume all liabilities and responsibility in
connection with all Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) no Secured Party (i) has any
duty (either before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to
clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor shall remain obligated
and liable under each contract or agreement included in the Collateral to be observed or performed
by such Debtor thereunder. No Secured Party shall have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement or the receipt by any Secured
Party of any payment relating to any of the Collateral, nor shall the any Secured Party be
obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any
such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received
by any Secured Party in respect of the Collateral or as to the sufficiency of any performance by
any party under any such contract or agreement, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have been assigned to
any Secured Party may be entitled at any time or times.

     13. Security Interest Absolute. All rights of the Secured Parties and all obligations of the
Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment
or performance of, or in any other term of, all or any of the Obligations, or any other amendment
or waiver of or any consent to any departure from the Notes or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other collateral for, or
any guaranty, or any other security, for all or any of the Obligations; (d) any action by the
Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other circumstance which
might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of
all or any part of the Security Interest granted hereby. Until the Obligations shall have been
paid and performed in full, the rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. Each Debtor expressly waives presentment, protest, notice of protest,
demand, notice of nonpayment and demand for performance. In the event that at any time any transfer
of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final
order of a court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or
satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and provisions hereof. Each
Debtor waives all right to require the Secured Parties to proceed against any other person or
entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal
assets, or to pursue any other

15

 

remedy. Each Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

     14. Term of Agreement. This Agreement and the Security Interest shall terminate on the date on
which all payments under the Notes have been indefeasibly paid in full and all other Obligations
have been paid or discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement shall survive and remain operative and in full force and effect regardless of the
termination of this Agreement.

     15. Power of Attorney; Further Assurances.

     (a) Each Debtor authorizes the Secured Parties, and does hereby make, constitute and
appoint the Secured Parties and their respective officers, agents, successors or assigns
with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with
power, in the name of the various Secured Parties or such Debtor, to, after the occurrence
and during the continuance of an Event of Default, (i) endorse any note, checks, drafts,
money orders or other instruments of payment (including payments payable under or in respect
of any policy of insurance) in respect of the Collateral that may come into possession of
the Secured Parties; (ii) to sign and endorse any financing statement pursuant to the UCC or
any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened against the
Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due
in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the Secured
Parties, and at the expense of the Debtors, at any time, or from time to time, to execute
and deliver any and all documents and instruments and to do all acts and things which the
Secured Parties deem necessary to protect, preserve and realize upon the Collateral and the
Security Interest granted therein in order to effect the intent of this Agreement and the
Notes all as fully and effectually as the Debtors might or could do; and each Debtor hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any inconsistent
provision in the Organizational Documents or other documents or agreements to which any
Debtor is subject or to which any Debtor is a party. Without limiting the generality of the
foregoing, after the occurrence and during the continuance of an Event of Default, each
Secured Party is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the United
States Copyright Office.

     (b) On a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in any
jurisdiction, including, without limitation, the jurisdictions indicated on Schedule
C attached hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Secured Parties, to perfect
the Security Interest granted hereunder and otherwise to carry out the intent and purposes
of this Agreement, or for assuring and confirming to the Secured Parties the grant or
perfection of a perfected security interest in all the Collateral under the UCC.

16

 

     (c) Each Debtor hereby irrevocably appoints the Secured Parties as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor and in the
name of such Debtor, from time to time in the Secured Parties’ discretion, to take any
action and to execute any instrument which the Secured Parties may deem necessary or
advisable to accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments thereto,
relative to any of the Collateral without the signature of such Debtor where permitted by
law, which financing statements may (but need not) describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such actions taken by
the Secured Parties. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.

     16. Notices. All notices, requests, demands and other communications hereunder shall be
subject to the notice provision of the Purchase Agreement (as such term is defined in the Notes).

     17. Other Security. To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Secured Parties shall have the right, in its
sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies
hereunder.

     18. Intentionally Omitted.

     19. Miscellaneous.

     (a) No course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties, any right,
power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege.

     (b) All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised singly or
concurrently.

     (c) This Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations, understandings
and agreements with respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by the parties hereto.

     (d) In the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is narrowed by
judicial construction, this Agreement shall, as to such jurisdiction, be construed as if
such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not
to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any
provision of this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of
such invalidity, prohibition or unenforceability without invalidating the remaining portion
of such provision or the other provisions of this Agreement and without affecting the
validity or enforceability of such provision or the other provisions of this Agreement in
any other jurisdiction.

17

 

     (e) No waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default or right, whether of the
same or similar nature or otherwise.

     (f) This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns.

     (g) Each party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the provisions and
purposes of this Agreement.

     (h) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles
of conflicts of law thereof. Each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement
and the Notes (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such proceeding.

     (i) This Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together shall constitute
one and the same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.

     (j) All Debtors shall jointly and severally be liable for the obligations of each
Debtor to the Secured Parties hereunder.

     (k) Each Debtor shall indemnify, reimburse and hold harmless the Secured Parties and
their respective partners, members, shareholders, officers, directors, employees and agents

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(collectively, “Indemnitees”) from and against any and all losses, claims,
liabilities, damages, penalties, suits, costs and expenses, of any kind or nature,
(including fees relating to the cost of investigating and defending any of the foregoing)
imposed on, incurred by or asserted against such Indemnitee in any way related to or arising
from or alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result from the
gross negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This indemnification provision
is in addition to, and not in limitation of, any other indemnification provision in the
Notes, the Purchase Agreement (as such term is defined in the Notes) or any other agreement,
instrument or other document executed or delivered in connection herewith or therewith.

     (l) Nothing in this Agreement shall be construed to subject any Secured Party to
liability as a partner in any Debtor or any if its direct or indirect subsidiaries that is a
partnership or as a member in any Debtor or any of its direct or indirect subsidiaries that
is a limited liability company, nor any Secured Party be deemed to have assumed any
obligations under any partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted for such
Debtor as a partner or member, as applicable, pursuant hereto.

     (m) To the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any partner or
member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents, the Debtors hereby
grant such consent and approval and waive any such noncompliance with the terms of said
documents.

[SIGNATURE PAGES FOLLOW]

19

 

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.

LAS VEGAS GAMING, INC.

/s/ Russell R. Roth

IMAGINEERING GAMING INC.

/s/ Russell R. Roth

LAS VEGAS KENO, INC.

/s/ Russell R. Roth

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

20

 

[SIGNATURE PAGE OF HOLDERS TO LAS VEGAS GAMING SA]

Name of
Investing Entity: CAMOFI Master LDC

Signature of Authorized Signatory of Investing entity: /s/
Jeffrey M. Haas

Name of Authorized Signatory: Jeffrey M. Haas

Title of Authorized Signatory: Authorized Signatory

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

21

 

SCHEDULE A

LOCATION OF COLLATERAL

Principal Place of Business of Debtors:

4000 W. Ali Baba Lane, Suite D

Las Vegas, Nevada 89118

Locations Where Collateral is Located or Stored:

SCHEDULE B

EXISTING LIENS ON COLLATERAL

NONE

22

 

SCHEDULE C

JURISDICTIONS IN WHICH COLLATERAL LOCATED

23

 

SCHEDULE D

ORGANIZATIONAL IDENTIFICATION NUMBERS

24

 

SCHEDULE E

NAMES; MERGERS AND ACQUISITIONS

25

 

SCHEDULE F

INTELLECTUAL PROPERTY

26

 

SCHEDULE G

ACCOUNT DEBTORS

27

 

SCHEDULE H

PLEDGED SECURITIES

One share of common stock Imagineering Gaming Inc.

85% Equity Interest in Las Vegas Keno, Inc. (“LVKI”) as detailed on the stock ledger of LVKI.

28

 

ANNEX A

to

SECURITY

AGREEMENT

FORM OF ADDITIONAL DEBTOR JOINDER

Security Agreement dated as of March 31, 2006 made by

Las Vegas Gaming, Inc.

and its subsidiaries party thereto from time to time, as Debtors

to and in favor of

the Secured Parties identified therein (the “Security Agreement”)

     Reference is made to the Security Agreement as defined above; capitalized terms used herein
and not otherwise defined herein shall have the meanings given to such terms in, or by reference
in, the Security Agreement.

     The undersigned hereby agrees that upon delivery of this Additional Debtor Joinder to the
Secured Parties referred to above, the undersigned shall (a) be an Additional Debtor under the
Security Agreement, (b) have all the rights and obligations of the Debtors under the Security
Agreement as fully and to the same extent as if the undersigned was an original signatory thereto
and (c) be deemed to have made the representations and warranties set forth in Section ___therein
as of the date of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY
INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND
AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

     Attached hereto are supplemental and/or replacement Schedules to the Security Agreement, as
applicable.

     An executed copy of this Joinder shall be delivered to the Secured Parties, and the Secured
Parties may rely on the matters set forth herein on or after the date hereof. This Joinder shall
not be modified, amended or terminated without the prior written consent of the Secured Parties.

 

 

     IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the name and on
behalf of the undersigned.

	 	 	 
	 

	 	[Name of Additional Debtor]
	 
	 	 
	 

	 	By:
	 
	 	 
	 

	 	Name:
	 

	 	Title:
	 
	 	 
	 

	 	Address:
	 
	 	 
	Dated:exv10w9

 

Exhibit 10.9

EXHIBIT F

SUBSIDIARY GUARANTEE

     SUBSIDIARY GUARANTEE, dated as of March 31, 2006, made by each of the signatories hereto
(together with any other entity that may become a party hereto as provided herein, (the
“Guarantors”), in favor of the purchasers signatory (the “Purchasers”) to that
certain Securities Purchase Agreement, dated as of the date hereof, between Las Vegas Gaming, Inc.,
a Nevada corporation (the “Company”) and the Purchasers.

W I T N E S S E T H:

     Whereas, pursuant to that certain Securities Purchase Agreement, dated as of the date hereof,
by and between the Company and the Purchasers (the “Purchase Agreement”), the Company has
agreed to sell and issue to the Purchasers, and the Purchasers have agreed to purchase from the
Company the Company’s Senior Secured Convertible Notes, due January 1, 2008 (the “Notes”),
subject to the terms and conditions set forth therein; and

     Whereas, each Guarantor will directly benefit from the extension of credit to the Company
represented by the issuance of the Notes; and

   NOW, THEREFORE, in consideration of the premises and to induce the Purchasers to enter into
the Purchase Agreement and to carry out the transactions contemplated thereby, each Guarantor
hereby agrees with the Purchasers as follows:

     1. Definitions. Unless otherwise defined herein, terms defined in the Purchase
Agreement and used herein shall have the meanings given to them in the Purchase Agreement. The
words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this
Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this
Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both the singular and
plural forms of such terms. The following terms shall have the following meanings:

     “Guarantee” means this Subsidiary Guarantee, as the same may be amended,
supplemented or otherwise modified from time to time.

     “Obligations” means the collective reference to all obligations and
undertakings of the Company of whatever nature, monetary or otherwise, under the Notes, the
Purchase Agreement, the Security Agreement, the Warrants, the Registration Rights
Agreement, the Advisory Services Agreement or any other future agreement or obligations
undertaken by the Company to the Purchasers, together with all reasonable attorneys’ fees,
disbursements and all other costs and expenses of collection incurred by Purchasers in
enforcing any of such Obligations and/or this Guarantee.

     2. Guarantee.

     (a) Guarantee.

	 	(i)	 	The Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantee to the
Purchasers and their respective successors, indorsees, transferees
and assigns, the prompt and

1

 

	 	 	 	complete payment and performance by the Company when due (whether
at the stated maturity, by acceleration or otherwise) of the
Obligations.
	 
	 	(ii)	 	Anything herein or in any other Transaction
Document to the contrary notwithstanding, the maximum liability of
each Guarantor hereunder and under the other Transaction Documents
shall in no event exceed the amount which can be guaranteed by such
Guarantor under applicable federal and state laws, including laws
relating to the insolvency of debtors, fraudulent conveyance or
transfer or laws affecting the rights of creditors generally (after
giving effect to the right of contribution established in Section
2(b)).
	 
	 	(iii)	 	Each Guarantor agrees that the Obligations
may at any time and from time to time exceed the amount of the
liability of such Guarantor hereunder without impairing the guarantee
contained in this Section 2 or affecting the rights and remedies of
the Purchasers hereunder.
	 
	 	(iv)	 	The guarantee contained in this Section 2
shall remain in full force and effect until all the Obligations and
the obligations of each Guarantor under the guarantee contained in
this Section 2 shall have been satisfied by payment in full.
	 
	 	(v)	 	No payment made by the Company, any of the
Guarantors, any other guarantor or any other Person or received or
collected by the Purchasers from the Company, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Obligations
shall be deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in
respect of the Obligations or any payment received or collected from
such Guarantor in respect of the Obligations), remain liable for the
Obligations up to the maximum liability of such Guarantor hereunder
until the Obligations are paid in full.
	 
	 	(vi)	 	Notwithstanding anything to the contrary in
this Agreement, with respect to any defaulted non-monetary
Obligations the specific performance of which by the Guarantors is
not reasonably possible (e.g. the issuance of the Company’s Common
Stock), the Guarantors shall only be liable for making the Purchasers
whole on a monetary basis for the Company’s failure to perform such
Obligations in accordance with the Transaction Documents.

     (b) Right of Contribution. Each Guarantor hereby agrees that to the extent
that a Guarantor shall have paid more than its proportionate share of any payment made

2

 

hereunder, such Guarantor shall be entitled to seek and receive contribution from and
against any other Guarantor hereunder which has not paid its proportionate share of such
payment. Each Guarantor’s right of contribution shall be subject to the terms and
conditions of Section 2(c). The provisions of this Section 2(b) shall in no respect limit
the obligations and liabilities of any Guarantor to the Purchasers, and each Guarantor
shall remain liable to the Purchasers for the full amount guaranteed by such Guarantor
hereunder.

     (c) No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the Purchasers, no
Guarantor shall be entitled to be subrogated to any of the rights of the Purchasers against
the Company or any other Guarantor or any collateral security or guarantee or right of
offset held by the Purchasers for the payment of the Obligations, nor shall any Guarantor
seek or be entitled to seek any contribution or reimbursement from the Company or any other
Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing
to the Purchasers by the Company on account of the Obligations are paid in full. If any
amount shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall be held by
such Guarantor in trust for the Purchasers, segregated from other funds of such Guarantor,
and shall, forthwith upon receipt by such Guarantor, be turned over to the Purchasers in
the exact form received by such Guarantor (duly indorsed by such Guarantor to the
Purchasers, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Purchasers may determine.

     (d) Amendments, Etc. With Respect to the Obligations. Each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of rights against
any Guarantor and without notice to or further assent by any Guarantor, any demand for
payment of any of the Obligations made by the Purchasers may be rescinded by the Purchasers
and any of the Obligations continued, and the Obligations, or the liability of any other
Person upon or for any part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Purchasers, and the Purchase Agreement and the other Transaction Documents
and any other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchasers may deem
advisable from time to time, and any collateral security, guarantee or right of offset at
any time held by the Purchasers for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. The Purchasers shall have no obligation to protect,
secure, perfect or insure any Lien at any time held by them as security for the Obligations
or for the guarantee contained in this Section 2 or any property subject thereto.

     (e) Guarantee Absolute and Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations and notice
of or proof of reliance by the Purchasers upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Company and any of the Guarantors, on the one hand, and the
Purchasers, on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this

3

 

Section 2. Each Guarantor waives to the extent permitted by law diligence,
presentment, protest, demand for payment and notice of default or nonpayment to or
upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be construed as
a continuing, absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of the Purchase Agreement or any other Transaction Document, any
of the Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the Purchasers, (b)
any defense, set-off or counterclaim (other than a defense of payment or performance or
fraud or misconduct by Purchasers) which may at any time be available to or be asserted by
the Company or any other Person against the Purchasers, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal discharge of the
Company for the Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the Purchasers
may, but shall be under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as they may have against the Company, any other Guarantor or any other
Person or against any collateral security or guarantee for the Obligations or any right of
offset with respect thereto, and any failure by the Purchasers to make any such demand, to
pursue such other rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Company, any other Guarantor
or any other Person or any such collateral security, guarantee or right of offset, shall
not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a matter of law,
of the Purchasers against any Guarantor. For the purposes hereof, “demand” shall include
the commencement and continuance of any legal proceedings.

     (f) Reinstatement. The guarantee contained in this Section 2 shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be restored or returned
by the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company
or any Guarantor or any substantial part of its property, or otherwise, all as though such
payments had not been made.

     (g) Payments. Each Guarantor hereby guarantees that payments hereunder will be
paid to the Purchasers without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Purchase Agreement.

     3. Representations and Warranties. Each Guarantor hereby makes the following
representations and warranties to Purchasers as of the date hereof:

     (a) Organization and Qualification. The Guarantor is a corporation or limited
liability company, duly incorporated, validly existing and in good standing under the laws
of the applicable jurisdiction set forth on Schedule 1, with the requisite corporate power
and authority to own and use its properties and assets and to carry on its business as
currently conducted. The Guarantor has no subsidiaries other than those identified as

4

 

such on the Disclosure Schedules to the Purchase Agreement. The Guarantor is duly
qualified to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of this Guaranty in any material
respect, (y) have a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Guarantor or (z) adversely impair in any material
respect the Guarantor’s ability to perform fully on a timely basis its obligations under
this Guaranty (a “Material Adverse Effect”).

     (b) Authorization; Enforcement. The Guarantor has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by this
Guaranty, and otherwise to carry out its obligations hereunder. The execution and delivery
of this Guaranty by the Guarantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all requisite corporate action on the part
of the Guarantor. This Guaranty has been duly executed and delivered by the Guarantor and
constitutes the valid and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and remedies or
by other equitable principles of general application.

     (c) No Conflicts. The execution, delivery and performance of this Guaranty by
the Guarantor and the consummation by the Guarantor of the transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of its Certificate
of Incorporation or By-laws or (ii) conflict with, constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which the Guarantor is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Guarantor is subject (including Federal and state
securities laws and regulations), or by which any material property or asset of the
Guarantor is bound or affected, except in the case of each of clauses (ii) and (iii), such
conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
as could not, individually or in the aggregate, have or result in a Material Adverse
Effect. The business of the Guarantor is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations which,
individually or in the aggregate, do not have a Material Adverse Effect.

     (d) Consents and Approvals. The Guarantor is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration with, any
court or other federal, state, local, foreign or other governmental authority or other
person in connection with the execution, delivery and performance by the Guarantor of this
Guaranty.

     (e) Purchase Agreement. The representations and warranties of the Company set
forth in the Purchase Agreement as they relate to such Guarantor, each of which is hereby
incorporated herein by reference, are true and correct as of each time such representations
are deemed to be made pursuant to such Purchase Agreement, and the Purchasers shall be
entitled to rely on each of them as if they were fully set forth

5

 

herein, provided, that each reference in each such representation and warranty to the
Company’s knowledge shall, for the purposes of this Section 3, be deemed to be a reference
to such Guarantor’s knowledge.

     (f) Foreign Law. Each Guarantor has consulted with appropriate foreign legal
counsel with respect to any of the above representations for which non-U.S. law is
applicable. Such foreign counsel have advised each applicable Guarantor that such counsel
knows of no reason why any of the above representations would not be true and accurate.
Such foreign counsel were provided with copies of this Subsidiary Guarantee and the
Transaction Documents prior to rendering their advice.

     4. Covenants. Each Guarantor covenants and agrees with the Purchasers that, from and
after the date of this Guarantee until the Obligations shall have been paid in full, such Guarantor
shall take, and/or shall refrain from taking, as the case may be, each commercially reasonable
action that is necessary to be taken or not taken, as the case may be, so that no Event of Default
is caused by the failure to take such action or to refrain from taking such action by such
Guarantor. Each Guarantor also agrees to comply with the Covenants contained in Section 8 of the
Notes.

     5. Miscellaneous.

     (a) Amendments in Writing. None of the terms or provisions of this Guarantee
may be waived, amended, supplemented or otherwise modified except in writing by the
Purchasers.

     (b) Notices. All notices, requests and demands to or upon the Purchasers or
any Guarantor hereunder shall be effected in the manner provided for in the Purchase
Agreement; provided that any such notice, request or demand to or upon any
Guarantor shall be addressed to such Guarantor at its notice address set forth on
Schedule 5(b).

     (c) No Waiver By Course Of Conduct; Cumulative Remedies. The Purchasers shall
not by any act (except by a written instrument pursuant to Section 5(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default under the Transaction Documents or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of the Purchasers, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A waiver by the
Purchasers of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Purchasers would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided by law.

6

 

     (d) Enforcement Expenses; Indemnification.

	 	(i)	 	Each Guarantor agrees to pay, or reimburse
the Purchasers for, all its costs and expenses incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or
otherwise enforcing or preserving any rights under this Guarantee and
the other Transaction Documents to which such Guarantor is a party,
including, without limitation, the reasonable fees and disbursements
of counsel to the Purchasers.
	 
	 	(ii)	 	Each Guarantor agrees to pay, and to save
the Purchasers harmless from, any and all liabilities with respect
to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable
in connection with any of the transactions contemplated by this
Guarantee.
	 
	 	(iii)	 	Each Guarantor agrees to pay, and to save
the Purchasers harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and
administration of this Guarantee to the extent the Company would be
required to do so pursuant to the Purchase Agreement.
	 
	 	(iv)	 	The agreements in this Section shall
survive repayment of the Obligations and all other amounts payable
under the Purchase Agreement and the other Transaction Documents.

     (e) Successor and Assigns. This Guarantee shall be binding upon the successors
and assigns of each Guarantor and shall inure to the benefit of the Purchasers and their
respective successors and assigns; provided that no Guarantor may assign, transfer or
delegate any of its rights or obligations under this Guarantee without the prior written
consent of the Purchasers.

     (f) Set-Off. Each Guarantor hereby irrevocably authorizes the Purchasers at
any time and from time to time while an Event of Default under any of the Transaction
Documents shall have occurred and be continuing, without notice to such Guarantor or any
other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and
appropriate and apply any and all deposits, credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Purchasers to or for the credit or the account
of such Guarantor, or any part thereof in such amounts as the Purchasers may elect, against
and on account of the obligations and liabilities of such Guarantor to the Purchasers
hereunder and claims of every nature and description of the Purchasers against such
Guarantor, in any currency, whether arising hereunder, under the Purchase Agreement, any
other Transaction Document or otherwise, as the Purchasers may elect, whether or not the
Purchasers have made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Purchasers shall notify such Guarantor promptly
of any such set-off and the application made by the Purchasers of the proceeds thereof,
provided that the failure to give such notice shall not

7

 

affect the validity of such set-off and application. The rights of the Purchasers
under this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Purchasers may have.

     (g) Counterparts. This Guarantee may be executed by one or more of the parties
to this Guarantee on any number of separate counterparts (including by telecopy), and all
of said counterparts taken together shall be deemed to constitute one and the same
instrument.

     (h) Severability. Any provision of this Guarantee 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, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

     (i) Section Headings. The Section headings used in this Guarantee are for
convenience of reference only and are not to affect the construction hereof or be taken
into consideration in the interpretation hereof.

     (j) Integration. This Guarantee and the other Transaction Documents represent
the agreement of the Guarantors and the Purchasers with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or warranties
by the Purchasers relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Transaction Documents.

     (k) Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS.

     (l) Submission to Jurisdictional; Waiver. Each Guarantor hereby
irrevocably and unconditionally:

	 	(i)	 	submits for itself and its property in any
legal action or proceeding relating to this Guarantee and the other
Transaction Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of New York, located
in New York County, New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
	 
	 	(ii)	 	consents that any such action or proceeding
may be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
	 
	 	(iii)	 	agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of
mail), postage

8

 

	 	 	 	prepaid, to such Guarantor at its address referred to in the
Purchase Agreement or at such other address of which the
Purchasers shall have been notified pursuant thereto;
	 
	 	(iv)	 	agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction; and
	 
	 	(v)	 	waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover in any
legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.

     (m) Acknowledgements. Each Guarantor hereby acknowledges that:

	 	(i)	 	it has been advised by counsel in the
negotiation, execution and delivery of this Guarantee and the other
Transaction Documents to which it is a party;
	 
	 	(ii)	 	the Purchasers have no fiduciary
relationship with or duty to any Guarantor arising out of or in
connection with this Guarantee or any of the other Transaction
Documents, and the relationship between the Guarantors, on the one
hand, and the Purchasers, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and
	 
	 	(iii)	 	no joint venture is created hereby or by
the other Transaction Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Guarantors and the
Purchasers.

     (n) Additional Guarantors. The Company shall cause each of its subsidiaries
formed or acquired on or subsequent to the date hereof to become a Guarantor for all
purposes of this Guarantee by executing and delivering an
Assumption Agreement in the form of Annex 1 hereto.

     (o) Release of Guarantors. Subject to Section 2(f), each Guarantor will be
released from all liability hereunder concurrently with the repayment in full of all
amounts owed under the Purchase Agreement, the Notes and the other Transaction Documents.

     (p) Seniority. The Obligations of each of the Guarantors hereunder rank senior
in priority to any other debt of such Guarantor.

     (q) Waiver of Jury Trial. EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS
HEREOF, THE PURCHASERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.

9

 

     IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written.

	 	 	 
	IMAGINEERING GAMING INC.
	 
	 	 
	By:

	 	/s/ Russell R. Roth
	Name:

	 	Russell R. Roth
	Title:

	 	CEO
	 
	 	 
	LAS VEGAS KENO, INC.
	 
	 	 
	By:

	 	/s/ Russell R. Roth
	Name:

	 	Russell R. Roth
	Title:

	 	CEO

10

 

SCHEDULE 1

GUARANTORS

     The following are the names, notice addresses and jurisdiction of organization of each
Guarantor.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	JURISDICTION	 	 	COMPANY	 
	 	 	 	 	 	 	OF	 	 	OWNED BY	 
	NAME	 	ADDRESS	 	 	INCORPORATION	 	 	PERCENTAGE	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

11

 

Annex 1 to

SUBSIDIARY GUARANTEE

ASSUMPTION AGREEMENT, dated as of                      ___,                      made by      
                                                       , a
                                         corporation (the “Additional Guarantor”), in favor of the Purchasers
pursuant to the Purchase Agreement referred to below. All capitalized terms not defined herein
shall have the meaning ascribed to them in such Purchase Agreement.

W I T N E S S E T H :

     WHEREAS, Las Vegas Gaming, Inc., a Nevada corporation (the “Company”) and the
Purchasers have entered into a Securities Purchase Agreement, dated as of March 31, 2006 (as
amended, supplemented or otherwise modified from time to time, the “Purchase Agreement”);

     WHEREAS, in connection with the Purchase Agreement, the Company and its Subsidiaries (other
than the Additional Guarantor) have entered into the Subsidiary Guarantee, dated as of March 31,
2006 (as amended, supplemented or otherwise modified from time to time, the “Guarantee”) in
favor of the Purchasers;

     WHEREAS, the Purchase Agreement requires the Additional Guarantor to become a party to the
Guarantee; and

     WHEREAS, the Additional Guarantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee;

NOW, THEREFORE, IT IS AGREED:

     1. Guarantee. By executing and delivering this Assumption Agreement, the Additional
Guarantor, as provided in Section 5(n) of the Guarantee, hereby becomes a party to the Guarantee as
a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor
and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedule 1 to the Guarantee. The Additional Guarantor hereby
represents and warrants that each of the representations and warranties contained in Section 3 of
the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor (after
giving effect to this Assumption Agreement) as if made on and as of such date.

     2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

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     IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

[ADDITIONALGUARANTOR]

By:                                                             

Name:

Title:

13

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