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EXHIBIT 10.7
TRUST AGREEMENT
THIS TRUST AGREEMENT (this "Agreement"), dated as of December
31, 1998, is entered into by and among LAKES GAMING, INC. (formerly known as GCI
LAKES, INC.), a Minnesota corporation ("Lakes"), GRAND CASINOS, INC., a
Minnesota corporation ("Company"), and FIRST UNION NATIONAL BANK, a national
banking association with offices at 230 S. Tryon Street, Charlotte, North
Carolina 28288, as Trustee (the "Trustee").
RECITALS
A. Lakes and Company have entered into a Distribution Agreement, dated
the date hereof and certain ancillary agreements thereto (collectively, the
"Distribution Agreement"), which provide for, among other things, (i) the
transfer by Company to Lakes of all of the operations, assets and liabilities of
Company and its subsidiaries comprising the Non-Mississippi Business (as defined
therein) and (ii) the distribution (the "Distribution") to the holders of
Company's common stock of all of the outstanding shares of Lakes' common stock.
B. Lakes, Company, Hilton Hotels Corporation, a Delaware corporation,
Park Place Entertainment Corporation (formerly known as Gaming Co., Inc.), a
Delaware corporation and Gaming Acquisition Corporation, a Minnesota corporation
("Merger Sub") have entered into an Agreement and Plan of Merger, dated as of
June 30, 1998 (the "Merger Agreement" and, together with the Distribution
Agreement, the "Agreements"), which provides for, among other things, the merger
of Merger Sub with and into Company (the "Merger") with Company as the surviving
corporation.
C. The Agreements provide that Lakes shall indemnify, save and hold
harmless Company and certain of its related parties, with respect to certain
matters upon the terms and subject to the conditions provided in the respective
Agreements and that as a source of payment therefor (and not in lieu thereof) a
trust estate shall be established for the protection of Company, its affiliates
and subsidiaries.
D. A material condition to the consummation of the transactions
contemplated by both of the Agreements is that the parties hereto enter into
this Agreement and that Lakes, Company and the Trustee enter into a Pledge and
Security Agreement of even date herewith (the "Pledge and Security Agreement").
E. The Trustee has agreed to hold the Trust Estate (as defined herein)
in accordance with the terms and provisions contained herein, which Trust Estate
shall be held for the benefit of Company with a reversionary interest in Lakes.
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AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. Defined Terms.
For purposes of this Agreement:
"Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"Cash" means United States Dollars in such form as may, at the
time, be legal tender for the payment of debts in the United States.
"Cash Equivalents" means Short-Term Treasuries or Joint
Approval Cash Equivalents.
"Claim" has the meaning set forth in Section 5(a).
"Counter Notice" has the meaning set forth in Section 5(a).
"Event of Default" has the meaning assigned in the Pledge and
Security Agreement.
"Joint Approval Cash Equivalents" means United States Dollar
indebtedness in any of the following forms, if and to the extent the Trustee has
been directed to invest in such indebtedness in a joint written investment
direction signed both by the Representative and by the Indemnitee's Agent: (i)
the outstanding short-term debt Securities of any corporation so long as such
debt securities are rated at least "A" by Standard & Poor's Corporation and are
not "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act of 1933, as amended, (ii) marketable direct obligations
guaranteed by the United States Government and backed by the full faith and
credit of the United States, issued after July 18, 1984 and maturing within 90
days from the date of acquisition thereof, (iii) marketable direct obligations
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within 90 days
from the date of acquisition thereof and, at the time of acquisition, having a
rating in one of the two highest rating categories obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if at any
time, neither of such rating services shall be rating such obligations, then
from such other nationally recognized rating services as may be acceptable to
Company), (iv) certificates of deposit maturing within 90 days from the date of
acquisition thereof and issued by any commercial bank which accepts deposits
insured by the Federal Deposit Insurance Corporation and which has a combined
capital and surplus greater than $500 million and a long term certificate of
deposit rating in one of the two highest rating categories
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obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc. (or, if at any time, neither of such rating services shall be
rating such obligations, then from such other nationally recognized rating
services as may be acceptable to Company) (any such commercial bank, an
"Acceptable Bank"); (v) repurchase agreements, Eurodollar deposits and bankers
acceptances maturing within 90 days from the date of acquisition thereof and
issued by an Acceptable Bank; (vi) investments in money market funds that invest
solely in (a) Short-Term Treasuries or repurchase agreements secured by
Short-Term Treasuries or (b) Joint Approval Cash Equivalents of the type
described in clauses (i) through (v) above or repurchase agreements secured by
such Joint Approval Cash Equivalents; or (vii) any other instrument that is
specifically approved in writing by Lakes and Company, if the Trustee receives
opinions of counsel reasonably satisfactory to it stating that such writing has
been duly authorized, executed and delivered by each of them and is binding upon
and enforceable against each of them. Notwithstanding the foregoing provisions
of this definition, any investment or security which otherwise would be a Joint
Approval Cash Equivalent but for the fact such investment or security has a
maturity date more than 90 days after the acquisition thereof, shall be deemed a
Joint Approval Cash Equivalent if it is otherwise convertible, at the option and
discretion of Trustee, into cash within 90 days of the date that the Trustee
provides a conversion notice to the issuer of the security.
"Liabilities" means any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Notice" has the meaning set forth in Section 5(a).
"Polo Plaza Project Liabilities" means any and all Liabilities
relating to or arising from the Nevada Resort Properties Polo Plaza Limited
Partnership or the purchase and/or development of the properties commonly known
as the Polo Plaza Property, the Shark Club Property, the Travelodge Property and
the Cable Center Property, including, but not limited to any and all Liabilities
under the Polo Plaza Partnership Purchase Agreement, dated as of October 3,
1996, by and among Grand Casinos Nevada I, Inc. ("Nevada Sub") and Cloobeck
Enterprises, Normie Gagerman, Stephen J. Cloobeck, Polo Limited Group, Polo
Limited Group II, Samuel S. Lionel, and Bette Sawyer; Consulting Agreement by
and between Nevada Sub and Stephen J. Cloobeck, dated as of July 12, 1996;
Consulting Agreement by and among Nevada Sub and Nevada Resort Properties Polo
Plaza Limited Partnership (the "Polo Partnership") and Cloobeck Enterprises,
dated as of July 12, 1996; Polo Plaza FINOVA (Construction) Loan Agreement,
dated as of April 16, 1993, by and between Greyhound Financial Corporation, as
Lender and the Polo Partnership, as Borrower; Leasehold Termination Agreement,
dated as of June 23, 1997, by and among Cloobeck Enterprises, the Polo
Partnership and Nevada Sub; Ground Lease, dated as of July 31, 1996, by and
between MacGregor Income Properties West I, Inc. and Cloobeck Enterprises;
Option Agreement, dated as of October 3, 1996, by and among the Polo
Partnership, Cloobeck Enterprises and Nevada
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Sub; Option Agreement, dated as of October 3, 1996, by and among Polo
Partnership, Cloobeck Enterprises and Nevada Sub; Brooks Family Trust Lease,
dated as of June 17, 1996, by and among Nevada Sub and Cloobeck Enterprises, as
Tenants, and the Brooks Family Trust and Nevada Brooks Cook, as Landlords;
Assignment of Lease, dated as of September 1996, whereby Cloobeck Enterprises
assigned its rights and obligations under the Brooks Lease to Nevada Sub;
Guaranty, dated as of June 17, 1996, by Company in favor of Brooks Landlords;
Lease Termination Agreement, dated as of October 29, 1997, by and between Nevada
Sub (as successor Lessor) and Chartwell Vegas Corp. (as successor Lessee); Lease
Agreement, dated as of May 1, 1992, by and between Brooks Family Trust, as
Lessor and Moving Forward, Inc., as Lessee, as amended; Hotel Management
Agreement, dated as of February 1, 1998, by and between Nevada Sub and Chartwell
Lodging, Inc., as Manager; and the Option Agreement, dated as of November 1,
1997, by and among Martin J. Cable and Olga B. Cable, as Trustees of the Cable
Family Trust and Nevada Sub.
"Short-Term Treasuries" means United States Dollar
indebtedness consisting of marketable direct obligations issued by the United
States Government or any agency thereof and backed by the full faith and credit
of the United States, in the form of Book-entry Securities maintained by the
Trustee or any nominee acting for it, solely in its name, in an account at the
Federal Reserve Bank of New York under the Treasury/Reserve Automated Debt Entry
System, issued after July 18, 1984 and maturing within 90 days from the date of
acquisition thereof.
"Stratosphere Liabilities" has the meaning set forth for such
term in the Distribution Agreement.
"Tax Liabilities" all Liabilities of Lakes arising out of its
indemnification obligations under that certain Tax Allocation and Indemnity
Agreement, dated as of the date hereof, between Company and Lakes, to the extent
such indemnification obligations are not satisfied pursuant thereto.
"Termination Date" has the meaning set forth in Section 6.
2. Declaration of Trust. As a non-exclusive source of payment
with respect to the observance and performance by Lakes of each and all of its
present and future indemnities, liabilities and obligations at any time arising
under, pursuant to or in respect of any of the Agreements (collectively, the
"Indemnification Obligations"), and the covenants and conditions of this
Agreement and the Pledge and Security Agreement (collectively, including the
Indemnification Obligations, the "Secured Obligations"), Lakes grants and
transfers to the Trustee to hold, and the Trustee is hereby authorized and
directed by Lakes to accept, and the Trustee hereby accepts, in trust under this
Agreement, for the benefit of Company, its affiliates, subsidiaries and all
other present and future holders of any of the Secured Obligations and each and
all of their members, successors and assigns, all right, title and interest in
the following property:
an agreement to pay, substantially in the form of Exhibit
A, executed by Lakes in favor of the Trust Estate pursuant to which
Lakes is obligated to pay to the Trust Estate: (a) $7.5 million in
cash on the first anniversary of the date thereof, (b) an additional
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$7.5 million in cash on the second anniversary of the date thereof, (c)
an additional $7.5 million in cash on the third anniversary of the date
thereof and (d) an additional $7.5 million in cash on the fourth
anniversary of the date thereof.
(collectively, the "Initial Trust Estate," and together with (i) all rights and
interests of the Trustee under the Pledge and Security Agreement, (ii) any and
all other property at any time hereafter transferred to the Trustee in trust
under this Agreement, and (iii) any and all present and future income,
distributions, substitutions, replacements and proceeds of or from the Initial
Trust Estate and any other such property, the "Trust Estate"). The Trustee, its
successors in trust under this Agreement and its assigns and the assigns of its
successors and assigns in trust shall have and hold the foregoing Trust Estate
until released to Company or Lakes in accordance with the terms hereof, in trust
under and subject to the terms and conditions set forth herein for the benefit
of Company and as a source of funds for the enforcement of the payment,
observance and performance of all Secured Obligations. Company and Lakes hereby
consent to the foregoing declaration of trust and agree that the Trust Estate is
to be held and applied by the Trustee subject to the further covenants,
conditions and trust set forth herein.
3. Appointment of Representative and Indemnitee's Agent.
a. Lakes hereby designates its:
Chairman of the Board,
President and Chief Executive Officer
and Chief Financial Officer
each of whom is authorized to act alone, as their duly appointed agents and
attorneys-in-fact, with full power of substitution, in any and all capacities,
for all purposes of this Agreement (each, the "Representative"). Actions and
inactions by such Representatives under this Agreement shall be binding and
conclusive on Lakes and may be conclusively relied upon by the other parties
hereto. Lakes, upon 10 days' written notice to the other parties, may remove any
person appointed as Representative or appoint another person as Representative.
No Representative shall be liable for any action taken or omitted by it, or any
action suffered by it to be taken or omitted, in good faith, and in the exercise
of its own best judgment.
b. Company hereby appoints its:
President and Executive Vice President
and Chief Financial Officer
each of whom is authorized to act alone, as their duly appointed agents and
attorneys-in-fact, with full power of substitution, in any and all capacities,
for all purposes of this Agreement (each, the "Indemnitee's Agent"). Actions and
inactions by the Indemnitee's Agent under this Agreement shall be binding and
conclusive on Company and may be conclusively relied upon by the other parties
hereto. Company, upon 10 days' written notice to the other parties, may remove
any person
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appointed as Indemnitee's Agent or appoint another person as Indemnitee's Agent.
No Indemnitee's Agent shall be liable for any action taken or omitted by it, or
any action suffered by it to be taken or omitted, in good faith, and in the
exercise of its own best judgment.
4. Investment and Valuation of Trust Estate.
a. The Trustee hereby acknowledges receipt of the
Initial Trust Estate.
1. The Trustee shall keep all cash at any time
held by it as part of the Trust Estate, from whatever source such
cash may be derived, in an interest-bearing account in United
States Dollars maintained by the Trustee solely in the name of the
Trustee, as Trustee hereunder, except that:
(1) Such cash shall be invested and
reinvested by the Trustee in Short-Term Treasuries,
(i) if the Trustee is so directed in writing by the
Indemnitee's Agent and if the Indemnitee's Agent
states in such writing that an Event of Default has
occurred and is continuing, and (ii) after the
Trustee receives written directions from the
Representative, stating that any and all cash held by
the Trustee as part of the Trust Estate shall be kept
invested in Short-Term Treasuries, and
(2) Notwithstanding the foregoing, such cash
shall be invested by the Trustee in Joint Approval
Cash Equivalents if and to the extent so directed by
the Representative and the Indemnitee's Agent, acting
jointly; and
2. Such cash and Cash Equivalents shall be
invested and reinvested solely in the name of the Trustee or its
nominee.
b. The Trustee shall be entitled to sell or redeem
any such investment as necessary to make any distributions required under this
Agreement and shall not be liable or responsible for any loss resulting from any
such sale or redemption or from any investment or failure to invest made in
accordance with this Agreement.
c. Income, if any, resulting from the investment of
the Trust Estate shall be for the account of Lakes, but shall be held as part of
the Trust Estate, subject to the provisions of this Agreement.
5. Payment of Claims.
a. From time to time on or before the termination
of this Agreement, the Indemnitee's Agent may deliver a notice (a "Notice") to
the Representative and the Trustee specifying in reasonable detail the nature
and dollar amount of any claim (a "Claim") that Company has under the Merger
Agreement and/or the Distribution Agreement; Company may make more than
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one Claim with respect to any underlying state of facts. If Representative gives
notice to the Indemnitee's Agent and the Trustee disputing any Claim (a "Counter
Notice") within 15 days following its receipt of the Notice, such Claim shall be
resolved as provided in Section 5(b). Lakes must have a reasonable basis in
giving any such Counter Notice and shall set forth in reasonable detail the
basis of its objection to the Claim in the Counter Notice. If no Counter Notice
is received by the Trustee within such 15-day period, then (i) the dollar amount
of the Claim, as set forth in the Notice, shall be deemed established for
purposes of this Agreement and the agreement(s) under which the Claim arose and
(ii) at the end of such 15-day period, the Trustee shall pay to Company the
dollar amount claimed in the Notice from the Trust Estate; provided, however, to
the extent that the Trust Estate does not contain sufficient funds to pay the
Claim (after the liquidation of the assets comprising the Trust Estate), such
Claim shall be paid by Trustee to the extent of such funds and the remaining
portion of the Claim shall be paid by Trustee, with no further notice to or
consent required by the Representative, as soon as further deposits are made by
Lakes into the Trust Estate.
b. If a Counter Notice is received with respect to a
Claim, the parties (other than the Trustee) shall promptly meet and confer and
attempt in good faith to resolve the objection. If they succeed, the parties
(other than the Trustee) shall promptly and jointly notify the Trustee in
writing and the Trustee shall act in accordance with such joint written notice.
If the parties shall not succeed within 5 business days of Company's receipt of
the Counter Notice, they shall, within an additional 10 business days, commence
and thereafter promptly complete an arbitration proceeding in accordance with
the provisions of Section 21 hereof. Thereafter, unless the parties shall
otherwise jointly instruct the Trustee in writing, the Trustee shall make
payment with respect to the Claim, if any, in accordance with the arbitrator's
award when received.
c. The Trustee (i) shall not be obligated to give any
notice under any of the foregoing provisions in this Section 5 and (ii) shall
not be entitled to object to any Notice given under any such provisions.
6. Termination of Agreement.
a. This Agreement shall terminate on the date after
(i) Company determines that all known material Indemnification Obligations with
respect to the Polo Plaza Project Liabilities, the Stratosphere Liabilities and
the Tax Liabilities have been completely settled (and with respect to any
settlement subject to court approval, such settlement shall have become final
and non-appealable) and satisfied, (ii) Company determines that no additional
material Indemnification Obligations are reasonably likely to arise out of, or
be asserted with respect to, the Polo Plaza Project Liabilities or the
Stratosphere Liabilities and (iii) Company and Lakes determine that no material
Indemnification Obligations are likely to arise out of, or be asserted with
respect to, any material Tax Liabilities (such date of termination, the
"Termination Date"). As promptly as practical after the Termination Date, the
Trustee shall release any remaining property (after the payment of (A) any and
all taxes owing with respect to the Trust Estate, if any, and (B) all of the
Trustee's fees, expenses and costs) in the Trust Estate to Lakes.
b. Upon the final distribution of all of the Trust
Estate in accordance with
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the terms of this Agreement, this Agreement shall terminate, except that the
provisions of Sections 10, 11, 14, 21 and 22 hereof shall survive such
termination.
c. Notwithstanding the foregoing, the Trustee shall not
be obligated to release or deliver any assets of the Trust Estate pursuant to
this Section 6 except if and to the extent (i) the Trustee receives joint
written instructions from the Representative and the Indemnitee's Agent,
directing such release or delivery, (ii) the Trustee (x) receives notice from
the Representative directing that such release or delivery to be made on any
date occurring after the Termination Date, (y) has given the Indemnitee's Agent
notice of the Trustee's receipt of such direction from the Representative, and
at least 30 days have elapsed since such notice was given to the Indemnitee's
Agent, and (z) has not received notice of objection to such release or delivery
from the Indemnitee's Agent, or (iii) in accordance with an arbitrator's award,
directing that such release or delivery be made on any date occurring after the
Termination Date, delivered in an arbitration proceeding conducted in accordance
with the provisions of Section 21 hereof.
7. Directions to Trustee. Both prior to and after the
occurrence of any Event of Default, the Trustee shall (subject to Sections 9 and
10 hereof) cooperate with Company, as Secured Party under the Pledge and
Security Agreement, in its efforts to exercise and enforce its rights and
remedies under the Pledge and Security Agreement in accordance with such
instructions as the Trustee from time to time may receive from Company, so long
as such instructions do not, in the good faith opinion of the Trustee, require
it to engage in any action which would violate any applicable law, regulation,
judgment, order or decree or expose it to liability for which it has not
received indemnification from Company pursuant to Section 11 hereof.
8. Tax Matters. Each party to this Agreement shall provide a
completed IRS Form W-8 or Form W-9 to the Trustee upon request by the Trustee.
9. Duties of the Trustee. The Trustee shall have no duties or
responsibilities other than those expressly set forth in this Agreement and the
Pledge and Security Agreement, and no implied duties or obligations shall be
read into this Agreement or the Pledge and Security Agreement against the
Trustee. The Trustee shall have no duty to enforce any obligation of any person,
other than as provided herein. The Trustee shall be under no liability to anyone
by reason of any breach or failure on the part of any party hereto or any maker,
endorser or other signatory of any document or any other person to perform such
person's obligations under any such document.
10. Liability of the Trustee; Withdrawal.
a. The Trustee shall not be liable for any action
taken or omitted by it, or any action suffered by it to be taken or omitted, in
good faith (except as provided in the immediately succeeding sentence), and may
rely conclusively and shall be protected in taking or omitting to take any
action based upon any order, notice, demand, certificate, opinion or advice of
counsel (including counsel chosen by the Trustee), statement, instrument, report
or other paper or document (not only as to its due execution and the validity
and effectiveness of its provisions, but also as to the truth and acceptability
of any information therein contained) which is believed by the
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Trustee to be genuine and to be signed or presented by the proper person(s). The
Trustee shall not be held liable for any error in judgment made in good faith by
an officer of the Trustee unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts or acted intentionally in bad
faith. The Trustee shall not be bound by any notice or demand, or any waiver,
modification, termination or rescission of this Agreement or any of the terms
hereof, unless evidenced by a writing delivered to the Trustee signed by the
proper party or parties and, if the duties or rights of the Trustee are
affected, unless it shall give its prior written consent thereto.
b. Without limitation of any other provision of this
Agreement, the Trustee shall not be responsible for and may conclusively rely
upon and shall be protected, indemnified and held harmless by Lakes or Company,
as the case may be, for the sufficiency or accuracy of the form of, or the
execution, validity, value or genuineness of any document or property received
(from any party), held or delivered by such party hereunder, or of the signature
or endorsement thereon, or for any description therein; nor shall the Trustee be
responsible or liable in any respect on account of the identity, authority or
rights of the persons executing or delivering or purporting to execute or
deliver a document, property or this Agreement.
c. No provision of this Agreement or the Pledge and
Security Agreement shall require the Trustee to expend or risk its own funds or
incur any liability. The Trustee may refuse to perform any duty or exercise any
right or power hereunder or thereunder unless it receives indemnity reasonably
satisfactory to it against any loss, liability or expense.
d. The Trustee makes no statement, promise,
representation or warranty whatsoever, and shall have no liability whatsoever,
to Company or its successors or assigns as to the authorization, execution,
delivery, legality, enforceability or sufficiency of this Agreement or the
Pledge and Security Agreement or as to the creation, perfection, priority or
enforceability of any security interest granted, or deemed to be granted,
hereunder or thereunder or as to the existence, ownership, quality, condition,
value or sufficiency of any of the Trust Estate or as to any other matter
whatsoever, except only that the Trustee represents and warrants to the other
parties hereto that (i) it has the right, power and authority, and all required
licenses and consents, to execute, deliver and perform its duties under this
Agreement and the Pledge and Security Agreement, and (ii) this Agreement and the
Pledge and Security Agreement have been duly executed and delivered by it, upon
due authorization, and (without representing as to the legality, binding effect
or sufficiency of any provision herein or therein) are binding upon and legally
enforceable against it, subject to laws generally affecting the enforcement of
creditors' rights and the effect of equitable principles, whether considered in
a court of law or equity.
e. In the event that the Trustee shall become
involved in any arbitration or litigation relating to the Trust Estate, the
Trustee is authorized to comply with any final, binding and nonappealable
decision reached through such arbitration or litigation.
f. The Trustee may resign at any time and be
discharged from its duties and obligations hereunder and under the Pledge and
Security Agreement, by giving notice to the other parties. Such resignation
shall not discharge or otherwise effect the Trust Estate or any
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property comprising part of the Trust Estate or any beneficial interest therein
or the rights, powers and liens created by or arising under this Agreement and
the Pledge and Security Agreement. Such resignation shall take effect when a
successor Trustee has been appointed by Company and has accepted the trusts
herein provided. If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns, the retiring Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
g. A successor Trustee shall deliver a written acceptance of
its appointment to Lakes, the retiring Trustee and to Company. Thereupon, the
resignation of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Agreement and all of the rights, powers and liens granted to the Trustee under
the Pledge and Security Agreement. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee provided all sums
owing to the retiring Trustee have been paid.
h. Notwithstanding the replacement of the Trustee pursuant
to this Section 10, the resigning Trustee shall continue to be entitled to the
rights, immunities and benefits provided under Sections 9, 10, 11 and 21 hereof.
11. Trustee's Fees and Indemnification. All fees (as may from time
to time be agreed in writing by the Trustee and Lakes) and reasonable expenses
and disbursements of the Trustee for its services hereunder and under the Pledge
and Security Agreement, shall be paid by Lakes. Company and Lakes, jointly and
severally, hereby agree to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Trustee, including legal or other fees
arising out of or in connection with its entering into this Agreement and the
Pledge and Security Agreement and carrying out its duties hereunder or
thereunder, including the costs and expenses of defending itself against any
claim of liability in the premises or any action for interpleader. The Trustee
shall be under no obligation to institute or defend any action, suit, or legal
proceeding in connection with this Agreement or the Pledge and Security
Agreement, unless first indemnified and held harmless to its satisfaction in
accordance with the foregoing, except that the Trustee shall not be indemnified
against any loss, liability or expense arising out of its bad faith, gross
negligence or willful misconduct. Such indemnity shall survive the termination
or discharge of this Agreement or resignation of the Trustee.
12. Inspection. All funds or other property held as part of the
Trust Estate shall at all times be clearly identified on the Trustee's accounts
as being held by the Trustee hereunder. Any party hereto may at any time during
the Trustee's business hours (with reasonable notice) inspect any records or
reports relating to the Trust Estate.
13. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given (i) when received if
personally delivered, (ii) when receipt is automatically acknowledged if
transmitted by telecopy, electronic or digital transmission method, (iii) the
day after it is sent, if
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sent for next day delivery to an address within the United States and Puerto
Rico by recognized overnight delivery service (e.g. Federal Express), (iv) the
third day after it is sent, if sent for next day delivery to any other address
by recognized international delivery service, and (v) upon receipt, if sent by
certified or registered mail, return receipt requested. In each case notice
shall be sent to:
a. If to Lakes or the Representative:
Lakes Gaming, Inc.
130 Cheshire Lane
Minnetonka, Minnesota 55305
Attn: Chairman of the Board
Telecopy: (612) 449-8509
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell, Esq.
Telecopy: (612) 672-8397
b. If to Company or Indemnitee's Agent:
Grand Casinos, Inc.
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Telecopy: (702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: (973) 643-6500
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c. If to the Trustee:
First Union National Bank
230 S. Tryon Street
Charlotte, North Carolina 28288
Attn: Donna J. Flanagan, Corporate
Trust Dept.
Telecopy (704) 383-7316
14. Non-Exclusive Remedy. Company and Lakes agree and
acknowledge that the Trust Estate shall not be Company's exclusive method of
receiving indemnification from Lakes pursuant to the Agreements and Lakes shall
be and remain in all respects personally liable for all Indemnification
Obligations and each liability may be enforced by any lawful means.
15. Modification; Waiver. Subject to applicable law, this
Agreement may be amended, modified or supplemented, with respect to any of the
terms contained herein, only by written agreement of the parties and the rights,
remedies, immunities and benefits created hereby or arising hereunder in favor
of any person may be waived by it only by an instrument in writing signed by it.
No such right, remedy, immunity or benefit shall be deemed waived by reason of
such person's failure to act, oral statements or course of conduct, including
any grant of a waiver on a different or prior occasion.
16. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties.
17. Assignment. This Agreement, and the rights, interests and
obligations hereunder, shall not be assigned by Lakes (whether by operation of
law or otherwise) without the prior written consent of Company. Subject to the
foregoing provisions of this Section 17, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
18. Governing Law. This Agreement shall be construed and
interpreted, and the rights of the parties shall be determined, in accordance
with the laws of the State of New York (without reference to the choice of law
provisions).
19. Interest in Trust Estate. Lakes has no interest in the Trust
Estate except only as to any property which has been released from the Trust
Estate and delivered to Lakes after the Termination Date as herein provided,
effective upon such release and delivery.
20. Severability. Each party agrees that, should any court or
other competent
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authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith or
not to take an action consistent herewith or required hereby, the validity,
legality and enforceability of the remaining provisions and obligations
contained or set forth herein shall not in any way be affected or impaired
thereby. Upon any such holding that any provision of this Agreement is null,
void or unenforceable, the parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability unless such party did not in good faith seek
to resist or object to the imposition or entering of such order or judgment;
provided, however, that nothing in this Section 20 shall be deemed to limit or
otherwise modify the Trustee's rights under Sections 10, 11 and 21 hereof.
21. Arbitration. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance or
injunctive relief thereof.
Notwithstanding anything in the preceding paragraph of this
Section 21 to the contrary, the parties shall have the right to submit to a
court, in accordance with the following provisions of this Section 21, (i) any
claim asserted by the Trustee, in its personal capacity, for the payment of
fees, expenses, disbursements or indemnification due to the Trustee under
Section 14 hereof (or due under any indemnity given to the Trustee pursuant to
Section 14 hereof), (ii) any claim asserted against the Trustee personally,
seeking damages or other relief against the Trustee (and not for purposes of
binding the Trust Estate) based on or relating to any alleged breach of any duty
or other actionable conduct of the Trustee, and (iii) any claim asserted by or
against the Trustee personally (and not for purposes of binding the Trust
Estate) otherwise relating in any manner to the rights, immunities and benefits
granted to the Trustee under Sections 12, 13 and 14 hereof (each of the claims
described in the foregoing clauses (i), (ii) and (iii) is a "Trustee Claim");
and, with respect to solely to such claims:
a. No party shall be obligated or entitled to submit
any Trustee Claim to arbitration or be bound by any arbitrator's award that
might in any manner relate to any Trustee Claim;
b. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY
TRUSTEE CLAIM MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE JURISDICTION
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OF THOSE COURTS FOR PURPOSES OF ADJUDICATION OF ANY TRUSTEE CLAIM. EACH PARTY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO 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 ACTION OR PROCEEDING IN SUCH JURISDICTION FOR
PURPOSES OF ADJUDICATION OF ANY TRUSTEE CLAIM. SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS MAY BE MADE BY ANY MEANS PERMITTED BY NEW YORK LAW.
c. EACH PARTY HERETO WAIVES ALL RIGHTS TO A TRIAL BY
JURY OF ANY TRUSTEE CLAIM AND AGREES THAT ANY TRUSTEE CLAIM SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH PARTY FURTHER
AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS HEREBY WAIVED AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE PLEDGE AND SECURITY
AGREEMENT OR ANY PROVISION HEREOF OR THEREOF, INSOFAR AS IT MAY CREATE A DEFENSE
TO ANY TRUSTEE CLAIM. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE PLEDGE AND
SECURITY AGREEMENT.
22. Remedies Cumulative. All rights and remedies of each party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
24. Specimen Signature. Each person at any time appointed as the
Representative or the Indemnitee's Agent shall present a specimen signature to
the Trustee within a reasonable time.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by its duly authorized officer, as of the day and year
first above written.
"COMPANY"
GRAND CASINOS, INC.,
a Minnesota corporation
By: /s/ TIMOTHY COPE
---------------------------------
Name: Timothy Cope
Title: Chief Financial Officer
"LAKES"
LAKES GAMING, INC.,
a Minnesota corporation
By: /s/ TIMOTHY COPE
---------------------------------
Name: Timothy Cope
Title: Chief Financial Officer
"TRUSTEE"
FIRST UNION NATIONAL BANK,
a national banking association
By: /s/ DONNA J. FLANAGAN
---------------------------------
Name: Donna J. Flanagan
Title: Vice President
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EXHIBIT A
AGREEMENT TO PAY
THIS AGREEMENT TO PAY (this "Agreement"), dated as of December 31,
1998, is entered into by and among LAKES GAMING, INC. (formerly known as GCI
LAKES, INC.), a Minnesota corporation ("Lakes") and FIRST UNION NATIONAL BANK, a
national banking association ("Payee"), in Payee's capacity as (i) Trustee under
that certain Trust Agreement, dated of even date herewith (the "Trust
Agreement"), by and among Lakes, Payee and GRAND CASINOS, INC., a Minnesota
Corporation ("Company") and (ii) a party to that certain Pledge and Security
Agreement, dated of even date herewith (the "Pledge and Security Agreement" and,
together with the Trust Agreement, the "Indemnification Trust Agreements") among
Lakes, and Payee and Company.
In consideration for the consummation of the transactions contemplated
by the Merger Agreement (as defined in the Indemnification Trust Agreements) and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Lakes hereby agrees to pay the payee the aggregate sum of
$30,000,000. Such amount shall be payable as follows: (a) $7.5 million in cash
on the first anniversary of the date of this Agreement, (b) an additional $7.5
million in cash on the second anniversary of the date of this Agreement, (c) an
additional $7.5 million in cash on the third anniversary of the date of this
Agreement, and (d) an additional $7.5 million in cash on the fourth anniversary
of the date of this Agreement, payable pursuant to and in accordance with the
Indemnification Trust Agreements.
Capitalized terms used, but not otherwise defined, herein shall have
the meanings set forth in the Merger Agreement.
Each of this Agreement and the payments contemplated hereby is subject
and entitled to the benefits of the Indemnification Trust Agreements, the Merger
Agreement and the Distribution Agreement (as defined in the Indemnification
Trust Agreements), reference to each of which is hereby made for a more complete
statement of the terms and conditions under which the obligations evidenced
hereby are made and are to be paid.
All payments due pursuant to this Agreement shall be made without
defense, set off or counterclaim, in lawful money of the United States of
America, and in same day funds and delivered to payee in accordance with the
terms of the Indemnification Trust Agreements.
Lakes acknowledges and agrees that Secured Party (as defined in the
Pledge and Security Agreement) is an intended third party beneficiary of this
Agreement. Upon the occurrence of Event of Default (as defined in the Pledge and
Security Agreement), Secured Party may exercise and enforce each and all of its
rights and remedies under the Pledge and Security Agreement.
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THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
of this Agreement.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by its duly authorized officer, as of the day and year
first written above.
"LAKES"
LAKES GAMING, INC.,
a Minnesota corporation
By: /s/ TIMOTHY COPE
---------------------------------
Name: Timothy Cope
Title: Chief Financial Officer
"PAYEE"
FIRST UNION NATIONAL BANK,
a national banking association
By: /s/ DONNA J. FLANAGAN
---------------------------------
Name: Donna J. Flanagan
Title: Vice President
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