EXHIBIT 4.4
SECURITY AGREEMENT
Dated as of June 18, 1999
between
THE MAJESTIC STAR CASINO, LLC
and
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
TABLE OF CONTENTS
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SECTION 1. Defined Terms................................................................................... 1
SECTION 2. Grant of Security............................................................................... 2
SECTION 3. Authorization................................................................................... 4
SECTION 4. Grantor Remains Liable.......................................................................... 5
SECTION 5. Representations and Warranties.................................................................. 5
SECTION 6. Perfection and Maintenance of Security Interest and Lien........................................ 6
SECTION 7. Financing Statements............................................................................ 6
SECTION 8. Protection of Collateral........................................................................ 6
SECTION 9. Processing, Sale and Collections................................................................ 7
SECTION 10. Equipment and Inventory......................................................................... 7
SECTION 11. Partial Release of Collateral................................................................... 8
SECTION 12. Trademark Licenses.............................................................................. 8
SECTION 13. General Covenants............................................................................... 8
SECTION 14. Trustee Appointed Attorney-in-Fact.............................................................. 9
SECTION 15. Trustee May Perform............................................................................. 10
SECTION 16. Trustee's Duties................................................................................ 10
SECTION 17. Remedies........................................................................................ 10
SECTION 18. Exercise of Remedies............................................................................ 11
SECTION 19. License......................................................................................... 11
SECTION 20. Injunctive Relief............................................................................... 11
SECTION 21. Interpretation and Inconsistencies: Merger...................................................... 12
SECTION 22. Expenses........................................................................................ 12
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SECTION 23. Amendments, Etc................................................................................. 12
SECTION 24. Notices......................................................................................... 12
SECTION 25. Continuing Security Interest; Termination....................................................... 12
SECTION 26. Severability.................................................................................... 13
SECTION 27. GOVERNING LAW................................................................................... 13
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL......................................... 13
(A) NON-EXCLUSIVE JURISDICTION...................................................................... 13
(B) OTHER JURISDICTIONS............................................................................. 13
(C) SERVICE OF PROCESS; INCONVENIENT FORUM.......................................................... 14
(D) WAIVER OF JURY TRIAL............................................................................ 14
(E) WAIVER OF BOND.................................................................................. 14
(F) ADVICE OF COUNSEL............................................................................... 14
SECTION 29. Gaming Laws..................................................................................... 14
SECTION 30. Interaction with Indenture...................................................................... 15
SECTION 31. Trust Indenture Act............................................................................. 15
SECTION 32. Appointment of Collateral Agent................................................................. 15
SECTION 33. Intercreditor Arrangement....................................................................... 15
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SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of June 18, 1999, is made by The
Majestic Star Casino, LLC, an Indiana limited liability company ("Grantor"), in
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favor of IBJ Whitehall Bank & Trust Company, as trustee under the Indenture (as
defined below) (the "Trustee"), for its benefit and for the benefit of the
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"Holders" (as defined below) who are, or may hereafter become, parties to the
Indenture.
PRELIMINARY STATEMENT
Grantor and Trustee have entered into a certain Indenture of even date
herewith (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which Grantor and the
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Trustee have agreed to certain terms for the benefit of Grantor and the Holders.
It is a condition precedent to the Purchase Agreement (as defined below) that
Grantor shall have granted the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used in this Agreement
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that are not defined herein are used with the meanings ascribed to such terms in
the Indenture. As used herein, the following terms shall have the meanings
indicated below (such meanings being equally applicable to both the singular and
the plural forms of the terms defined):
"Agreement" shall mean this Security Agreement, as the same may from
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time to time be amended, restated, modified or supplemented, and shall refer to
this Agreement as the same may be in effect at the time such reference becomes
operative.
"Collateral" shall mean all property and rights in property now owned
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or hereafter at any time acquired by Grantor in or upon which a Lien is granted
in favor of the Trustee by Grantor under this Agreement, including, without
limitation, the property described in Section 2.
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"Holders" shall mean the holders of the Secured Obligations from time
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to time and shall include their respective successors, transferees and assigns.
"Purchase Agreement" shall mean that certain Purchase Agreement, dated
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June 15, 1999, by and among the Grantor, Capital and Initial Purchaser.
"Secured Obligations" shall mean (1) the Obligations of the Issuers
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arising under or pursuant to or evidenced by the Indenture, the Notes, the other
Security Documents, and the Registration Rights Agreement, as the same may be
amended, modified, or supplemented from time to time, and (ii) Grantor's
obligations and liabilities under this Agreement and each agreement, document or
instrument executed pursuant to or in connection with this Agreement or the
Indenture, as the same may be amended, modified, or supplemented from time to
time.
"UCC" shall mean the Uniform Commercial Code as adopted and in effect
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on the date hereof in the State of Indiana; provided, however, in the event
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that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, priority or enforcement of the Trustee's and the Holders' security
interest in any Collateral is governed by the laws of a jurisdiction other than
the State of Indiana, the term "UCC" shall mean the Uniform Commercial Code as
adopted and in effect in such other jurisdiction on the date hereof, for
purposes relating to such attachment, perfection, priority or enforcement and
for purposes of descriptions of property that incorporate terms that are defined
in the UCC.
The terms "accounts", "chattel paper", "documents", "equipment",
"general intangibles", "instruments", "inventory", and "proceeds," when the
first letter is lower case, are used herein with the meanings ascribed to such
terms in the UCC.
SECTION 2. Grant of Security. To secure the prompt and complete
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payment, observance and performance of the Secured Obligations, Grantor hereby
assigns and pledges to Trustee, for the equal and ratable benefit of the
Holders, and grants to Trustee for the equal and ratable benefit of the Holders
a security interest, subject only to (i) the security interest which may be
granted after the date hereof to the Lender as security for the Credit Facility,
and (ii) Permitted Liens, in all of Grantor's right, title and interest in and
to the following, whether now owned or existing or hereafter arising or acquired
and wheresoever located:
(a) All rights to payment for goods sold or leased or for services
rendered, whether or not evidenced by an instrument or chattel paper,
and whether or not earned by performance; all accounts receivable,
contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to Grantor arising from the sale, lease or exchange
of goods or other property by it and/or the performance of services by
it and all of Grantor's rights in, to and under all purchase orders
for goods, services or other property, and all of Grantor's rights to
any goods, services or other property represented by any of the
foregoing (including, without limitation, returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation
and rights to stoppage in transit), in each case whether now in
existence or hereafter arising or acquired including, without
limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind
given by any person or entity with respect to any of the foregoing,
and all other property constituting accounts, whether now owned or
existing or hereafter acquired or arising (collectively, "Accounts");
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(b) All goods now owned or hereafter acquired by Grantor (wherever
located, whether in the possession of Grantor or of a bailee or other
person for sale, storage, transit, processing, use or otherwise and
whether consisting of whole goods, spare parts, components, supplies,
materials, or consigned, returned or repossessed goods) which are held
for sale or lease, which are to be furnished (or have been furnished)
under any contract of service or which are raw materials, work in
process or materials used or consumed in Grantor's business, and all
other
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property constituting inventory, whether now owned or existing
or hereafter acquired or arising (collectively, "Inventory");
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(c) All machinery and equipment (including but not limited to slot
machines and other gaming machines and equipment), all manufacturing,
distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, fixtures and trade fixtures,
tools, tooling, molds, dies, vehicles, vessels, trucks, buses, motor
vehicles and all other goods of every type and description (other than
Inventory), in each instance whether now owned or hereafter acquired
by Grantor and wherever located and all other property constituting
equipment, whether now owned or hereafter acquired or arising
(collectively, "Equipment");
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(d) All rights, interests, choses in action, causes of actions, claims and
all other intangible property of Grantor of every kind and nature, in
each instance whether now owned or hereafter acquired by Grantor and
however and whenever arising, including, without limitation, all
corporate and other business records; all loans, royalties, and other
obligations receivable; customer lists, credit files, correspondence,
and advertising materials; firm sale orders, other contracts and
contract rights; all tax refunds and tax refund claims; all right,
title and interest under leases, subleases, licenses and concessions
and other agreements relating to real or personal property; all
payments due or made to Grantor in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property by
any person or governmental authority; all credits with and other
claims against carriers and shippers; all rights to indemnification;
all patents, and patent applications (including all reissues,
divisions, continuations and extensions); all trade secrets and
inventions; all copyrights (including all computer software and
related documentation); all rights and interests in and to trademarks,
trademark registrations and applications therefor, service marks,
service mark registrations and applications therefor, trade names,
corporate names, brand names, slogans, all goodwill associated with
the foregoing; all license agreements and franchise agreements, all
reversionary interests in pension and profit sharing plans and
reversionary, beneficial and residual interest in trusts; all proceeds
of insurance of which Grantor is beneficiary; and all letters of
credit, guaranties, liens, security interests and other security held
by or granted to Grantor; all other intangible property, whether or
not similar to the foregoing; and all other property constituting
general intangibles, whether now owned or existing or hereafter
acquired or arising;
(e) All rights and interests in and to any pending or executory contracts,
requests for quotations, invitations for bid, agreements, leases and
arrangements of which Grantor is a party to or in which Grantor has an
interest, whether now owned or existing or hereafter acquired or
arising;
(f) All chattel paper, leases, and instruments, and all payments
thereunder and instruments and other property from time to time
delivered in respect thereof or in
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exchange therefor, all documents, and all bills of sale, bills of
lading, warehouse receipts and other documents of title, in each
instance whether now owned or hereafter acquired by Grantor;
(g) All right, title and interest in the Berthing Agreement dated as of
April 23, 1996, by and between Grantor and Buffington Harbor
Riverboats, L.L.C., as amended, supplemented or modified from time to
time (the "Berthing Agreement");
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(h) All property or interests in property now owned or hereafter acquired
by Grantor which now may be owned or hereafter may come into the
possession, custody or control of Trustee or any of the Holders or any
agent or Affiliate of any of them in any way and for any purpose
(whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise); and all rights and interests of Grantor, now
existing or hereafter arising and however and wherever arising, in
respect of any and all (a) notes, drafts, letters of credit, stocks,
bonds, and debt and equity securities, whether or not certificated,
and warrants, options, puts and calls and other rights to acquire or
otherwise relating to the same; and (b) proceeds of loans, including,
without limitation, loans made under the Indenture;
(i) All books and records relating to any of the property described above,
and all accessions and additions to, substitutions, and replacements,
and products of any of the property described above; and
(j) All "proceeds" as defined in the UCC of all or any of the types or
items of property described above, including insurance proceeds,
proceeds of all warranty and tort claims, and all other property of
the types described above arising from or received by Grantor in
connection with the sale or disposition thereof ("Proceeds").
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Notwithstanding the foregoing or anything to the contrary contained in
this Agreement, the term "Collateral" shall not include, and no security
interest is granted in Excluded Assets, including any agreements, permits,
licenses, authorizations, or similar property which under the terms thereof or
applicable law may not be pledged, hypothecated or given as collateral security
without the consent of some third party, including any Governmental Authority.
SECTION 3. Authorization. Grantor hereby authorizes Trustee to
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retain and authorizes each Holder, and each Affiliate of Trustee and of each
Holder, to pay or deliver to Trustee, for the benefit of the Holders, without
any necessity on the Trustee's or any Holder's part to resort to other security
or sources of reimbursement for the Secured Obligations, at any time following
the occurrence and during the continuance of any Event of Default, and without
further notice to Grantor (such notice being expressly waived), any sums or
property held by such Person, for application against any portion of the Secured
Obligations, irrespective of whether any demand has been made or whether such
portion of the Secured Obligations is then due and payable. Trustee will
promptly notify Grantor of Trustee's receipt of such funds or other
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property for application against the Secured Obligations, but failure to do so
will not affect or impair in any respect the rights granted to the Trustee and
the Holders under the preceding sentence. Trustee may give notice to such Person
of the above authorization and of the assignment and grant of a security
interest in such sums made in the Agreement, and make any suitable arrangements
with any such Person for effectuation thereof, and Grantor hereby irrevocably
appoints Trustee as its attorney to collect, following the occurrence and during
the continuance of an Event of Default, any and all such sums to the extent any
such payment is not made to Trustee by such Holder or Affiliate thereof.
SECTION 4. Grantor Remains Liable. Anything herein to the contrary
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notwithstanding, (a) Grantor shall remain solely liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Trustee of any of its
rights hereunder shall not release Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral, and (c) neither
Trustee nor the Holders shall have any responsibility, obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Trustee or the Holders be required or obligated, in any
manner, to (i) perform or fulfill any of the obligations or duties of Grantor
thereunder, (ii) make any payment, or make any inquiry as to the nature or
sufficiency of any payment received by Grantor or the sufficiency of any
performance by any party under any such contract or agreement, or (iii) present
or file any claim, or take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 5. Representations and Warranties. Grantor represents and
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warrants, as of the date of this Agreement, as follows:
(a) The locations listed on Schedule 1 constitute all locations at
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which Grantor's Inventory and/or Equipment is located and Grantor has exclusive
possession and control of such Inventory and Equipment, except for such
Inventory and Equipment which is (i) temporarily in transit between or to such
locations, or (ii) temporarily stored with third parties or held by third
parties for processing, engineering, evaluation or repairs, and the location of
such Inventory and/or Equipment is set forth in Schedule 1-A. The chief place
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of business and chief executive office of Grantor are located at 1 Buffington
Harbor, Gary, Indiana 46406-3000.
(b) This Agreement creates in favor of Trustee a legal, valid and
enforceable security interest in the Collateral. When financing statements have
been filed in the appropriate offices against Grantor in the locations listed on
Schedule 1-B, Trustee will have a fully perfected lien on, and security interest
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in, the Collateral in which a security interest may be perfected by such filing,
subject only to (i) the Lien which may be granted after the date hereof to the
Lender as security for the Credit Facility and (ii) Permitted Liens.
(c) Grantor is the legal and beneficial owner of the Collateral free
and clear of all Liens. Grantor has taken all actions necessary under the UCC
to perfect its interest in any Accounts purchased or otherwise acquired by it,
as against its assignors and creditors of its assignors.
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(d) The correct legal name of Grantor is The Majestic Star Casino,
LLC. Grantor currently conducts business under the name The Majestic Star
Casino, LLC and, in certain areas and for certain operations, the trade names
listed on Schedule 2, which are the only trade names or fictitious names
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currently used by Grantor. Grantor has never had any other legal name or used
any trade name or fictitious name that is not set forth on Schedule 2.
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(e) No authorization, approval or other action by, notice to or filing
with any Governmental Authority other than those previously obtained, taken, or
made and which are in full force and effect, or contemplated by this Agreement
is required (i) for the grant by Grantor of the security interest in the
Collateral granted hereby; or (ii) the execution, delivery or performance of
this Agreement by Grantor.
SECTION 6. Perfection and Maintenance of Security Interest and Lien.
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Grantor agrees that until all of the Secured Obligations (other than contingent
indemnity obligations for which no unsatisfied demand has been made) have been
fully satisfied and the Indenture has been terminated, Trustee's security
interests in and Liens on and against the Collateral and all proceeds and
products thereof, shall continue in full force and effect. Grantor shall
perform any and all steps required to perfect, maintain and protect Trustee's
security interests in and Liens on and against the Collateral granted or
purported to be granted hereby or to enable Trustee to exercise its rights and
remedies hereunder with respect to any Collateral, including, without
limitation, (i) executing and filing financing statements, amendments thereof,
and continuation statements executed by the Trustee in form and substance
reasonably satisfactory to Trustee, (ii) delivering to Trustee all chattel
paper, certificates, notes and other instruments, and letters of credit on which
Grantor is named as a beneficiary, that represent, evidence or secure any of the
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Trustee, (iii)
delivering to Trustee warehouse receipts covering that portion of the
Collateral, if any, located in warehouses and for which warehouse receipts are
issued, (iv) after the occurrence and during the continuance of an Event of
Default, transferring Inventory and Equipment to warehouses designated by
Trustee or taking such other steps as are deemed reasonably necessary by Trustee
to maintain Trustee's control of the Inventory and Equipment, and (v) marking
conspicuously each document, contract, chattel paper and all records pertaining
to the Collateral with a legend, in form and substance satisfactory to Trustee,
indicating that such document, contract, chattel paper, or Collateral is subject
to the security interest granted hereby.
If any Inventory or Equipment is in the possession or control of any
warehouseman or Grantor's agents or processors, Grantor shall notify such
warehouseman, agent or processor of Trustee's security interest in such
Inventory and Equipment and instruct them to hold all such Inventory or
Equipment for Trustee's account and subject to Trustee's instructions in a
manner satisfactory to the Trustee.
SECTION 7. Financing Statements. To the extent permitted by
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applicable law, Grantor hereby authorizes Trustee to file one or more financing
or continuation statements and amendments thereto with respect to all or any
portion of the Collateral, without Grantor's signature appearing thereon.
Grantor agrees that a carbon, photographic, photostatic, or other
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reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Grantor shall pay the costs of, or incidental to, all
recordings or filings of all financing statements, including, without
limitation, any filing expenses incurred by Trustee pursuant to this Section 7.
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SECTION 8. Protection of Collateral. Grantor, at its sole cost and
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expense, shall:
(a) upon request by Trustee, deliver to Trustee certified schedules,
in such form as may be specified by Trustee, identifying the Collateral, or such
part thereof as may be specified in such request, together with such supporting
documents and information as reasonably may be requested, all in reasonable
detail;
(b) acquire and maintain its property (excepting only Excluded Assets)
in a manner that will enable such property to become subject to the Lien granted
under this Security Agreement and refrain from entering into agreements that
would prohibit any such property from becoming subject to the Lien granted
hereunder without the consent of some third party; and
(c) acquire and maintain the consent or approval of any person or
entity (including any Governmental Authority) whose consent or approval is
required for the granting of a lien or security interest in any Collateral to
Trustee.
SECTION 9. Processing, Sale and Collections. Until the occurrence of
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an Event of Default which is continuing and receipt from Trustee of written
notice of the revocation of Grantor's authority, Grantor:
(a) will, at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any Account, including the taking of such action
with respect to such collection as Trustee may reasonably request or, in the
absence of such request, as Grantor may deem advisable; and
(b) may grant, in the ordinary course of business, to any Account
debtor, any rebate, refund or adjustment to which such Account debtor may be
lawfully entitled, and may accept, in connection therewith, the return of goods,
the sale or lease of which shall have given rise to the obligation of the
Account debtor.
If requested by Trustee (but only after the occurrence of an Event of
Default which is continuing), Grantor will note the security interest of Trustee
on all records relative to the Collateral, including, without limitation, any
invoice that evidences an Account. Upon the occurrence and during the
continuance of any Event of Default, upon request of Trustee, Grantor will
promptly notify (and Grantor hereby authorizes Trustee so to notify) each
Account debtor in respect of any Account that such Collateral has been assigned
to Trustee, and that any payments due or to become due in respect of such
Collateral are to be made directly to Trustee or its designee.
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SECTION 10. Equipment and Inventory. Grantor covenants and agrees
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with Trustee that from the date of this Agreement and until termination of this
Agreement pursuant to Section 25, Grantor shall :
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(a) keep the Equipment and Inventory (other than Equipment or
Inventory sold in the ordinary course of business, or otherwise, if permitted
under the Indenture) at the places specified in Schedule 1, except for Equipment
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and Inventory (i) temporarily in transit between such locations or (ii)
temporarily stored at locations set forth on Schedule 1-A, and deliver written
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notice to Trustee at least thirty (30) days prior to establishing any other
location at which it reasonably expects to maintain Inventory and/or Equipment;
and
(b) cause all property used or useful in the conduct of its business
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of Grantor may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 10(b) shall prevent Grantor from
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discontinuing the operation or maintenance of any of such property if such
discontinuance is, in the judgment of Grantor, desirable in the conduct of its
business and not disadvantageous in any material respect to the Trustee or the
Holders.
SECTION 11. Partial Release of Collateral. So long as no Default or
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Event of Default has occurred and is continuing under the Indenture, Collateral
may be released from the security interest created by this Agreement at any time
or from time to time as provided in the Indenture.
SECTION 12. Trademark Licenses. As long as no Default or Event of
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Default has occurred and is continuing, nothing set forth herein or in any other
Security Document is intended or shall be construed to prevent the Grantor from
entering into license agreements pertaining to the Trademarks (as such term is
defined in the Trademark Security Agreement); provided that Grantor will not,
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without the Trustee's prior written consent, enter into any license agreement
which is inconsistent with the Trademark Security Agreement.
SECTION 13. General Covenants. Grantor covenants and agrees with
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Trustee that from and after the date of this Agreement and until termination of
this Agreement pursuant to Section 25,:
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(a) Grantor will keep and maintain at Grantor's own cost and expense
satisfactory and complete records of Grantor's Collateral in a manner consistent
with Grantor's current business practice, including, without limitation, a
record of all payments received and all credits granted with respect to such
Collateral. Grantor shall, for Trustee's further security, at Trustee's
request, deliver and turn over to Trustee or Trustee's designated
representatives at any time following the occurrence and during the continuation
of an Event of Default, any such books and records (including, without
limitation, any and all computer tapes, programs and
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source and object codes relating to such Collateral in which Grantor has an
interest or any part or parts thereof).
(b) Grantor will not create, permit or suffer to exist, and will
defend the Collateral against, and take such other action as is necessary to
remove, any Lien on any of the Collateral other than (i) the Lien which may be
granted after the date hereof to the Lender as security for the Credit Facility
and (ii) Permitted Liens, and will defend the right, title and interest of
Trustee in and to Grantor's rights to such Collateral, including, without
limitation, the proceeds and products thereof, against the claims and demands of
all Persons whatsoever.
(c) Grantor agrees to pay promptly when due all taxes, assessments and
governmental charges upon or against the Collateral, or Grantor, or for the
property or operations of Grantor, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith by appropriate proceedings and for
which Grantor has established adequate reserves. Grantor shall give written
notice to Trustee of all happenings and events having a material adverse effect
on the Collateral or the value or amount thereof, including, without limitation,
the creation or assertion of any Lien or security interest against any of the
Collateral that is not a Permitted Lien.
(d) In the event Grantor fails to pay taxes, assessments, costs and
expenses which Grantor is required to pay or in the event Grantor fails to keep
the Collateral free from other security interests, liens or encumbrances not
permitted under the terms of this Security Agreement, Trustee may make
expenditures for any and all such purposes. All costs and expenses of Trustee
in retaking, holding, preparing for sale and selling or otherwise realizing upon
any Collateral or enforcing any provisions hereof, including reasonable
attorneys' fees, shall constitute part of the Secured Obligations, and shall
bear interest from the date incurred at the rate of 11 7/8% per annum.
(e) Grantor shall: (i) at all reasonable times allow Trustee and its
representatives to examine, inspect and/or make abstracts from Grantor's books
and records and to arrange for verification of Collateral, under reasonable
procedures, which in the case of Accounts may be made directly with the Account
debtors or by other methods; provided, however, that until the occurrence of an
Event of Default which is continuing, Trustee shall endeavor (subject to
receiving Grantor's cooperation and assistance) to utilize procedures reasonably
calculated to avoid communicating to Account debtors that such inquiries
directed to Account debtors are requested for the benefit of the Trustee; and
(ii) furnish to Trustee upon request additional statements of any Account,
together with all notes or other papers evidencing the same and any guaranty,
security or other information relating thereto.
(f) Grantor will comply with the terms of the Indenture with respect
to the Collateral, including without limitation, provisions regarding the
maintenance of insurance covering the Collateral.
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(g) Grantor will not change the location of its chief place of
business and chief executive office, except upon not fewer than thirty (30)
days' prior written notice to Trustee.
SECTION 14. Trustee Appointed Attorney-in-Fact. Grantor hereby
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irrevocably appoints Trustee as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Trustee's discretion, to take any action and to execute any
instrument which Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, (a) following the
occurrence and during the continuance of an Event of Default, to:
(i) obtain and adjust insurance required to be paid to the Trustee
or any Holders pursuant to the Indenture;
(ii) ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i) or (ii) above; and
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(iv) file any claims or take any action or institute any proceedings
which Trustee may deem necessary or desirable for the collection of any of the
Collateral, or otherwise to enforce the rights of Trustee with respect to any of
the Collateral;
and (b) at any time, to:
(i) obtain access to records maintained for Grantor by computer
services companies and other service companies or bureaus; and
(ii) do all other things reasonably necessary to carry out this
Agreement.
SECTION 15. Trustee May Perform. If Grantor fails to perform any
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agreement contained herein or in the Indenture, Trustee may perform, or cause
performance of, such agreement, and the expenses of Trustee incurred in
connection therewith shall be payable by Grantor under Section 22.
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SECTION 16. Trustee's Duties. The powers conferred on Trustee
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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 Collateral in its possession and the accounting for monies
actually received by it hereunder, Trustee shall not have any duty as to any
Collateral. Trustee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Trustee accords its own
property, it being understood that Trustee shall be under no obligation to take
any necessary steps to preserve rights against prior
10
parties or any other rights pertaining to any Collateral, but may do so at its
option, and all reasonable expenses incurred in connection therewith shall be
for the sole account of Grantor and shall be added to the Secured Obligations.
SECTION 17. Remedies. If any Event of Default shall have occurred
--------
and be continuing Trustee shall have, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party upon default under the UCC (whether or not the UCC applies to
the affected Collateral) and further, Trustee may, without notice, demand or
legal process of any kind (except as may be required by law), all of which
Grantor waives, at any time or times, (i) enter Grantor's owned or leased
premises and take physical possession of the Collateral and maintain such
possession on Grantor's owned or leased premises, at no cost to Trustee or any
of the Holders, or remove the Collateral, or any part thereof, to such other
place(s) as Trustee may desire, (ii) require Grantor to, and Grantor hereby
agrees that it will at its expense and upon request of Trustee forthwith,
assemble all or any part of the Collateral as directed by Trustee and make it
available to Trustee at a place to be designated by Trustee which is reasonably
convenient to Trustee, and (iii) sell, lease, assign, grant an option or options
to purchase or otherwise dispose of the Collateral or any part thereof at public
or private sale, at any exchange, broker's board or at any of the offices of
Trustee or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as Trustee may deem commercially reasonable. Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days'
notice to Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Trustee shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Trustee shall apply all cash proceeds received by Trustee in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral (after payment of any amounts payable to Trustee pursuant
to Section 22) for the benefit of the Holders, against all or any part of the
----------
Secured Obligations in such order as may be required by the Indenture. Any
surplus of such cash or cash proceeds held by Trustee and remaining after
payment in full of all the Secured Obligations shall be paid over to Grantor or
to whomsoever may be lawfully entitled to receive such surplus. The rights and
remedies provided under this Agreement are cumulative and may be exercised
singly or concurrently and are not exclusive of any rights and remedies provided
by law or equity.
SECTION 18. Exercise of Remedies. In connection with the exercise
--------------------
of its remedies pursuant to Section 17, Trustee may, (i) exchange, enforce,
----------
waive or release any portion of the Collateral and any other security for the
Secured Obligations; (ii) apply such Collateral or security and direct the order
or manner of sale thereof as Trustee may, from time to time, determine; and
(iii) settle, compromise, collect or otherwise liquidate any such Collateral or
security in any manner following the occurrence of an Event of Default, without
affecting or impairing Trustee's right to take any other further action with
respect to any Collateral or security or any part thereof.
11
SECTION 19. License. Trustee is hereby granted a license or other
-------
right to use, following the occurrence and during the continuance of an Event of
Default, without charge, Grantor's labels, patents, copyrights, trade secrets,
trade names, trademarks, service marks, customer lists and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral,
provided that Trustee uses quality standards at least substantially equivalent
to those of Grantor for the manufacture, advertising, sale and distribution of
Grantor's products and services; Grantor's rights under all licenses and all
franchise agreements shall inure to Trustee's benefit.
SECTION 20. Injunctive Relief. Grantor recognizes that in the event
-----------------
Grantor fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Holders; therefore, Grantor agrees that the Holders, if Trustee so
determines and requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 21. Interpretation and Inconsistencies: Merger.
-------------------------------------------
(a) The rights and duties created by this Agreement shall, in all
cases, be interpreted consistently with, and shall be in addition to (and not in
lieu of), the rights and duties created by the Indenture and the other Security
Documents. In the event that any provision of this Agreement shall be
inconsistent with any provision of the Indenture, the Intercreditor Agreement,
or any other Security Document, such provision of the other agreement shall
govern.
(b) Except as provided in subsection (a) above, this Agreement and the
other Security Documents represent the final agreement of the Grantor and the
Trustee with respect to the matters contained herein and therein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between the Grantor and the Trustee or any other Holder.
SECTION 22. Expenses. Grantor will upon demand pay to Trustee
--------
and/or the Holders the amount of any and all reasonable fees and expenses,
including the reasonable fees and expenses of their counsel and agents, as
provided in the Indenture.
SECTION 23. Amendments, Etc. Except as otherwise provided by the
----------------
Indenture, the consent of the Holders of at least a majority in principal amount
of the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for Notes) shall be required to amend, modify,
supplement, or waive any provision of this Agreement. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 24. Notices. All notices and other communications provided
-------
for hereunder shall be given in the manner set forth in Section 11.2 of the
------------
Indenture.
12
SECTION 25. Continuing Security Interest; Termination. (a) Except
-----------------------------------------
as provided in Section 25(b), this Agreement shall create a continuing security
-------------
interest in the Collateral and shall (i) remain in full force and effect until
the later of the payment or satisfaction in full of the Secured Obligations
(other than contingent indemnity obligations for which no unsatisfied demand has
been made) and the termination of the Indenture, (ii) be binding upon Grantor,
its successors and assigns, and (iii) inure, together with the rights and
remedies of Trustee hereunder, to the benefit of the Trustee and any of the
Holders. Nothing set forth herein or in any other Security Document is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement or any other Security Document
or any Collateral. Grantor's successors and assigns shall include, without
limitation, a receiver, trustee or Grantor-in-possession thereof or therefor.
(b) Upon the payment in full in cash of the Secured Obligations (other
than contingent indemnity obligations for which no unsatisfied demand has been
made) and the termination of the Indenture, this Agreement and the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Grantor. Upon any such termination of security interest, Grantor
shall be entitled to the return, upon its request and at its expense, of such of
the Collateral held by Trustee as shall not have been sold or otherwise applied
pursuant to the terms hereof and Trustee will, at Grantor's expense, execute and
deliver to Grantor such other documents as Grantor shall reasonably request to
evidence such termination.
SECTION 26. Severability. It is the parties' intention that this
------------
Agreement be interpreted in such a way that it is valid and effective under
applicable law. However, if one or more of the provisions of this Agreement
shall for any reason be found to be invalid or unenforceable, the remaining
provisions of this Agreement shall be unimpaired.
SECTION 27. GOVERNING LAW. ANY DISPUTE BETWEEN THE GRANTOR AND THE
-------------
TRUSTEE OR ANY HOLDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF INDIANA.
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
--------------------------------------------------------
(A) NON-EXCLUSIVE JURISDICTION. THE GRANTOR HEREBY IRREVOCABLY
--------------------------
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE GRANTOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
13
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM, BUT THE GRANTOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK.
(B) OTHER JURISDICTIONS. GRANTOR AGREES THAT THE TRUSTEE OR ANY
-------------------
HOLDER SHALL HAVE THE RIGHT TO PROCEED AGAINST GRANTOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER THE GRANTOR OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
SECURED OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF SUCH PERSON. GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. GRANTOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS; INCONVENIENT FORUM. IF AND TO THE EXTENT
--------------------------------------
GRANTOR'S RESIDENT AGENT IN ANY JURISDICTION IS NOT CT CORPORATION SYSTEM, THE
GRANTOR WAIVES PERSONAL SERVICE OF PROCESS UPON IT AND IRREVOCABLY APPOINTS CT
CORPORATION SYSTEM, WHOSE ADDRESS IS ONE NORTH CAPITOL AVENUE, INDIANAPOLIS,
INDIANA 46204, AS GRANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS ISSUED BY ANY COURT. THE GRANTOR IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
---------------------
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN NEW YORK, NEW YORK.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
--------------------
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE
14
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. GRANTOR WAIVES THE POSTING OF ANY BOND
--------------
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE THIS AGREEMENT BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
-----------------
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 28, WITH ITS COUNSEL.
----------
SECTION 29. Gaming Laws. (a) The Trustee acknowledges, understands
-----------
and agrees that the Gaming Laws may impose certain licensing or transaction
approval requirements prior to the exercise of the rights and remedies granted
to it under this Agreement with respect to the Collateral subject to the Gaming
Laws.
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the Trustee in the
exercise of its rights hereunder, then Grantor agrees to use its best efforts to
secure such consent and to cooperate with the Trustee in obtaining any such
consent. Upon the occurrence and during the continuation of any Event of
Default, Grantor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Trustee may be required to file in order to obtain any necessary approvals under
the Gaming Laws, and if Grantor fails or refuses to execute such documents, the
Trustee or the clerk of the court with jurisdiction may execute such documents
on behalf of Grantor.
(c) Notwithstanding any other provision of this Agreement to the
contrary, nothing in this Agreement shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
Grantor or (ii) effect any transfer, sale, purchase, lease or hypothecation of,
or any borrowing or loaning of money against, or any establishment of any voting
trust agreement or other similar agreement with respect to (all within the
meaning of Indiana Code 4-33-4-21), any certificate of suitability or any
owner's license heretofore or hereafter issued to any person, including Grantor,
under any of the Gaming Laws, including Indiana Code 4-33.
SECTION 30. Interaction with Indenture. All terms, covenants,
--------------------------
conditions, provisions and requirements of the Indenture are incorporated by
reference in this Security Agreement. In the event of any conflict or
inconsistency between the provisions of this Security Agreement and those of the
Indenture, including, without limitation, any conflicts or inconsistencies in
any definitions herein or therein, the provisions or definitions of the
Indenture shall govern.
15
SECTION 31. Trust Indenture Act. If any provision of this Agreement
-------------------
conflicts with any provision of the Trust Indenture Act, the provisions of the
Trust Indenture Act shall control.
SECTION 32. Appointment of Collateral Agent. The Trustee may, solely
-------------------------------
at its discretion, appoint a collateral agent to enforce the rights and remedies
available to the Trustee under this Agreement.
SECTION 33. Intercreditor Arrangement. The parties hereto
-------------------------
acknowledge and agree, for the benefit of the Lender under the Credit Facility,
that, during any period that obligations or commitments are outstanding under
the Credit Facility, the exercise of the rights and remedies of the Trustee
hereunder are or will be subject to the terms of the Intercreditor Agreement.
In the event of any inconsistency between the terms hereof and the Intercreditor
Agreement, the Intercreditor Agreement shall control.
16
IN WITNESS WHEREOF, Grantor and Trustee caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
THE MAJESTIC STAR CASINO, LLC
as Grantor
By: Barden Development, Inc., its manager
By: _________________________________
Name: _______________________________
Title: ______________________________
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: _________________________________
Name: _______________________________
Title: ______________________________
17
SCHEDULE 1
TO
SECURITY AGREEMENT
Locations of Collateral:
-----------------------
One Buffington Drive
Gary, Indiana 46406
18
SCHEDULE 1-A
TO
SECURITY AGREEMENT
Third Party Locations:
---------------------
Corporate Name of Description Maximum
Third Party Address of Relationship Amount
- ----------- ------- --------------- ------
19
SCHEDULE 1-B
TO
SECURITY AGREEMENT
Financing Statement Filing Locations:
------------------------------------
None, except:
Office of Secretary of State of Indiana
20
SCHEDULE 2
TO
SECURITY AGREEMENT
Trade Names:
-----------
Majestic Star
Majestic Star Casino
Club M-Star
21