Guarantor Security Agreement between Majestic Investor Holdings, LLC, Majestic Investor Capital Corp., and Foothill Capital Corporation (December 6, 2001)

Summary

This agreement is between Majestic Investor Holdings, LLC and Majestic Investor Capital Corp. (the Debtors) and Foothill Capital Corporation (the Secured Party). The Debtors grant Foothill Capital a security interest in their assets to secure obligations under a related loan agreement and guaranty. The agreement defines the collateral, the parties’ obligations, and the terms under which the Secured Party can enforce its rights if the Debtors default. The agreement is part of a broader financing arrangement and is intended to protect the lender’s interests.

EX-4.14 30 c67068ex4-14.txt GUARANTOR SECURITY AGREEMENT Exhibit 4.14 GUARANTOR SECURITY AGREEMENT This GUARANTOR SECURITY AGREEMENT (this "Agreement"), dated as of December 6, 2001 is executed and delivered by MAJESTIC INVESTOR HOLDINGS, LLC, a Delaware limited liability company ("Parent"), MAJESTIC INVESTOR CAPITAL CORP., a Delaware corporation ("MICC") (Parent and MICC are referred to hereinafter each individually as a "Debtor," and individually and collectively, jointly and severally, as the "Debtors"), in favor of FOOTHILL CAPITAL CORPORATION, a California corporation ("Secured Party"). WHEREAS, Parent, Borrowers and Secured Party are, contemporaneously herewith, entering into that certain Loan and Security Agreement of even date herewith (as amended, restated, modified, renewed or extended from time to time, the "Loan Agreement"); WHEREAS, each Debtor has executed that certain General Continuing Guaranty, of even date herewith, in favor of Secured Party (the "Guaranty"), respecting certain obligations of Borrowers owing to Secured Party under the Loan Agreement; WHEREAS, each Debtor desires to secure its obligations under the Loan Documents to which it is party (including the Guaranty) by granting to Secured Party security interests in the Collateral as set forth herein; and WHEREAS, each Debtor will benefit by virtue of the loans from Secured Party to Borrowers. NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and each intending to be bound hereby, Secured Party and each Debtor agree as follows: 1. DEFINITIONS AND CONSTRUCTION. 1.1. DEFINITIONS. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. As used in this Agreement, the following terms shall have the following definitions: "Accounts" shall mean all of each Debtor's now owned or hereafter acquired right, title, and interest with respect to "accounts" (as that term is defined in the Code), and any and all supporting obligations in respect thereof. "Agreement" shall mean this Security Agreement and any extensions, riders, supplements, notes, amendments, or modifications to or in connection with this Security Agreement. 1 "Bankruptcy Code" shall mean the United States Bankruptcy Code (11 U.S.C. Section 101 et seq.), as amended, and any successor statute. "Borrower" and "Borrowers" shall have the meaning ascribed to such terms in the Loan Agreement. "Code" shall mean the California Uniform Commercial Code as in effect from time to time. "Collateral" shall mean each of the following: the Accounts; the Debtor's Books; the Equipment; the General Intangibles; the Inventory; the Investment Property; the Negotiable Collateral; any money, or other assets of each Debtor which now or hereafter come into the possession, custody, or control of Secured Party; and the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the Collateral, and any and all Accounts, Debtor's Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. "Control Agreement" shall mean a control agreement, in form and substance reasonably satisfactory to Secured Party, executed and delivered by the applicable Debtor, Secured Party, and the applicable securities intermediary with respect to a Securities Account or bank with respect to a deposit account. "Debtor's Books" shall mean each Debtor's now owned or hereafter acquired books and records (including all of its Records indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of its Records relating to its business operations or financial condition, and all of its goods or General Intangibles related to such information). "Debtor" and "Debtors" shall have the meanings ascribed to such terms in the preamble of this Agreement. "Equipment" shall mean all of each Debtors' now owned or hereafter acquired right, title, and interest with respect to equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than consumer goods, farm products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. "Event of Default" shall have the meaning ascribed to it in Section 6. "General Intangibles" shall mean all of each Debtor's now owned or hereafter acquired right, title, and interest with respect to general intangibles (including payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or 2 regulations, choses or things in action, goodwill, patents, trade names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), and any and all supporting obligations in respect thereof, and any other personal property other than goods, Accounts, Investment Property, and Negotiable Collateral. "Guaranty" shall have the meaning ascribed to such term in the recitals to this Agreement. "Indebtedness" shall mean (a) all obligations of a Debtor for borrowed money, (b) all obligations of a Debtor evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of a Debtor in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of a Debtor under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of a Debtor, irrespective of whether such obligation or liability is assumed, (e) all obligations of a Debtor for the deferred purchase price of assets (other than trade debt incurred in the ordinary course of a Debtor's business and repayable in accordance with customary trade practices), and (f) any obligation of a Debtor guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to a Debtor) any obligation of any other Person. "Indemnified Liabilities" shall have the meaning ascribed to it in Section 9.3. "Indemnified Person" shall have the meaning ascribed to it in Section 9.3. "Inventory" shall mean all of each Debtor's now owned or hereafter acquired right, title, and interest with respect to inventory, including goods held for sale or lease or to be furnished under a contract of service, goods that are leased by each such Debtor as lessor, goods that are furnished by each such Debtor under a contract of service, and raw materials, work in process, or materials used or consumed in each such Debtor's business. "Investment Property" shall mean all of a Debtor's now owned or hereafter acquired right, title, and interest with respect to "investment property" as that term is defined in the Code, and any and all supporting obligations in respect thereof. "Loan Agreement" shall have the meaning ascribed to such term in the recitals to this Agreement. "Material Adverse Change" shall mean (a) a material adverse change in the business, prospects, operations, assets, liabilities or condition (financial or otherwise) of the Debtors, taken as a whole, (b) a material impairment of the Debtors' (taken as a whole) ability to perform their obligations under the Loan Documents or of the Secured Party's ability to enforce the Obligations or realize upon the Collateral, or (c) a material impairment 3 of the enforceability or priority of Secured Party's Liens with respect to the Collateral as a result of an action or failure to act on the part of a Debtor. "Negotiable Collateral" shall mean all of each Debtor's now owned and hereafter acquired right, title, and interest with respect to letters of credit, letter of credit rights, instruments, promissory notes, drafts, documents, and chattel paper (including electronic chattel paper and tangible chattel paper), and any and all supporting obligations in respect thereof. "Parent" shall have the meaning ascribed to such term in the preamble of this Agreement. "Permitted Protest" shall mean the right of a Debtor to protest any Lien (other than any such Lien that secures the Secured Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the applicable Debtor's Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by the applicable Debtor in good faith, and (c) Secured Party is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of Secured Party's Liens. "Secured Obligations" shall mean, with respect to each Debtor, all liabilities, Obligations, or undertakings owing by each such Debtor to Secured Party of any kind or description arising out of or outstanding under, advanced or issued pursuant to, or evidenced by the Guaranty, the other Loan Documents to which each such Debtor is a party, or this Agreement, irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, voluntary or involuntary, whether now existing or hereafter arising, and including all interest (including interest that accrues after the filing of a case under the Bankruptcy Code) and any and all costs, fees (including attorneys' fees), and expenses which each such Debtor is required to pay pursuant to any of the foregoing, by law, or otherwise. "Secured Party's Liens" shall mean the Liens granted by each Debtor to Secured Party under this Agreement or the other Loan Documents to which each such Debtor is a party. "Voidable Transfer" shall have the meaning ascribed to it in Section 14.8. 1.2. CODE. Any terms used in this Agreement which are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein. 1.3. CONSTRUCTION. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words 4 "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. Any reference in this Agreement or in any of the other Loan Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable. In the event of a direct conflict between the terms and provisions of this Agreement and the Loan Agreement, it is the intention of the parties hereto that both such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of the Loan Agreement shall control and govern; provided, however, that the inclusion herein of additional obligations on the part of each Debtor and supplemental rights and remedies in favor of Secured Party in each case in respect of the Collateral, shall not be deemed a conflict with the Loan Agreement. 1.4. SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference. 2. CREATION OF SECURITY INTEREST. 2.1. GRANT OF SECURITY INTEREST. Each Debtor hereby grants to Secured Party a continuing security interest in all of its right, title, and interest in all currently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all of the Secured Obligations in accordance with the terms and conditions of the Loan Documents and in order to secure prompt performance by each Debtor of each such Debtor's covenants and duties under the Loan Documents. Secured Party's Liens in and to the Collateral shall attach to all Collateral without further act on the part of Secured Party or any Debtor. Anything contained in this Agreement or any other Loan Document to the contrary notwithstanding, except for Permitted Dispositions, no Debtor has authority, express or implied, to dispose of any item or portion of the Collateral. 2.2. NEGOTIABLE COLLATERAL. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, and if and to the extent that perfection or priority of Secured Party's security interest is dependent on or enhanced by possession, the applicable Debtor, promptly upon the request of Secured Party shall endorse and deliver physical possession of such Negotiable Collateral to Secured Party. 2.3. COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE COLLATERAL. At any time after the occurrence and during the continuation of an Event of Default, Secured Party or Secured Party's designee may (a) notify Account Debtors of any Debtor that the Accounts, chattel paper, or General Intangibles have been assigned to Secured Party or that Secured Party has a security interest therein, or (b) collect the Accounts, chattel paper, or General Intangibles directly and charge the reasonable collection costs and expenses to the Loan Account. Each Debtor agrees that it will hold in trust for Secured Party as Secured Party's trustee, any Collections that it receives and promptly will 5 deliver said Collections to Secured Party or a Cash Management Bank in their original form as received by the applicable Debtor. 2.4. DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the request of Secured Party, each Debtor shall execute and deliver to Secured Party any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, and all other documents (the "Additional Documents") that Secured Party may request in its Permitted Discretion, in form and substance satisfactory to Secured Party, to perfect and continue perfected or better perfect Secured Party's Liens in the Collateral (whether now owned or hereafter arising or acquired), and in order to fully consummate all of the transactions contemplated hereby and under the other Loan Documents. In addition, on such periodic basis as Secured Party shall reasonably require, each Debtor shall (a) provide Secured Party with a report of all new patentable, copyrightable, or trademarkable materials acquired or generated by such Debtor during the prior period, (b) cause all patents, copyrights, and trademarks acquired or generated by such Debtor that are necessary in the conduct of such Debtor's business and that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing office in a manner sufficient to impart constructive notice of such Debtor's ownership thereof, unless the applicable Debtor, with respect to patents and trademarks, but not copyrights, in its commercially reasonable discretion, determined otherwise, and (c) cause to be prepared, executed, and delivered to Secured Party supplemental schedules to the applicable Loan Documents to identify such patents, copyrights, and trademarks as being subject to the security interests created thereunder. 2.5. POWER OF ATTORNEY. Each Debtor hereby irrevocably makes, constitutes, and appoints Secured Party (and any of Secured Party's officers, employees, or agents designated by Secured Party), as such Debtor's true and lawful attorney, with power to: (a) if such Debtor refuses to, or fails timely to execute and deliver any of the documents described in Section 2.4, sign the name of such Debtor on any of the documents described in Section 2.4; (b) at any time that an Event of Default has occurred and is continuing, sign such Debtor's name on any invoice or bill of lading relating to the Collateral, drafts against Account Debtors, or notices to Account Debtors; (c) send requests for verification of Accounts; (d) endorse such Debtor's name on any Collection item that may come into Secured Party's possession; (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under such Debtor's policies of insurance and make all determinations and decisions with respect to such policies of insurance; and (f) at any time that an Event of Default has occurred and is continuing, settle and adjust disputes and claims respecting the Accounts, chattel paper, or General Intangibles directly with Account Debtors, for amounts and upon terms which Secured Party determines to be reasonable, and Secured Party may cause to be executed and delivered any documents and releases which Secured Party determines to be necessary. The appointment of Secured Party as each Debtor's attorney, and each and every one of Secured Party's rights and powers, being coupled with an interest, is irrevocable until, and shall terminate when, all of the 6 Secured Obligations have been fully and finally repaid and performed and Secured Party's obligation to extend credit under the Loan Agreement is terminated. 2.6. RIGHT TO INSPECT. Secured Party (through any of its officers, employees or agents), shall have the right, from time to time hereafter, to inspect each Debtor's Books and to check, test and appraise the Collateral in order to verify such Debtor's financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, such visits and inspections by Secured Party must be coordinated with the applicable Debtor so as to limit the aggregate of all such visits and inspections to twice during each fiscal year. 3. REPRESENTATIONS AND WARRANTIES. Each Debtor represents and warrants as follows: 3.1. NO PRIOR ENCUMBRANCES. Such Debtor has good and indefeasible title to the Collateral, free and clear of Liens except for Permitted Liens. 3.2. PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office of such Debtor and all other locations at which such Debtor has a place of business are set forth on Schedule 3.2. Such Debtor's FEIN is set forth on Schedule 3.2. 3.3. EQUIPMENT. All of such Debtor's Equipment is used or held for use in each Debtor's business and is fit for such purposes. 3.4. LOCATION OF INVENTORY AND EQUIPMENT. Such Debtor's Inventory and Equipment are not stored with a bailee, warehouseman, or similar party and are located only at the locations identified on Schedule 3.4. 3.5. INVENTORY RECORDS. Such Debtor keeps correct and accurate records itemizing and describing the type, quality, and quantity of its Inventory, and the book value thereof. 3.6. DUE ORGANIZATION AND QUALIFICATION. Such Debtor is duly organized and is existing and in good standing under the laws of the jurisdiction of its organization and is qualified and licensed to do business in, and is in good standing in, any state where the failure to be so licensed or qualified could reasonably be expected to result in a Material Adverse Change. 3.7. DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and performance of this Agreement, the Guaranty, and any other Loan Document to which such Debtor is a party are within such Debtor's powers, have been duly authorized, and are not in conflict with, nor constitute a breach of, any provision contained in the applicable Debtor's Governing Documents, or any partnership or trust agreement pertaining to such Debtor, nor 7 will they constitute an event of default under any material agreement to which such Debtor is now or may hereafter become a party. 3.8. LITIGATION. Other than those matters disclosed on Schedule 5.10 to the Loan Agreement, there are no actions, suits, or proceedings pending or, to the best knowledge of such Debtor, threatened against such Debtor, or any of its Subsidiaries, as applicable, except for: (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if decided adversely to such Debtor, or any of its Subsidiaries, as applicable, reasonably could not be expected to result in a Material Adverse Change. 3.9. FRAUDULENT TRANSFER. (a) The Debtors, taken as a whole, are Solvent. (b) No transfer of property is being made by a Debtor and no obligation is being incurred by a Debtor in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Debtor. 3.10. RELIANCE BY SECURED PARTY; CUMULATIVE. The warranties, representations, and agreements set forth herein shall be conclusively presumed to have been relied upon by Secured Party and shall be cumulative and in addition to any and all other warranties, representations, and agreements which any Debtor shall now or hereinafter give, or cause to be given, to Secured Party. 4. AFFIRMATIVE COVENANTS. Each Debtor covenants and agrees that, until full and final payment of the Secured Obligations, and unless Secured Party shall otherwise consent in writing, such Debtor shall do all of the following: 4.1. SCHEDULES OF ACCOUNTS. With such regularity as Secured Party shall require (subject to Section 6.2 of the Loan Agreement), provide Secured Party with schedules describing all Accounts. Secured Party's failure to request such schedules or any Debtor's failure to execute and deliver such schedules shall not affect or limit Secured Party's security interests or other rights in and to the Accounts. 4.2. INVENTORY REPORTING. With such regularity as Secured Party shall require (subject to Section 6.2 of the Loan Agreement), execute and deliver to Secured Party a report regarding such Debtor's Inventory specifying such Debtor's cost therefor and further specifying such other information as Secured Party may reasonably request. 4.3. TITLE TO EQUIPMENT. Upon Secured Party's reasonable request, deliver to Secured Party properly endorsed, any and all evidences of ownership of, 8 certificates of title, or applications for title to any items of material Equipment for which such certificates are available. 4.4. SECURED PARTY EXPENSES. Promptly and without demand, reimburse Secured Party for all sums expended by Secured Party which constitute Lender Expenses and such Debtor hereby authorizes and approves all advances and payments by Secured Party for items constituting Lender Expenses. 4.5. COVENANTS IN LOAN AGREEMENT. Comply with each of the affirmative covenants which are set forth in Section 6 of the Loan Agreement as if such Debtor were a party thereto. 5. NEGATIVE COVENANTS. Each Debtor covenants and agrees that until full and final payment of the Secured Obligations, it will comply with each of the negative covenants which are set forth in Section 7 of the Loan Agreement as if such Debtor were a party thereto. 6. EVENTS OF DEFAULT. Any one or more of the following events shall constitute an event of default (each, an "Event of Default") under this Agreement: (a) The occurrence of an Event of Default (as defined in the Loan Agreement); (b) If a Debtor makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Secured Obligations, except to the extent such payment is permitted by the terms hereof and by the subordination provisions applicable to such Indebtedness; or (c) If this Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Collateral covered hereby or thereby. 7. SECURED PARTY'S RIGHTS AND REMEDIES. 7.1. RIGHTS AND REMEDIES. Upon the occurrence of an Event of Default, the security hereby constituted shall become enforceable and, in addition to all other rights and remedies available to Secured Party as provided hereafter, Secured Party may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by each Debtor: (a) Proceed directly and at once, without notice, against any Debtor to collect and recover the full amount or any portion of the Secured Obligations, 9 without first proceeding against Borrowers, or against any security or collateral for the Secured Obligations; (b) Without notice to any Debtor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward the payment of the Secured Obligations (i) any indebtedness due or to become due from Secured Party to any Debtor and (ii) any moneys, credits or other property belonging to a Debtor at any time held by or coming into the possession of Secured Party; (c) Exercise in respect of the Collateral, in addition to other rights and remedies provided for herein and in the Guaranty or otherwise available to it, all the rights and remedies available to it at law (including those of a secured party under the Code) or in equity; (d) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which Secured Party considers advisable, and in such cases, Secured Party will credit the Loan Account with only the net amounts received by Secured Party in payment of such disputed Accounts after deducting all Lender Expenses incurred or expended in connection therewith; (e) Cause each Debtor to hold all returned Inventory in trust for Secured Party, segregate all returned Inventory from all other property of such Debtor or in such Debtor's possession and conspicuously label said returned Inventory as the property of Secured Party for the benefit thereof; (f) Without notice or demand upon any Debtor, make such payments and do such acts as Secured Party considers necessary or reasonable to protect its security interest in the Collateral. Each Debtor agrees to assemble the Collateral if Secured Party so requires, and to make the Collateral available to Secured Party as Secured Party may designate. Each Debtor authorizes Secured Party to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Secured Party's determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of the Debtors' owned premises, each Debtor hereby grants Secured Party a license to enter into possession of such premises and to occupy the same, without charge, for up to one hundred twenty (120) days in order to exercise any of Secured Party's rights or remedies provided herein, at law, in equity, or otherwise; (g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Secured Party is hereby granted a license or other right to use, without charge, each Debtor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, 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, and 10 each Debtor's rights under all licenses and all franchise agreements shall inure to Secured Party's benefit; (h) Sell all or any part of the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including a Debtor's premises) as Secured Party determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale; (i) Secured Party shall give notice of the disposition of the Collateral as follows: (i) Secured Party shall give the applicable Debtor a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, then the time on or after which the private sale or other disposition is to be made; and (ii) The notice shall be personally delivered or mailed, postage prepaid, to the applicable Debtor as provided in Section 10, at least ten (10) days before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market; (j) Secured Party may credit bid and purchase at any public sale; (k) Secured Party may seek the appointment of a receiver or keeper to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a receiver without the requirement of prior notice or a hearing; (l) Secured Party shall have all other rights and remedies available at law or in equity or pursuant to any other Loan Document; and (m) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by the Debtors. Any excess will be returned, without interest and subject to the rights of third Persons, by Secured Party to the applicable Debtor. 7.2. REMEDIES CUMULATIVE. Secured Party's rights and remedies under this Agreement, the other Loan Documents, and all other agreements shall be cumulative. Secured Party shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Secured Party of one right 11 or remedy shall be deemed an election, and no waiver by Secured Party of any Event of Default on a Debtor's part shall be deemed a continuing waiver. No delay by Secured Party shall constitute a waiver, election, or acquiescence by it. 8. TAXES AND EXPENSES REGARDING THE COLLATERAL. If any Debtor fails to pay any monies (whether taxes, rents, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Secured Party, in its sole discretion and without prior notice to any Debtor, may do any or all of the following: (a) make payment of the same or any part thereof; (b) set up such reserves in the Loan Account as Secured Party deems necessary to protect Secured Party from the exposure created by such failure; or (c) in the case of the failure to comply with Section 6.8 of the Loan Agreement, obtain and maintain insurance policies insuring each Debtor's ownership and use of the Collateral, and take any action with respect to such policies as Secured Party deems prudent. Any amounts paid or deposited by Secured Party shall constitute Lender Expenses, shall immediately become additional Secured Obligations, shall bear interest at the applicable rate described in the Loan Document, and shall be secured by the Collateral. Any payments made by Secured Party shall not constitute an agreement by Secured Party to make similar payments in the future or a waiver by Secured Party of any Event of Default under this Agreement. Secured Party need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance, or lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. Secured Party shall use its best efforts to provide notice to the applicable Debtor of any action taken by it under this Section 8. 9. WAIVERS; INDEMNIFICATION. 9.1. DEMAND; PROTEST; ETC. To the extent permitted by law, each Debtor waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Secured Party on which such Debtor may in any way be liable. 9.2. SECURED PARTY'S LIABILITY FOR COLLATERAL. So long as Secured Party complies with its obligations, if any, under Section 9-207 of the Code, Secured Party shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk of loss, damage, or destruction of the Collateral shall be borne by the Debtors. 9.3. INDEMNIFICATION. Each Debtor agrees to defend, indemnify, save, and hold the Lender-Related Persons and each of their respective officers, employees, 12 and agents (each an "Indemnified Person") harmless against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other Person, and (b) all losses (including reasonable attorneys' fees and disbursements) in any way suffered, incurred, or paid by Secured Party as a result of or in any way arising out of, following, or consequential to transactions with Borrowers or the Debtors, whether under this Agreement, the other Loan Documents or otherwise (all of the foregoing, collectively, the "Indemnified Liabilities"). Notwithstanding the foregoing, no Debtor shall have any obligation under this Section 9.3 with respect to any Indemnified Liability that resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement. 10. NOTICES. All notices and other communications hereunder to Secured Party shall be in writing and shall be mailed, sent or delivered in accordance with the Loan Agreement and all notices and other communications hereunder to a Debtor shall be in writing and shall be mailed, sent or delivered in care of Parent in accordance with the Loan Agreement. 11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF SECURED PARTY IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH DEBTOR AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11. EACH DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH DEBTOR AND SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF 13 LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 12. DESTRUCTION OF DEBTORS' DOCUMENTS. All documents, schedules, agings, or other papers delivered to Secured Party may be destroyed or otherwise disposed of by Secured Party four (4) months after they are delivered to or received by Secured Party, unless the applicable Debtor requests, in writing, the return of said documents, schedules or other papers and makes arrangements, at such Debtor's expense, for their return. 13. RELEASE OF COLLATERAL. Upon any sale, license or other disposition of assets of any Debtor constituting Collateral permitted under the Loan Documents, the security interest and other rights granted hereunder with respect to such Collateral shall be automatically terminated and released, and Secured Party, at the request of the applicable Debtor, will execute and deliver to such Debtor the proper instruments (including UCC termination statements) acknowledging the release of Secured Party's security interest in such Collateral and will file such instruments with the United States Patent and Trademark Office and the United States Copyright Office as may be necessary to evidence the release of Secured Party's security interest in such Collateral. 14. GENERAL PROVISIONS. 14.1. EFFECTIVENESS. This Agreement shall be binding and deemed effective when executed by each Debtor and accepted and executed by Secured Party. 14.2. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that no Debtor may assign this Agreement or any rights or duties hereunder without Secured Party's prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Secured Party shall release the applicable Debtor from its Secured Obligations. Secured Party may assign this Agreement and its rights and duties hereunder and no consent or approval by any Debtor is required in connection with any such assignment. Secured Party reserves the right to sell, assign, transfer, negotiate, or grant participations in all or any part of, or any interest in its rights and benefits hereunder. In connection therewith, Secured Party may disclose all documents and information which Secured Party now or hereafter may have relating to any Debtor or any Debtor's business. To the extent that Secured Party assigns its rights and obligations to a third Person, Secured Party thereafter shall be released from such assigned obligations to each of the Debtors and such assignment shall effect a novation between each of the Debtors and such third Person. 14.3. SECTION HEADINGS. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each section applies equally to this entire Agreement. 14.4. INTERPRETATION. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Secured Party or any Debtor, whether 14 under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto. 14.5. SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 14.6. AMENDMENTS IN WRITING. This Agreement can only be amended by a writing signed by Secured Party and each Debtor. 14.7. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. 14.8. REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment of the Secured Obligations by a Debtor or the transfer by a Debtor to Secured Party of any property of a Debtor should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors' rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, and other voidable or recoverable payments of money or transfers of property (collectively, a "Voidable Transfer"), and if Secured Party is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Secured Party is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys' fees of Secured Party related thereto, the liability of each of the Debtors automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made. 14.9. GAMING LAWS. All rights, remedies and powers provided in this Agreement or any other agreement related to the Loan Agreement may be exercised only to the extent that the exercise thereof does not violate any Applicable Gaming Laws and Liquor Laws and all provisions of the Agreement are intended to be subject to the Applicable Gaming Laws and Liquor Laws and to be limited solely to the extent necessary to not render the provisions of this Agreement invalid or unenforceable, in whole or in part. Lender will timely apply for and receive all required approvals of the applicable Gaming Authority under Applicable Gaming Laws (including but not limited to any such sale or disposition of gaming Equipment consisting of slot machines, gaming tables, cards, dice, gaming chips, player tracking systems, and all other "gaming devices" (as such term or words of like import 15 referring thereto are defined in the Applicable Gaming Laws), and "associated equipment" (as such term or words of like import referring thereto are defined in the Applicable Gaming Laws)) and of the Liquor Authorities under applicable Liquor Laws for the sale of liquor and other alcoholic beverages. [Signature page follows] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. MAJESTIC INVESTOR HOLDINGS, LLC, a Delaware limited liability company By: /s/ Michael E. Kelly --------------------- Name: Michael E. Kelly --------------------- Title: EVP, COO, CFO --------------------- MAJESTIC INVESTOR CAPITAL CORP., a Delaware corporation By: /s/ Michael E. Kelly --------------------- Name: Michael E. Kelly --------------------- Title: EVP, COO, CFO --------------------- FOOTHILL CAPITAL CORPORATION, a California corporation By: /s/ Kevin M. Coyle --------------------- Name: Kevin M. Coyle --------------------- Title: Sr. Vice President --------------------- S-1