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EXHIBIT 10.3
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SUBORDINATION AGREEMENT
GRANTED BY LAKES GAMING, INC.,
IN FAVOR OF HIBERNIA NATIONAL BANK
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This Subordination Agreement (the "Agreement") is entered into
as of February 15, 1999 (the "Effective Date"), by:
LAKES GAMING, INC. (hereinafter referred to as "Lakes
Gaming"), a Minnesota corporation, whose permanent
mailing address is 130 Chesire Lane, Minnetonka,
Minnesota, 55305, represented herein by Timothy Cope,
its duly authorized Chief Financial Officer.
Lakes Gaming hereby represents, covenants and agrees as follows:
1. As used herein, the term "Subordinated Claims" shall mean all debts,
liabilities and obligations of the Coushatta Tribe of Louisiana
(hereinafter referred to as the "Tribe"), a federally recognized Indian
tribe, and/or the Coushatta Tribe of Louisiana Building Authority (the
"Authority"), an instrumentality of the Tribe (the "Tribe and the
Authority are sometimes collectively referred to as the "Borrowers" and
individually as a "Borrower") to Lakes Gaming, whether such debts,
liabilities and obligations now exist or are hereafter incurred or
arise, or whether the obligation of the Borrowers thereon be direct,
contingent, primary, secondary, joint and several, or otherwise, and
irrespective of whether such debts, liabilities or obligations are
evidenced by note, contract, open account or otherwise, and
irrespective of the person or entity in whose favor such debts or
liabilities may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be
acquired by Lakes Gaming, including, without limitation, the following
documents in which Lakes Gaming acquired interests pursuant to that
certain dated executed by Grand Casinos,
Inc., a Minnesota corporation, and by Grand Casinos of Louisiana,
Inc.-Coushatta, a Minnesota corporation, (collectively the "Grand
Entities") in favor of Lakes Gaming and Grand Casinos of Louisiana,
LLC- Coushatta:
(a) That certain Indemnity Agreement dated as of May 1, 1997,
between the Borrowers in favor of Grand Casinos and Grand
Casinos of Louisiana, Inc.- Coushatta (collectively the "Grand
Entities");
(b) That certain Mortgage, Assignment of Leases and Rents and
Security Agreement dated as of May 1, 1997, executed by the
Authority in favor of the Grand Entities;
(c) An Assignment of Construction Contract of Borrower dated as of
May 1, 1997, executed by the Tribe in favor of the Grand
Entities; and
(d) An Assignment of Architect's Contract of Borrower dated as of
May 1, 1997, executed by the Tribe in favor of the Grand
Entities.
SUBORDINATION AGREEMENT -- PAGE 1
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2. For and in consideration of the Hibernia Indebtedness (herein defined)
under the Hibernia Documents (herein defined), and in order to induce
the Hibernia National Bank ("Hibernia"), acting in its discretion in
each instance, to make loans or otherwise to give, grant or extend
credit at any time or times to the Borrowers under the Hibernia
Documents, Lakes Gaming hereby agrees:
(a) To subordinate, and does hereby subordinate, the payment by
each Borrower of the Subordinated Claims, together with any
and all interest accrued or to accrue thereon, to the payment
to Hibernia of any and all debts, liabilities and obligations
for which each Borrower may now or hereafter be under
obligation to Hibernia (the "Hibernia Indebtedness"), under:
(i) that certain Commercial Loan Agreement dated as of
May 1, 1997, between Hibernia, as lender, and the
Borrowers, as co-borrowers, as amended by that
certain First Amendment to Commercial Loan Agreement
dated , 1998, and by that certain Second
Amendment to Commercial Loan Agreement dated
, 1998 (herein referred to as the "Loan
Agreement");
(ii) that certain Promissory Note dated as of May 1, 1997,
executed by the Borrowers in favor of Hibernia in the
original principal sum of $25,000,000.00 as amended
by that certain First Allonge to Promissory Note
dated , 1998 and as amended by that certain
Second Allonge to Promissory Note dated ,
1998 (herein referred to as the "Note");
(iii) that certain Dominion Account Agreement dated as of
May 1, 1997, executed by the Tribe and Grand Casinos
of Louisiana, Inc.- Coushatta in favor of Hibernia,
which agreement encumbers the proceeds from the
gaming operations at the Tribe's casino operations as
well as the Casino Bank Accounts which are more fully
described therein (the "Dominion Account Agreement")
(iv) that certain Commercial Security Agreement dated as
of May 1, 1997, executed by the Borrowers, as
debtors, in favor of Hibernia, as secured party,
which agreement covers certain equipment referred to
therein (the "Security Agreement");
(v) that certain Non-Standard Financing Statement
executed by the Borrowers, as the debtors, in favor
of the Hibernia, as the secured party, on or about
May 1, 1997, regarding the Collateral (as defined in
the aforesaid Dominion Account) which instrument has
been recorded in the public records of Allen Parish,
Louisiana, together with any subsequent financing
statements executed by the Borrowers in connection
with the security interests granted in the Security
Agreement (the "Financing Statements"); and
SUBORDINATION AGREEMENT -- PAGE 2
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(vi) that certain "Agreement Restricting the Transfer or
Encumbrance of Property" dated as of May 1, 1997,
which was executed by the Borrowers in favor of
Hibernia which instrument has been recorded in the
public records of Allen Parish, Louisiana (the
"Negative Pledge").
(the Loan Agreement, Note, Dominion Account
Agreement, Security Agreement, Financing Statements
and the Negative Pledge are sometimes collectively
referred to as the "Hibernia Documents")
(whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligation of the Borrowers
thereon be direct, contingent, primary, secondary, joint and
several, or otherwise, and irrespective of whether such debts
or liabilities be evidenced by note, contract, open account or
otherwise).
(b) Not to ask, demand, sue for, take or receive all or any part
of the Subordinated Claims, or any interest thereon, unless or
until that portion of the Hibernia Indebtedness then due shall
have been fully paid and discharged; provided however, unless
and until Hibernia notifies Lakes Gaming at the address noted
above that an Event of Default has occurred under the terms of
the Loan Agreement, Lakes Gaming may continue to receive
scheduled payments from the Tribe under the Subordinated
Claims;
(c) That, if any payment(s) is (are) made on account of the
Subordinated Claims contrary to the terms of this Agreement,
each and every amount so paid shall be held in trust by Lakes
Gaming on behalf of Hibernia and Lakes Gaming will promptly
pay such amounts to Hibernia to be credited and applied to any
Hibernia Indebtedness (principal and/or interest) then owing
to Hibernia by the Borrowers whether matured or unmatured;
(d) That any liens, security interests, judgments liens, charges
or other encumbrances upon the assets of each Borrower
securing payment of the Subordinated Claims shall be and
remain inferior and subordinate to any liens, security
interests, judgment liens, charges or other encumbrances upon
the assets of each Borrower securing payment of the Hibernia
Indebtedness;
(e) If Lakes Gaming forecloses upon any of the Subordinated Claims
or obtains possession of the property of a Borrower in lieu of
foreclosure, all assets of each such Borrower or proceeds
thereof obtained thereby shall be held in trust by Lakes
Gaming on behalf of Hibernia and Lakes Gaming will promptly
pay such amounts to Hibernia to be credited and applied to any
Hibernia Indebtedness (principal and/or interest) then owing
to Hibernia by the Borrowers, whether matured or unmatured;
SUBORDINATION AGREEMENT -- PAGE 3
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(f) That, upon any distribution of the assets or readjustment of
indebtedness of either Borrower whether by reason of
reorganization, liquidation, dissolution, bankruptcy,
receivership, assignment for the benefit of creditors, or any
other action or proceeding involving the readjustment of all
or any of the Subordinated Claims, or the application of
assets of either Borrower to the payment or liquidation
thereof, either in whole or in part, Hibernia shall be
entitled to receive payment in full of any and all of the
Hibernia Indebtedness then owing to Hibernia by such Borrower
prior to the payment of all or any portion of the Subordinated
Claims; and
(g) Not to transfer, assign, encumber or subordinate at any time
while this Agreement remains in effect, any right, claim or
interest of any kind in or to any of the Subordinated Claims,
either principal or interest, unless such is done expressly
subject to the terms and provisions of this Agreement.
4. This Agreement is complete and effective upon execution by Lakes Gaming
and delivery of this Agreement to Hibernia.
5. This is a continuing Agreement and shall remain in full force and
effect and be binding upon Lakes Gaming and its legal representatives,
successors or assigns, until all of the Hibernia Indebtedness has been
paid in full and the aforesaid Loan Agreement has been terminated.
6. This Agreement shall be deemed to be made under and shall be governed
by the laws of the State of Louisiana in all respects, including
matters of construction, validity and performance.
7. None of the terms or provisions of this Agreement may be waived,
altered, modified or amended except in writing duly signed for and on
behalf of Hibernia and Lakes Gaming.
8. Hibernia will not alter, modify or amend any of the Hibernia Documents
with the prior written consent of Lakes Gaming, which consent will not
be unreasonably withheld.
IN WITNESS WHEREOF, the undersigned has executed this Agreement before
the undersigned witnesses on the date shown below, but effective as of the
Effective Date.
WITNESSES: LAKES GAMING, INC.
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By: /s/ Timothy Cope
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Timothy Cope, Its Chief
Financial Officer
- ------------------------------ Date: March 5, 1999
ACCEPTED:
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HIBERNIA NATIONAL BANK
By
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, its
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Date:
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STATE OF MINNESOTA,
COUNTY OF .
On this day of , 1999, before me
appeared TIMOTHY COPE, to me known, who, being by me duly sworn, did say:
That he is the Chief Financial Officer of LAKES GAMING, INC.,
Minnesota corporation, and that the foregoing instrument was signed in behalf of
said corporation by authority of its Managers and Members, and said Appearer
acknowledged said instrument to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
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NOTARY PUBLIC in and for
.
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SUBORDINATION AGREEMENT -- PAGE 6