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Exhibit 10.6
GUARANTOR SECURITY AGREEMENT
THIS
AGREEMENT is made this 15 day of December, 2005, between each of
the
undersigned, as debtor (herein individually
and collectively called the
"DEBTOR") and LYLE BERMAN FAMILY
PARTNERSHIP, a Minnesota general partnership
(herein, with its participants, successors
and assigns, called the "SECURED
PARTY"), as secured party.
Each
Debtor has guaranteed the indebtedness of Lakes Entertainment,
Inc.,
a Minnesota corporation and Lakes Poker
Tour, LLC, a Minnesota limited liability
company (each a "Borrower" and together the
"Borrowers") to the Secured Party
pursuant to the terms of that certain
Guaranty of even date herewith (the
"Guaranty"). All capitalized terms not
otherwise defined herein, shall have the
meaning set forth in that certain Loan
Agreement of even date herewith by and
between the Debtor and the Borrowers (the
"Loan Agreement").
For good
and valuable consideration, each Debtor hereby agrees for the
benefit of the Secured Party as
follows:
1.01
Debtor hereby grants the Secured Party a security interest
(collectively referred to as the "Security
Interests") in all personal property
of the Debtor, including the property
described below, as security for the
payment and performance of each and every
debt, liability and obligation of
every type and description which Debtor or
Borrowers, may now or at any time
hereafter owe to the Secured Party arising
under the Guaranty (whether such
debt, liability or obligation now exists or
is hereafter created or incurred,
and whether it is direct or indirect, due
or to become due, absolute or
contingent, primary or secondary,
liquidated or unliquidated, or sole, joint,
several or joint and several; all such
debts, liabilities and obligations are
herein collectively referred to as the
"Obligations"). The Security Interests
shall attach to all personal property of
Debtor and all products and proceeds
thereof, whether now owned or hereafter
acquired, including the following
(collectively, the "Collateral"):
(a) All equipment ("Equipment") fixtures, and inventory
("Inventory") (including all goods held for
sale, lease or demonstration or to
be furnished under contracts of service,
goods leased to others, trade-ins and
repossessions, raw materials, work in
process and materials or supplies used or
consumed in Debtor's business), including
all spare and repair parts, special
tools, equipment and replacements for any
of the foregoing, and any software
embedded therein or related thereto;
(b) All accounts ("Receivables"), contract rights, documents,
chattel paper (including electronic chattel
paper), instruments, and general
intangibles, and all returned or
repossessed goods the sale of which gave rise
to any of the foregoing;
(c) All financial assets, investment property, securities
(whether
certificated or uncertificated, and
including investment company securities),
security entitlements, securities accounts,
commodity contracts, and commodity
accounts, including all substitutions and
additions thereto, and all dividends,
distributions and sums distributable or
payable from, upon or in respect of such
property;
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(d) All commercial tort claims;
(e) All deposit accounts;
(f) All letter-of-credit rights;
(g) All supporting obligations that support the payment or
performance of any of the foregoing;
and
(h) All additions and accessions to, all proceeds, products,
offspring and profits of, and all rights
and privileges incident to, any of the
foregoing.
1.02
Debtor represents, warrants and agrees that:
(a) Debtor
has (or will have at the time it acquires rights in Collateral
hereafter arising) and will maintain so
long as the Security Interests may
remain outstanding, absolute title to each
item of Collateral and all proceeds
thereof, free and clear of all interests,
liens, attachments, encumbrances and
security interests except the Security
Interests as provided herein, and except
as the Secured Party may otherwise agree in
writing. Debtor will defend the
Collateral against all claims or demands of
all persons (other than the Secured
Party) claiming the Collateral or any
interest therein, Debtor will not sell or
otherwise dispose of any material portion
of the Collateral or any interest
therein except for the sale of Inventory in
the normal course of Debtor's
business, without the Secured Party's prior
written consent.
(b) Debtor
does business solely under its own name and the trade names (if
any) set forth below (or if none are
listed, Debtor warrants that it does not
have any tradenames). The chief executive
office of Debtor is located at the
address set forth below and all of Debtor's
records relating to its business or
the Collateral are kept at that location.
The addresses where the Collateral
will be kept, if different from that
appearing below Debtor's signature, are set
forth in Exhibit A. No Collateral will be
kept at any other location, except for
job sites from time to time, without the
prior written consent of Secured Party,
but the parties intend that the Collateral,
wherever located, is covered by this
Agreement. Debtor will not permit any
tangible Collateral or any records
pertaining to Collateral to be located in
any state or area in which, in the
event of such location, a financing
statement covering such Collateral would be
required to be, but has not in fact been,
filed in order to perfect the Security
Interests. Debtor will not change its name
or the location of its place of
business, without prior written notice to
the Secured Party. Debtor shall advise
Secured Party in writing at least thirty
(30) days before any change of name,
identity, form of organization, state of
organization, corporate structure, or
chief executive office.
(c)
[Intentionally omitted].
(d) Each
right to payment and each instrument, document, chattel paper
and
other agreement constituting or evidencing
Collateral is (or, in the case of all
future Collateral, will be when arising or
issued) the valid, genuine and
legally enforceable obligation, subject to
no defense, setoff or counterclaim,
of the account debtor or other obligor
named therein or in Debtor's records
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pertaining thereto as being obligated to
pay such obligation. Except in the
ordinary course of Debtor's business,
Debtor will not agree to modify, amend,
subordinate, cancel or terminate the
obligation of any such account debtor or
other obligor, without the Secured Party's
prior written consent.
(e) Debtor
will keep all tangible Collateral in good repair, working order
and condition, normal depreciation
excepted, and will, from time to time,
replace any worn, broken or defective
parts.
(f) Debtor
will promptly pay all taxes and other governmental charges
levied or assessed upon or against any
Collateral or upon or against the
creation, perfection or continuance of the
Security Interests.
(g) Debtor
will keep all Collateral free and clear of all security
interests, liens and encumbrances except
the Security Interests provided herein
and except other security interests
approved in writing by the Secured Party.
(h) Debtor will
at all reasonable times permit the Secured Party or its
representatives to examine or inspect any
Collateral, or any evidence of
Collateral, wherever located, and Debtor
will at any time and from time to time
send requests for verification of accounts
or notices of assignment to account
debtors and other obligors.
(i) Debtor
will keep accurate and complete records pertaining to the
Collateral and pertaining to Debtor's
business and financial condition, prepared
on the basis of generally accepted
accounting principles consistently applied;
will submit to the Secured Party such
weekly, monthly and other periodic reports
concerning the Collateral and Debtor's
business and financial condition as the
Secured Party may from time to time
request; and will permit the Secured Party,
or its employees, accountants, attorneys or
agents, to examine and copy any or
all of its records at any time during
Debtor's business hours.
(j) Debtor
will promptly notify the Secured Party of any loss of or
material damage to any Collateral or of any
substantial adverse change, known to
Debtor, in any Collateral or the prospect
of payment thereof.
(k) Upon
request by the Secured Party, whether such request is made
before
or after the occurrence of an Event of
Default, Debtor will promptly deliver to
the Secured Party in pledge all
instruments, documents and chattel papers
constituting Collateral, duly endorsed or
assigned by Debtor.
(l) Debtor
will at all times keep its business and all tangible Collateral
insured against risks of fire (including
so-called extended coverage), theft,
collision (for Collateral consisting of
motor vehicles) and such other risks and
in such amounts as the Secured Party may
reasonably request, with a Secured
Party's loss payee endorsement to the
Secured Party to the extent of its
interest.
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(m) Debtor
will pay or reimburse the Secured Party on demand for all costs
of collection of any of the Obligations and
all other out-of-pocket expenses
(including in each case all reasonable
attorneys' fees and legal expenses)
incurred by the Secured Party in connection
with the creation, perfection,
protection, satisfaction, foreclosure or
enforcement of the Security Interests
or the creation, continuance or enforcement
of this Agreement or any or all of
the Obligations.
(n) Debtor
will use and keep the Collateral, and will require that others
use and keep the Collateral, only for
lawful purposes, without violation of any
federal, state or local law, statute or
ordinance.
(o) Debtor
from time to time will execute and deliver or endorse any and
all instruments, documents, conveyances,
assignments, security agreements,
financing statements and other agreements
and writings which the Secured Party
may reasonably request in order to secure,
protect, perfect or enforce the
Security Interests or the rights of the
Secured Party under this Agreement (but
any failure to request or assure that
Debtor executes, delivers or endorses any
such item shall not affect or impair the
validity, sufficiency or enforceability
of this Agreement and the Security
Interests, regardless of whether any such
item was or was not executed, delivered or
endorsed in a similar context or on a
prior occasion).
If Debtor
at any time fails to perform or observe any of the foregoing
agreements, and if such failure shall
continue for a period of 30 calendar days
after the Secured Party gives Debtor
written notice thereof (or in the case of
the agreements contained in clauses (g) and
(1) above, immediately upon the
occurrence of such failure, without notice
or lapse of time), the Secured Party
may, but need not, perform or observe such
agreement on behalf and in the name,
place and stead of Debtor (or, at the
Secured Party's option, in the Secured
Party's name) and may, but need not, take
any and all other actions which the
Secured Party may reasonably deem necessary
to cure or correct such failure
(including, without limitation, the payment
of taxes, the satisfaction of
security interests, liens or encumbrances,
the performance of obligations owed
to account debtors or other obligors, the
procurement and maintenance of
insurance, the execution of assignments,
security agreements and financing
sta
