1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
SUBORDINATION AGREEMENT
GRANTED BY LAKES GAMING , INC.,
IN FAVOR OF HIBERNIA NATIONAL BANK
- --------------------------------------------------------------------------------
This Subordination Agreement (the "Agreement") is entered into
as of May 28, 1999, 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 Tunica-Biloxi Tribe of Louisiana
(hereinafter referred to as the "Tribe"), a federally recognized Indian
tribe, to Lakes Gaming, whether such debts, liabilities and obligations
now exist or are hereafter incurred or arise, or whether the obligation
of the Tribe 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.
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 Bank"), 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 Tribe under the Hibernia Documents,
Lakes Gaming hereby agrees, subject to the terms of that certain
Intercreditor Agreement dated May 28, 1999, between Hibernia Bank,
Lakes Gaming and Grand Coushatta of Louisiana, LLC-Tunica-Biloxi, as
follows:
(a) To subordinate, and does hereby subordinate, the payment by the
Tribe of the Subordinated Claims, together with any and all interest
accrued or to accrue thereon, to the payment to Hibernia Bank of any
and all debts, liabilities and obligations for which the Tribe may now
or hereafter be under obligation to Hibernia Bank (the "Hibernia
Indebtedness"), under:
(i) that certain Equipment Loan Agreement dated May 28,
1999, between Hibernia Bank, as lender, and the
Tribe, as borrower (herein referred to as the "Loan
Agreement");
(ii) that certain Promissory Note dated May 28, 1999,
executed by the Tribe in favor
2
of Hibernia Bank in the original principal sum of
$6,000,000.00 (herein referred to as the "Note");
(iii) that certain Commercial Security Agreement dated May
28, 1999, executed by the Tribe, as debtor, in favor
of Hibernia Bank, as secured party, which agreement
covers certain equipment and machinery more fully
described therein (the "Hibernia Security
Agreement");
(iv) that certain Dominion Account Agreement dated May 28,
1999, executed by the Tribe, The Cottonport Bank, Hibernia,
Lakes Gaming and Grand Casinos of Louisiana L.L.C.
--Tunica-Biloxi (the "Hibernia Dominion Account Agreement");
and
(v) all Non Standard Financing Statements executed by the
Tribe, as the debtor, in favor of the Hibernia Bank, as the
secured party, regarding the Collateral (as defined in the
Hibernia Security Agreement and/or the Dominion Account
Agreement) which instruments are recorded in the public
records of Avoyelles Parish, Louisiana, (the Loan Agreement,
Note, Hibernia Security Agreement, Hibernia Dominion Account
Agreement and Hibernia Financing Statement 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 Tribe
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 Bank
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 Bank and Lakes Gaming will promptly pay such amounts to
Hibernia Bank to be credited and applied to any Hibernia Indebtedness
(principal and/or interest) then owing to Hibernia Bank by the Tribe,
whether matured or unmatured;
(d) That any liens, security interests, judgments liens, charges or
other encumbrances upon the Tribe's assets 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 Tribe's assets securing payment of the Hibernia
Indebtedness;
3
(e) If Lakes Gaming forecloses upon any of the Subordinated Claims or
obtains possession of the Tribe's property in lieu of foreclosure, all
assets of the Tribe or proceeds thereof obtained thereby shall be held
in trust by Lakes Gaming on behalf of Hibernia Bank and Lakes Gaming
will promptly pay such amounts to Hibernia Bank to be credited and
applied to any Hibernia Indebtedness (principal and/or interest) then
owing to Hibernia Bank by the Tribe, whether matured or unmatured;
(f) That, upon any distribution of the assets or readjustment of
indebtedness of the Tribe, 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 the Tribe to the payment or liquidation
thereof, either in whole or in part, Hibernia Bank shall be entitled to
receive payment in full of any and all of the Hibernia Indebtedness
then owing to Hibernia Bank by the Tribe 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 Bank.
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 Bank and Lakes Gaming.
8. Hibernia Bank 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.
LAKES GAMING, INC.
By: s/ Timothy Cope
-----------------------------------------
Timothy Cope, Its Chief Financial Officer
ACCEPTED:
4
HIBERNIA NATIONAL BANK
By s/ Christopher Haskew
--------------------------------------------
Christopher Haskew, its Vice President
Date: May 28, 1999