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EXHIBIT 10.6
ASSIGNMENT, PLEDGE AND SECURITY AGREEMENT
This Assignment, Pledge and Security Agreement (the "Agreement") is
made and entered into as of the ____ day of November, 1996, by and between
Diversified Opportunities Group,, Ltd., an Ohio limited liability company whose
principal place of business is at 425 Lakeside Avenue, Cleveland, Ohio 44114
(the "Secured Party"), and Black Hawk Gaming & Development Company, Inc., a
Colorado corporation, whose principal place of business is at 2060 Broadway,
Suite 400, Boulder, Colorado 80302 (the "Debtor").
1. Pledge and Grant of Security Interest. As security for the
payment of all indebtedness and other obligations of the Debtor to the Secured
Party under a certain Convertible Promissory Note of even date herewith
executed by the Debtor in the original principal amount of $1,500,000 and
payable to the Secured Party and any and all renewals, extensions or
substitutions therefor (the "Note") and the obligations of Debtor under that
certain Amended and Restated Purchase Agreement of even date herewith between
the Debtor and the Secured Party (the "Purchase Agreement") and under this
Agreement (collectively, the "Obligations"), the Debtor hereby pledges and
assigns to the Secured Party, and grants to the Secured Party a security
interest in, all of the Debtor's right, title, and interest in and to certain
property consisting of (a) the Membership Interest of the Debtor in Black
Hawk/Jacobs Entertainment, LLC, a Colorado limited liability company (the
"LLC"), (b) the Capital Interest of the Debtor in the LLC, (c) the interest of
the Debtor in the Net Profits and Net Losses and Net Cash Flow of the LLC
together with any and all additional Membership Interests in the LLC now or
hereafter acquired by the Debtor in any manner, and any and all certificates
representing the membership interests, and all cash, dividends, distributions
and other instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of the
Membership Interests; and (d) all products and proceeds of any of the
foregoing, and all other rights and privileges associated with Debtor's
membership in the LLC (collectively, the "Collateral"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by the Debtor to the
Secured Party but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding
involving the Debtor. "Proceeds" shall have the meaning set forth in the
Uniform Commercial Code and shall include without limitation all proceeds of
the conversion, voluntary or involuntary, of the foregoing into cash or
liquidated claims. (All capitalized terms used but not otherwise defined
herein shall have the meanings given to such terms in the Operating Agreement
for the LLC (the "Operating Agreement").) The other members of the LLC are
Secured Party and BH Entertainment Ltd. ("Entertainment").
2. Representations, Warranties and Covenants of the Debtor. The
Debtor represents, warrants and agrees as follows:
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(a) The Debtor owns all of the Collateral including,
without limitation, both the legal title and beneficial interest in the
Membership Interest, free and clear of all liens, claims and encumbrances
except for the rights of the Secured Party granted hereunder;
(b) The Debtor has full power and authority to make the
pledges, assignments and grants of security interests made hereby;
(c) No consent of any person or entity and no
authorization, approval or other action by, and no notice to or filing with any
governmental authority or regulatory body is required for the Debtor to make
the pledges, assignments or grants of security interests made hereby or for the
Secured Party to exercise its rights hereunder;
(d) The pledges, assignments and grants of security
interests made hereby will not contravene any agreement binding upon the
Debtor;
(e) The pledge of the Membership Interest, and the grant
of a security interest therein, to the Secured Party is, and shall remain, duly
noted in the books and records of the LLC including, without limitation, the
register or other similar listing of membership interests;
(f) The Note and this Agreement are legally valid and
binding and are enforceable against the parties thereto in accordance with
their respective terms, and this Agreement creates in favor of the Secured
Party a valid first priority security interest in, and lien upon, the
Collateral;
(g) The chief executive office of the Debtor is located
at the address set forth at the top of this Agreement and the Debtor shall
notify the Secured Party promptly in writing in the event the Debtor relocates
its chief executive office during the term of this Agreement;
(h) The Debtor will execute such financing statements in
connection herewith as the Secured Party may reasonably request;
(i) The Debtor will pay or cause to be paid all taxes,
assessments, fees and other charges respecting the Collateral or this Agreement
which are from time to time levied upon or assessed against the Collateral,
this Agreement or the Debtor (but the Debtor may contest such taxes or other
charges in good faith and with due diligence, provided no part of the
Collateral will be subject to a lien, forfeiture, sale or diminution in value
in connection with such contested tax or other charge during any such contest);
(j) The Debtor will not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of or grant any option with respect to
the Membership Interest or the Collateral or (ii) create or permit to exist any
lien, security interest, restriction, option or other charge or encumbrance
upon or with respect to any of the Collateral except for the rights granted to
the Secured Party hereby; and
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(k) Except as permitted by the Operating Agreement, the
Debtor shall cause the LLC not to issue any Membership Interest or other
securities in addition to or in substitution for the Membership Interest except
to the Debtor, Secured Party or Entertainment, and the Debtor shall,
immediately upon its acquisition (directly or indirectly) thereof, pledge to
the Secured Party any and all such additional Membership Interests or other
securities of the LLC upon the terms and subject to the conditions of this
Agreement and such Membership Interests or securities shall constitute part of
the Collateral hereunder.
3. Membership Interest.
(a) If at any time the Membership Interest is evidenced
by one or more certificates, then the Debtor shall deliver or cause to be
delivered to the Secured Party such certificate(s), duly endorsed to the order
of the Secured Party in order to evidence the pledge being made hereunder. The
Membership Interest shall be held by the Secured Party in accordance with the
terms of this Agreement. Upon the occurrence of an Event of Default as
provided herein, the Secured Party shall have the right, at any time in its
discretion and without notice to the Debtor, to transfer to or to register in
the name of the Secured Party, or any of its nominees, any or all of the
Membership Interest. In addition, the Secured party shall have the right at
any time to exchange any certificates or instruments representing or evidencing
any of the Membership Interest for certificates or instruments of smaller or
larger denominations.
(b) So long as no Event of Default or event which, with
the giving of notice or the lapse of time, or both, would become an Event of
Default shall have occurred and be continuing:
(i) The Debtor shall be entitled to exercise or
refrain from exercising any and all voting
and other consensual rights pertaining to the
Membership Interest or any part thereof for
any purpose not inconsistent with the terms
of this Agreement or the Note; provided,
however, that the Debtor shall not exercise
or refrain from exercising any such right if,
in the Secured Party's judgment, such action
would have a material adverse effect on the
value of the Collateral or any part thereof.
(ii) The Debtor shall be entitled to receive and
retain any and all dividends or other
distributions paid in respect of the
Membership Interest; provided, however, that
any and all
(a) dividends and distribution paid or
payable other than in cash in
respect of, and certificates,
instruments and other property
received, receivable or otherwise
distributed in respect of, or in
exchange for, any of the Membership
Interest;
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(b) dividends and other distributions
paid or payable in cash in respect
of any Membership Interest in
connection with a partial or total
liquidation or dissolution or in
connection with a reduction of
capital, capital surplus or paid-in
surplus; and
(c) cash paid, payable or otherwise
distributed in respect of, or in
redemption of, or in exchange for,
any Membership Interest;
shall be, and shall be forthwith delivered to
the Secured Party to hold as, Collateral and
shall, if received by the Debtor, be received
in trust for the benefit of the Secured
Party, be segregated from the other property
or funds of the Debtor, and be forthwith
delivered to the Secured Party as Collateral
in the same form as so received (with any
necessary indorsement or assignment).
(iii) The Secured Party shall execute and deliver
(or cause to be executed and delivered) to
the Debtor all such proxies and other
instruments as the Debtor may reasonably
request for the purpose of enabling the
Debtor to exercise the voting and other
rights which the Debtor is entitled to
exercise pursuant to paragraph (i) above and
to receive the dividends or payments which it
is authorized to receive and retain pursuant
to paragraph (ii) above.
(c) Upon the occurrence of an Event of Default:
(i) All rights of the Debtor to exercise or
refrain from exercising the voting and other
consensual rights which it would otherwise be
entitled to exercise pursuant to Section
3(b)(i) and to receive and retain pursuant to
Section 3(b)(ii) shall cease, and all such
rights shall thereupon become vested in the
Secured Party who shall thereupon have the
sole right to exercise or refrain from
exercising such voting and other consensual
rights and to receive and hold as Collateral
such dividends and payments.
(ii) All dividends and payments which are received
by the Debtor contrary to the provisions of
paragraph (i) of this Section 3(c) shall be
received in trust by the Debtor for the
benefit of the Secured Party, shall be
segregated from other funds of the Debtor and
shall be forthwith paid over to the Secured
Party as collateral in the same form as so
received (with any necessary indorsement).
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4. Indemnification. The Debtor hereby agrees to indemnify and
save the Secured Party harmless from any loss, damage or expense, including
attorneys' fees, incurred by the Secured Party as a result of the Debtor's
breach of any of the terms of this Agreement or any of the warranties,
obligations or undertakings described in this Agreement, the Note or any other
instrument executed in connection herewith. The Debtor further agrees to pay
to the Secured Party upon demand the amount of any and all reasonable expenses,
including the fees and expenses of its counsel and any experts and agents,
which the Secured Party may incur in connection with the administration of this
Agreement, the custody, preservation or use of, or the sale of, collection from
or other realization upon, any of the Collateral or the exercise or enforcement
of any of the rights of the Secured Party hereunder. The indemnities set forth
in this Section 4 shall survive the expiration or earlier termination of this
Agreement with respect to acts or events occurring or alleged to have occurred
prior to such expiration or earlier termination.
5. Default and Remedies.
(a) Each of the following shall constitute an Event of
Default hereunder:
(i) An Event of Default occurs and is continuing
under the Note;
(ii) The Debtor defaults in the performance of any
obligation of the Debtor hereunder or under
the Purchase Agreement for more than fifteen
(15) days after the Secured Party has given
notice of such default to the Debtor;
(iii) Entertainment delivers a notice to the Debtor
that pursuant to the terms of the Operating
Agreement, Entertainment is electing its
Purchase Right of the Debtor's Membership
Interest in the LLC, or an event occurs that
pursuant to the terms of the Operating
Agreement would subject all of the Debtor's
Membership Interest in the LLC to automatic
and immediate termination; or
(iv) Any representation or warranty made herein by
the Debtor shall prove to have been false or
misleading in any material respect as of the
date hereof or to have been breached and is
not cured within fifteen (15) days after the
Secured Party has given notice to the Debtor
thereof.
(b) (i) Subject to clause (ii), below, if an Event of
Default shall occur, then the Secured Party may at its option (x) declare the
Note to be immediately due and payable in full, whereupon the unpaid principal
of and accrued interest on the Note shall become immediately due and payable
and (y) the Secured Party may exercise all rights and remedies (not
inconsistent with the terms of the Note or this Agreement) with respect to the
Collateral as are available to it under such agreements and instruments and
applicable law.
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(ii) The following provisions shall apply if an Event of
Default shall occur. The principal and accrued interest on the Note shall be
immediately due and payable without any notice or other action being required
on the part of the Secured Party. If the Event of Default consists of
Entertainment's election of a Purchase Right, then the Secured Party's remedies
for this Event of Default shall be limited to the extent and in the
circumstances provided in the Operating Agreement. If the Event of Default is
one that causes the automatic termination of the Debtor's Membership Interest,
and the Membership Interest of the Secured Party as a result increases in
accordance with the provisions of the Operating Agreement, then the Secured
Party shall transfer the Note to the LLC as provided by the Operating Agreement
and shall exercise no remedies thereunder inconsistent with its obligations as
set out under the Operating Agreement. In the event of any other Event of
Default hereunder, then Secured Party's remedy shall be limited in the same
manner as if the Event of Default consists of Entertainment's election of a
Purchase Right under the Operating Agreement. In any event, provided all of
the applicable provisions of Section 11.2(b) of the Operating Agreement occur,
Secured Party shall take no further action against the Debtor to enforce
payment under the Note, except for the payment of accrued but unpaid interest.
(iii) Without limiting the generality of the remedies
provided for above, following an Event of Default the Secured Party shall (i)
be entitled to exercise all rights with respect to the Membership Interest,
including the right to vote the Membership Interest and to give all consents,
waivers and ratifications in respect thereof, and in such event and for such
purpose, the Debtor hereby irrevocably constitutes and appoints the Secured
Party as its proxy and attorney-in-fact (which appointment shall be coupled
with an interest) with full power of substitution, to do so. To evidence such
appointment, the Debtor agrees to execute and deliver such further documents
and instruments as the Secured Party reasonably may request. The rights and
remedies provided in this Agreement are cumulative and in addition to any
rights and remedies which the Secured Party may have under the Note or at law
or in equity. The Secured Party shall be entitled to reimbursement from the
Debtor for all reasonable costs, attorneys' fees and legal expenses incurred by
it in exercising such rights and remedies.
6. Termination; Reinstatement or Continuation. The Secured Party
agrees that upon satisfaction by the Debtor of all of the Obligations, the
Secured Party shall cancel this Agreement and related financing statements, if
any, and return to the Debtor any document or instrument delivered by the
Debtor to the Secured Party to perfect the pledge and security agreement
granted hereunder. Notwithstanding the foregoing, this Agreement shall be
reinstated or continue to be effective, as the case may be, if at any time any
payment or performance of the Obligations is rescinded or must otherwise be
returned by the Secured Party upon the insolvency, bankruptcy or reorganization
of the Debtor or otherwise, all as though such payment or performance had not
be made.
7. Secured Party's Duties. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any certificates or other instruments evidencing the Membership
Interest in its possession and an accounting for moneys actually received by it
hereunder, the Secured Party shall have no duty, as to any Collateral, to
ascertain or take action
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with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its possession if
such Collateral is accorded treatment substantially equal to that which the
Secured Party accords its own property.
8. Miscellaneous.
(a) Governing Law. This Agreement and the Note shall be
contracts made under and governed by the laws of the State of Colorado.
(b) Colorado Gaming Laws. The exercise of any rights
under this Agreement shall be subject to and consistent with the requirements
of the Colorado gaming laws (C.R.S. Section 12-47.1-101 et seq., as the same
may be amended or supplemented from time to time, together with the regulations
promulgated thereunder).
(c) Severability. Whenever possible, each provision of
the Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective
only to the extent and duration of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
(d) Notice. Any notice required or given hereunder shall
be deemed properly given (i) two business days after mailed, certified mail,
return receipt requested, postage prepaid, addressed to the designated
recipient at its address set forth in the introductory paragraph of this
Agreement or such other address as such party may advise by notice given in
accordance with this provision or (ii) upon receipt by the party to whom
addressed if given in writing by personal delivery, commercial courier service,
telecopy or other means which provides a permanent record of the delivery of
such notice.
(e) No Waiver; Modification. The Secured Party may in
its sole discretion waive a default. Any waiver granted by the Secured Party
must be made in a writing signed by the Secured Party and no failure or delay
of the Secured Party in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof. Any such waiver granted in a
particular instance or of a particular default shall not be a waiver of other
defaults or of the same kind of default at another time. No modification or
change in this Agreement or the Note or any related instrument or agreement
shall bind the Secured Party unless in writing signed by the Secured Party. No
oral agreement shall be binding.
(f) Further Assurances. The Debtor from time to time
shall, at its own expense, execute and deliver all such proxies, agreements and
other instruments and documents and take all such action as may be necessary or
that the Secured Party may deem appropriate in order to perfect and protect any
security interest granted or purported to be granted hereby or the
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first priority of such security interest, to enable the Secured Party to
enforce its rights and remedies hereunder or otherwise to effectuate the
purposes of this Agreement and carry out the terms hereof.
(g) Financing Statements. If permitted by law, the
Debtor authorizes the Secured Party to file a financing statement with respect
to the Collateral signed only by the Secured Party and to file a carbon,
photograph or other reproduction of this Agreement or of a financing statement
for such purpose.
(h) Successors. This Agreement shall be binding upon,
and shall inure to the benefit of, the successors and assigns of the Debtor and
the Secured Party. Neither party may assign this Agreement or its rights
hereunder without the prior written consent of the other party.
(i) Counterparts. 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, when taken together, shall constitute one and the
same Agreement.
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IN WITNESS WHEREOF, the Debtor and the Secured Party have duly
executed and delivered this Agreement as of the day and year first above
written.
BLACK HAWK GAMING & DIVERSIFIED OPPORTUNITIES
DEVELOPMENT COMPANY, INC. GROUP LTD.
By: /s/ STEPHEN R. ROARK By: JACOBS ENTERTAINMENT LTD.,
--------------------------- its manager
Name/Title: President
-------------------
By: /s/ DAVID C. GRUNENWALD
-----------------------------
Title: Vice President
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