EXHIBIT 10.1
EXECUTION COPY
FINANCING AGREEMENT
Financing Agreement, dated as of February 15, 2006, by and among Lakes
Entertainment, Inc., a Minnesota corporation (the "Parent"), the subsidiaries of
the Parent listed as a "Borrower" on the signature pages hereto (each a
"Borrower" and collectively, the "Borrowers"), each other subsidiary of the
Parent that becomes a "Guarantor" in accordance with the terms hereof (each a
"Guarantor" and collectively, the "Guarantors"), the financial institutions from
time to time party hereto (each a "Lender" and collectively, the "Lenders"), and
PLKS Funding, LLC, a Delaware limited liability company ("PLKS"), as a Lender
and as agent for the Lenders (in such capacity, the "Agent").
RECITALS
The Borrowers have asked the Lenders to extend credit to the Borrowers
consisting of term loans in the aggregate principal amount of up to $50,000,000
(the "Financing Facility"). The proceeds of the term loan shall be used to
refinance existing debt and for other general corporate and other working
capital purposes of the Borrowers and to pay fees and expenses related to this
Agreement and the transactions contemplated herein. The Lenders are severally,
and not jointly, willing to extend such credit to the Borrowers subject to the
terms and conditions hereinafter set forth.
In consideration of the premises and the covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
Section 1.01 Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means each debtor, customer or obligor in any way
obligated on or in connection with any Account Receivable.
"Account Receivable" means, with respect to any Person, any and all
rights of such Person to payment for goods sold and/or services rendered,
including accounts, general intangibles, payment intangibles and any and all
such rights evidenced by chattel paper, instruments or documents, whether due or
to become due and whether or not earned by performance, and whether now or
hereafter acquired or arising in the future, and any proceeds arising therefrom
or relating thereto.
"Action" has the meaning specified therefor in Section 11.12.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power,
directly or indirectly, either to (i) vote 10% or more of the Capital Stock
having ordinary voting power for the election of directors of such Person or
(ii) direct or cause the direction of the management and policies of such Person
whether by contract or otherwise. Notwithstanding anything herein to the
contrary, in no event shall the Agent or any Lender be considered an "Affiliate"
of any Loan Party.
"After Acquired Property" has the meaning specified therefor in
Section 6.01(o).
"Agent" has the meaning specified therefor in the preamble hereto.
"Agent Advances" has the meaning specified therefor in Section
9.08(a).
"Agent's Account" means an account at a bank designated by the Agent
from time to time as the account into which the Loan Parties shall make all
payments to the Agent for the benefit of the Agent and the Lenders under this
Agreement and the other Loan Documents.
"Agreement" means this Financing Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.
"Assignment and Acceptance" means an assignment and acceptance entered
into by an assigning Lender and an assignee, and accepted by the Agent, in
accordance with Section 11.07 hereof and substantially in the form of Exhibit F
hereto or such other form acceptable to the Agent.
"Authorized Officer" means, with respect to any Person, the chief
executive officer, chief financial officer, president, general counsel, or
executive vice president of such Person.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
Section 101, et seq.), as amended, and any successor statute.
"Berman Employment Agreement" means the Employment Agreement, dated as
of the date hereof, between Lyle Berman and the Parent.
"Berman Loan" means the loan made under that certain Loan Agreement,
dated as of December 15, 2005, among Parent, Lakes Poker Tour, LLC, and the Lyle
Berman Family Partnership (which is to be repaid in full with the proceeds of
the initial Loan made on the date hereof).
"Blocked Account" has the meaning specified therefor in Section
7.01(a).
"Blocked Account Agreement" means a control agreement in form and
substance reasonably acceptable to the Agent with respect to a Blocked Account.
"Blocked Account Bank" has the meaning specified therefor in Section
7.01(a).
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
-2-
"Board of Directors" means, with respect to any Person, the board of
directors (or comparable managers) of such Person or any committee thereof duly
authorized to act on behalf of the board.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day on
which banking institutions located in any such states are closed.
"Business Plan" shall mean Parent's business plan as updated at least
semi-annually and which is intended to reflect anticipated revenues and expenses
related to corporate overhead for at least the following six month period, new
projects up to $5,000,000 in the aggregate, and funds needed in the reasonable
judgment of the Parent for the development, funding and operation of any
Projects for at least the following six month period (including guaranteed
minimum payments to Indian Tribes with respect thereto) or new projects in
accordance with the terms hereof.
"Capital Expenditures" means, with respect to any Person for any
period, the sum of (i) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that in accordance with GAAP are or should be
included in "property, plant and equipment" or in a similar fixed asset account
on its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations paid or payable during such period,
and (ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or fixed assets of, or the Capital Stock
of, any other Person.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"Capitalized Lease" means, with respect to any Person, any lease of
real or personal property by such Person as lessee which is (i) required under
GAAP to be capitalized on the balance sheet of such Person or (ii) a transaction
of a type commonly known as a "synthetic lease" (i.e. a lease transaction that
is treated as an operating lease for accounting purposes but with respect to
which payments of rent are intended to be treated as payments of principal and
interest on a loan for Federal income tax purposes).
"Capitalized Lease Obligations" means, with respect to any Person,
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Change in Law" has the meaning specified therefor in Section 3.04(a).
-3-
"Change of Control" means each occurrence of any of the following:
(a) the acquisition, directly or indirectly, by any person or group
(within the meaning of Section 13(d)(3) of the Exchange Act) of beneficial
ownership of more than 33% of the aggregate outstanding voting power of the
Capital Stock of the Parent;
(b) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Parent
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Parent was approved by
a vote of at least a majority the directors of the Parent then still in office
who were either directors at the beginning of such period, or whose election or
nomination for election was previously approved) cease for any reason to
constitute a majority of the Board of Directors of the Parent;
(c) the Parent shall cease to have beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of 100% of the aggregate voting power of the
Capital Stock of each other Loan Party, free and clear of all Liens (other than
any Liens granted hereunder and Permitted Liens);
(d) (i) any Loan Party consolidates or amalgamates with or merges into
another entity (other than as permitted by Section 6.02(c)), or conveys,
transfers or leases all or substantially all of its property and assets to
another Person, or (ii) any entity consolidates or amalgamates with or merges
into any Loan Party in a transaction pursuant to which the outstanding voting
Capital Stock of such Loan Party is reclassified or changed into or exchanged
for cash, securities or other property, other than any such transaction
described in this clause (ii) in which either (A) in the case of any such
transaction involving the Parent, no person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) has, directly or indirectly, acquired
beneficial ownership of more than 33% of the aggregate outstanding voting
Capital Stock of the Parent or (B) in the case of any such transaction involving
a Loan Party other than the Parent, the Parent has beneficial ownership of 100%
of the aggregate voting power of all Capital Stock of the resulting, surviving
or transferee entity; or
(e) Lyle Berman is no longer actively involved in the day to day
operations and management of the business of the Parent (other than as a result
of his death).
"Collateral" means all of the property and assets and all interests
therein and proceeds thereof now owned or hereafter acquired by any Person upon
which a Lien is granted or purported to be granted by such Person as security
for all or any part of the Obligations.
"Collateral Assignment of Life Insurance Policy" shall mean a
collateral assignment of the Life Insurance Policy whereby Loan Parties shall
collaterally assign all of Credit Parties' rights in the Life Insurance Policy
to Agent for itself and the benefit of the Lenders, in form and substance to
Agent in its Permitted Discretion.
"Commitments" means, with respect to each Lender, the commitment of
such Lender to make the Loan to the Borrowers in the amount set forth in
Schedule 1.01(A) hereto, as the same may be terminated or reduced from time to
time in accordance with the terms of this Agreement.
-4-
"Common Stock" means the Common Stock of the Parent, $0.01 par value.
"Contingent Obligation" means, with respect to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to make
take-or-pay or similar payments, if required, regardless of nonperformance by
any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (B) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, assets, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (D) otherwise to assure or
hold harmless the holder of such primary obligation against loss in respect
thereof. The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation with
respect to which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable pursuant
to the terms of the instrument evidencing such Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability with
respect thereto (assuming such Person is required to perform thereunder), as
determined by such Person in good faith.
"Current Value" has the meaning specified therefor in Section 6.01(o).
"Default" means an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default.
"Disposition" means any transaction, or series of related
transactions, pursuant to which any Person or any of its Subsidiaries sells,
assigns, transfers or otherwise disposes of any property or assets (whether now
owned or hereafter acquired) to any other Person, in each case, whether or not
the consideration therefor consists of cash, securities or other assets owned by
the acquiring Person.
"Dollar," "Dollars" and the symbol "$" each means lawful money of the
United States of America.
"Effective Date" means the date, on or before February 15, 2006, on
which (i) except as provided in this Agreement or otherwise agreed by the Agent
(as determined by the closing of the transactions contemplated hereby and the
provisions hereunder), all definitive loan documentation, including with
limitation all documentation relating to the Warrants and Preferred Stock is
executed by the Loan Parties and the Lender, (ii) all of the conditions
precedent set forth in Section 4.01 are satisfied or waived and (iii) the
initial $25,000,000 Loan is made.
-5-
"Employee Plan" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained (or that was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of any Loan Party or any of its ERISA
Affiliates.
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Person or Governmental Authority involving violations of Environmental Laws or
Releases of Hazardous Materials (i) from any assets, properties or businesses
owned or operated by any Loan Party or any of its Subsidiaries or any
predecessor in interest; (ii) from adjoining properties or businesses; or (iii)
onto any facilities which received Hazardous Materials generated by any Loan
Party or any of its Subsidiaries or any predecessor in interest.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the Federal
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as such laws may be amended or otherwise modified from time to time, and
any other present or future federal, state, local or foreign statute, ordinance,
rule, regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or establishing
standards of conduct for protection of the environment or other government
restrictions relating to the protection of the environment or the Release,
deposit or migration of any Hazardous Materials into the environment.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by any Loan Party or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by any Loan Party or any of its
Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case, as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
such Person is a member
-6-
and which would be deemed to be a "controlled group" within the meaning of
Sections 414(b), (c), (m) and (o) of the Internal Revenue Code.
"Event of Default" means any of the events set forth in Section 8.01.
"Excess Cash Amount" shall mean, on each Excess Cash Payment Date, the
amount equal to (which amount shall in no event be less than $0) (v) cash on
hand on such Excess Cash Payment Date, less (w) cash or in-kind payments due in
the next six months on account of any contractual or other arrangements such as
(but not limited to) management and consulting agreements, promissory notes,
loan agreement and other agreements with Indian Tribes or related to the
Projects or other projects in accordance with the terms hereof, less (x) cash
received by a Loan Party as a result of the incurrence of construction
indebtedness in excess of the amount referred to in (w) above, less (y) the
amount of cash necessary in the reasonable judgment of the Loan Parties for the
development, funding, and operation of any Projects or new projects developed in
accordance herewith over the next six months, less (z) sufficient cash which, in
the reasonable judgment of the Parent, will fund six months of corporate
overhead, in the case of (x), (y), and (z), in accordance with the Business
Plan.
"Excess Cash Payment Date" shall mean the last day of each June and
December during the term hereof
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Account" has the meaning given thereto in the Security
Agreement.
"Excluded Subsidiary" shall mean those Subsidiaries listed on Schedule
1.01(C) and any newly-formed Subsidiary which the Parent has notified the Agent
that such newly-formed Subsidiary should be an Excluded Subsidiary pursuant to
Section 6.01(t).
"Extraordinary Receipts" means any cash in excess of $500,000 in the
aggregate received since the Effective Date by the Parent or any of its
Subsidiaries not in the ordinary course of business (and not consisting of
proceeds described in Section 2.05(c)(i), (ii) or (iii) hereof), including,
without limitation, (i) foreign, United States, state or local tax refunds, (ii)
pension plan reversions, (iii) proceeds of insurance, (iv) judgments, proceeds
of settlements or other consideration of any kind in connection with any cause
of action, (v) condemnation awards (and payments in lieu thereof), (vi)
indemnity payments and (vii) any purchase price adjustment received in
connection with any purchase agreement. Dividends and distributions received by
Parent or any of its Subsidiaries shall be deemed to be received in the ordinary
course of business.
"Facility" means the real property in Minnesota and California owned
by the Loan Party identified with respect to such property and as more fully set
forth on Schedule 5.01(p) hereto, including, without limitation, the land on
which each such facility is located, all buildings and other improvements
thereon, all fixtures located at or used in connection with each such facility,
all whether now or hereafter existing.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal to, for each day during such period, the weighted average
of the rates on overnight Federal
-7-
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Filing Covenant" has the meaning specified therefor in Section
6.01(q).
"Financial Statements" means (i) the audited consolidated balance
sheet of the Parent and its Subsidiaries for the Fiscal Year ended January 2,
2005, and the related consolidated statement of operations, shareholders' equity
and cash flows for the Fiscal Year then ended, and (ii) the monthly unaudited
balance sheet of the Parent and its Subsidiaries for the month ending
immediately prior to the Effective Date (or if not yet available, the second
immediately preceding month).
"Financing Facility" has the meaning specified therefor in the
recitals hereto.
"Fiscal Quarter" means the fiscal quarter of the Parent and its
Subsidiaries consistent with Parent's existing accounting practices.
"Fiscal Year" means the fiscal year of the Parent and its Subsidiaries
consistent with Parent's existing accounting practices.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis.
"Grand Casino Litigation" means that certain litigation pertaining to
the establishment of the Parent as a public corporation via a distribution of
its common stock to the shareholders of Grand Casino and the agreement governing
the sharing and allocation of tax benefits accruing to Grand Casinos and certain
Affiliates of Grand Casinos.
"Governmental Authority" means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantor" means each other Person which guarantees, pursuant to
Section 6.01(b) or otherwise, all or any part of the Obligations.
"Guaranty" means each guaranty substantially in the form of Exhibit A,
made by any other Guarantor in favor of the Agent for the benefit of the Agent
and the Lenders pursuant to Section 6.01(b) or otherwise.
"Hazardous Material" means (a) any element, compound or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws or that is likely to cause immediately, or at
-8-
some future time, harm to or have an adverse effect on, the environment or risk
to human health or safety, including, without limitation, any pollutant,
contaminant, waste, hazardous waste, toxic substance or dangerous good which is
defined or identified in any Environmental Law and which is present in the
environment in such quantity or state that it contravenes any Environmental Law;
(b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any
substance exhibiting a hazardous waste characteristic, including, without
limitation, corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) any raw materials, building
components (including, without limitation, asbestos-containing materials) and
manufactured products containing hazardous substances listed or classified as
such under Environmental Laws.
"Hedging Agreement" means any interest rate, foreign currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement.
"Highest Lawful Rate" means, with respect to the Agent or any Lender,
the maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations under laws applicable to the Agent or such Lender which are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than applicable laws now allow.
"IGRA" has the meaning specified therefor in Section 5.01(i).
"Inactive Subsidiary" means the Subsidiaries listed on Schedule
1.01(B) hereto.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money; (ii) all obligations of
such Person for the deferred purchase price of property or services (other than
undisputed trade payables or other undisputed accounts payable incurred in the
ordinary course of such Person's business and not outstanding for more than 120
days after the date such payable was created, which trade payables and other
accounts payable shall not be deemed to constitute Indebtedness); (iii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments or upon which interest payments are customarily made; (iv)
all reimbursement, payment or other obligations and liabilities of such Person
created or arising under any conditional sales or other title retention
agreement with respect to property used and/or acquired by such Person, even
though the rights and remedies of the lessor, seller and/or lender thereunder
may be limited to repossession or sale of such property; (v) all Capitalized
Lease Obligations of such Person; (vi) all obligations and liabilities,
contingent or otherwise, of such Person, in respect of letters of credit,
acceptances and similar facilities; (vii) all obligations and liabilities,
calculated on a basis satisfactory to the Agent and in accordance with accepted
practice, of such Person under Hedging Agreements; (viii) all monetary
obligations under any receivables factoring, receivable sales or similar
transactions and all monetary obligations under any synthetic lease, tax
ownership/operating lease, off-balance sheet financing or similar financing;
(ix) all Contingent Obligations;
-9-
(x) liabilities incurred under Title IV of ERISA with respect to any plan (other
than a Multiemployer Plan) covered by Title IV of ERISA and maintained for
employees of such Person or any of its ERISA Affiliates; (xi) withdrawal
liability incurred under ERISA by such Person or any of its ERISA Affiliates
with respect to any Multiemployer Plan; and (xii) all obligations referred to in
clauses (i) through (xi) of this definition of another Person secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) a Lien upon property owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness. The Indebtedness of any Person shall include the Indebtedness of
any partnership of or joint venture in which such Person is a general partner or
a joint venturer. Notwithstanding the foregoing, the Indebtedness of any Loan
Party shall not include contractual obligations to make guarantied minimum
payments to Indian Tribes, in accordance with the Projects, or other projects
developed to the extent permitted hereunder, it being understood and agreed that
such obligations shall be deemed to be loans subject to the provisions of
Section 6.02(e).
"Indemnified Matters" has the meaning specified therefor in Section
11.15.
"Indemnitees" has the meaning specified therefor in Section 11.15.
"Indian Tribe" means an Indian tribe or an instrumentality, component,
or other Affiliate thereof.
"Initial Shares" has the meaning specified in Section 2.01(b)(i).
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, or extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended (or any successor statute thereto) and the regulations thereunder.
"Inventory" means, with respect to any Person, all goods and
merchandise of such Person, including, without limitation, all raw materials,
work-in-process, packaging, supplies, materials and finished goods of every
nature used or usable in connection with the shipping, storing, advertising or
sale of such goods and merchandise, whether now owned or hereafter acquired, and
all such other property the sale or other disposition of which would give rise
to an Account Receivable or cash.
"Iowa" shall mean those certain two casinos on the land of the Iowa
Tribe of Oklahoma in Oklahoma.
"Jamul" shall mean that certain casino on the Rancheria of the Jamul
Indian Village near San Diego, California.
"Jamul Indians" shall mean the Jamul Indian Village, a federally
recognized tribe.
-10-
"Jamul Development and Management Agreement" shall mean that certain
First Amended and Restated Memorandum of Agreement regarding Gaming Development
and Management Agreements, dated as of October 22, 2004, between the Jamul
Indians and Lakes Argovitz.
"Kickapoo Tribe" shall mean the Kickapoo Traditional Tribe of Texas
Indian Tribe.
"Kickapoo Indebtedness" shall mean Indebtedness or other obligations
of the Kickapoo Tribe owing to one or more Loan Parties in a principal amount
not to exceed $6,333,563.
"Lakes Argovitz" means Lakes Kean Argovitz Resorts-California, LLC, a
Delaware limited liability company.
"Lakes Gaming Michigan" means Great Lakes Gaming of Michigan, LLC, a
Minnesota limited liability company.
"Lakes Shingle Springs" means Lakes KAR-Shingle Springs, LLC, a
Delaware limited liability company.
"Lease" means any lease of real property to which any Loan Party or
any of its Subsidiaries is a party as lessor or lessee.
"Lender" has the meaning specified therefor in the preamble hereto.
"Liabilities" has the meaning specified therefor in Section 2.07.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Life Insurance Policy" shall mean one or more current, valid and
fully paid key man life insurance policies insuring the life of Lyle Berman in
the aggregate amount of $20,000,000 until payment in full in cash of the
Obligations and termination of the Commitments and (i) which provides that no
Person (other than pursuant to the Collateral Assignment of Life Insurance
Policy, Agent) has any rights thereto, (ii) is issued by a carrier and otherwise
is in form and substance acceptable to Agent in its Permitted Discretion, (iii)
expressly provides that it cannot be altered, amended or modified in any
material respect (including, without limitation, with respect to amounts of
coverage, beneficiaries and/or loss payees and additional insureds) or canceled
without thirty (30) calendar days' prior written notice to Agent and (iv) that,
pursuant to the Collateral Assignment of Life Insurance Policy, it inures to the
benefit of Agent, for the benefit of itself and the benefit of the Lenders.
"Loan" means, collectively, the loans made by the Lenders to the
Borrowers pursuant to Section 2.01.
-11-
"Loan Account" means an account maintained hereunder by the Agent on
its books of account at the Payment Office and, with respect to the Borrowers,
in which the Borrowers will be charged with all Loans made to, and all other
Obligations incurred by, the Borrowers.
"Loan Document" means this Agreement, any Guaranty, any Security
Agreement, any Pledge Agreement, any Mortgage, any UCC Filing Authorization
Letter, Collateral Assignment of Life Insurance Policy, the Warrants, the
Registration Rights Agreement, the Securities Purchase Agreement and any other
agreement, instrument, and other document executed and delivered at any time
pursuant hereto or thereto or otherwise evidencing or securing any Loan or any
other Obligation.
"Loan Party" means any Borrower and any Guarantor.
"Maintenance Covenant" has the meaning specified therefor in Section
6.01(q).
"Management and Consulting Agreements" shall mean, collectively, the
Jamul Development and Management Agreement, Pokagon Development Agreement,
Pokagon Management Agreement and Shingle Springs Development and Management
Agreement, and any other management, development or consulting or loan agreement
executed by a Loan Party and a third party (including an Indian Tribe) with
respect to a Project or a new project permitted in accordance with the terms
hereof.
"Material Adverse Effect" means a material adverse effect on any of
(i) the operations, business, assets, properties, condition (financial or
otherwise) or prospects of any Borrower or the Borrowers taken as a whole, (ii)
the ability of any Loan Party to perform any of its obligations under any Loan
Document to which it is a party, (iii) the legality, validity or enforceability
of this Agreement or any other Loan Document, (iv) the rights and remedies of
the Agent or any Lender under any Loan Document, or (v) the validity, perfection
or priority of a Lien in favor of the Agent for the benefit of the Lenders on
any of the Collateral. Notwithstanding the foregoing, in no event shall a
Material Adverse Effect be caused by any adverse litigation filed against any
Loan Party that prevents or enjoins the actual construction of the Pokagon,
Shingle Springs or Jamul (it being understood that such preventing or enjoining
could create an Event of Default under Section 8.01(v) if such section is
otherwise applicable).
"Material Contract" means, with respect to any Person, (i) all
contracts relating to the Projects (including, without limitation, that certain
proposed development, financing, and services agreement relating to Jamul) that
if terminated or violated could reasonably be expected to have a Material
Adverse Effect and (ii) each contract or agreement to which such Person or any
of its Subsidiaries is a party involving aggregate consideration payable to or
by such Person or such Subsidiary of $1,000,000 or more.
"Maturity Date" means February 15, 2009, or such earlier date on which
any Loan shall become due and payable in accordance with the terms of this
Agreement and the other Loan Documents.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto.
-12-
"Mortgage" means a mortgage, deed of trust or deed to secure debt, in
form and substance satisfactory to the Agent, made by a Loan Party in favor of
the Agent for the benefit of the Agent and the Lenders, securing the Obligations
and delivered to the Agent pursuant to Section 4.01(d), Section 6.01(b), Section
6.01(o) or otherwise.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Loan Party or any of its ERISA
Affiliates has contributed to, or has been obligated to contribute, at any time
during the preceding six (6) years.
"Net Cash Proceeds" means, (i) with respect to any Disposition by any
Person or any of its Subsidiaries, the amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of such Person
or such Subsidiary, in connection therewith after deducting therefrom only, (A)
reasonable expenses related thereto incurred by such Person or such Subsidiary
in connection therewith, (B) transfer taxes paid to any taxing authorities by
such Person or such Subsidiary in connection therewith, and (C) net income taxes
to be paid in connection with such Disposition (after taking into account any
tax credits or deductions and any tax sharing arrangements) and (ii) with
respect to the issuance or incurrence of any Indebtedness by any Person or any
of its Subsidiaries, or the sale or issuance by any Person or any of its
Subsidiaries of any shares of its Capital Stock, the aggregate amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment or disposition of deferred consideration)
by or on behalf of such Person or such Subsidiary in connection therewith, after
deducting therefrom only (A) reasonable expenses related thereto incurred by
such Person or such Subsidiary in connection therewith, (B) transfer taxes paid
by such Person or such Subsidiary in connection therewith and (C) net income
taxes to be paid in connection therewith (after taking into account any tax
credits or deductions and any tax sharing arrangements); in each case of clause
(i) and (ii) to the extent, but only to the extent, that the amounts so deducted
are (x) actually paid to a Person that, except in the case of reasonable
out-of-pocket expenses, is not an Affiliate of such Person or any of its
Subsidiaries and (y) properly attributable to such transaction or to the asset
that is the subject thereof.
"Notice of Borrowing" has the meaning specified therefor in Section
2.02(a).
"Obligations" means all present and future indebtedness, obligations,
and liabilities of each Loan Party to the Agent and the Lenders under the Loan
Documents, whether or not the right of payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured, unsecured, and whether or not
such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 8.01. Without limiting the generality of the foregoing,
the Obligations of each Loan Party under the Loan Documents include (a) the
obligation to pay principal, interest, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by such Person under
the Loan Documents, and (b) the obligation of such Person to reimburse any
amount in respect of any of the foregoing that the Agent or any Lender (in its
sole discretion) may elect to pay or advance on behalf of such Person.
-13-
"Operating Lease Obligations" means all obligations for the payment of
rent for any real or personal property under leases or agreements to lease,
other than Capitalized Lease Obligations.
"Parent" has the meaning specified therefor in the preamble hereto.
"Participant Register" has the meaning specified therefor in Section
11.07(g).
"Payment Office" means the Agent's office located at 623 Fifth Avenue,
32nd Floor, New York, New York 10022, or at such other office or offices of the
Agent as may be designated in writing from time to time by the Agent to the
Parent.
"Pawnee" shall mean those certain three (3) casinos on the land of the
Pawnee Nation in Oklahoma.
"Pawnee Guaranty" means a guaranty by a Loan Party in a maximum amount
not to exceed $15,000,000 in respect of Pawnee.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Indebtedness" means:
(a) any Indebtedness owing to the Agent and any Lender under this
Agreement and the other Loan Documents;
(b) to the extent not otherwise constituting Permitted Indebtedness,
any other Indebtedness listed on Schedule 6.02(b), and the extension of
maturity, refinancing or modification of the terms thereof; provided, however,
that (i) such extension, refinancing or modification is pursuant to terms that
are not less favorable to the Loan Parties and the Lenders than the terms of the
Indebtedness being extended, refinanced or modified and (ii) after giving effect
to such extension, refinancing or modification, the amount of such Indebtedness
is not greater than the amount of Indebtedness outstanding immediately prior to
such extension, refinancing or modification;
(c) Indebtedness evidenced by Capitalized Lease Obligations entered
into in order to finance Capital Expenditures made by the Loan Parties in
accordance with the provisions of Section 6.02(g), which Indebtedness, when
aggregated with the principal amount of all Indebtedness incurred under this
clause (c) and clause (d) of this definition, does not exceed $250,000 at any
time outstanding;
(d) Indebtedness permitted by clauses (d), (e), and (j) of the
definition of "Permitted Liens";
(e) the Pawnee Guaranty and other guaranties, other Contingent
Obligations and other Indebtedness permitted under Section 6.02(e);
(f) with the written consent of the Agent, Subordinated Indebtedness;
-14-
(g) [Intentionally Omitted];
(h) Indebtedness of any Loan Party to a Borrower or of a Borrower to a
Loan Party.
(i) Indebtedness of Lakes Jamul Development, LLC and Lakes
Gaming-Mississippi, LLC in an aggregate principal amount not in excess of
$600,000,000, to be incurred after the Effective Date: (A) in order to provide
financing for Lakes Jamul Development, LLC, with respect to the construction of
Jamul (the "Jamul Indebtedness") which Jamul Indebtedness may be secured by
Liens on any secured promissory note (and collateral therefor) evidencing such
construction financing and on other assets arising solely out of Jamul and owned
by Lakes Jamul Development LLC, to which Liens the Agent will subordinate any
Liens of the Agent in the same assets (other than the mortgage of the Agent in
respect thereof); and (B) for Lakes Gaming-Mississippi, LLC to finance the
construction of Vicksburg (the "Vicksburg Indebtedness"), which Vicksburg
Indebtedness may be secured by Liens solely on assets of Vicksburg, to which
Liens the Agent will subordinate any Liens of the Agent in the same assets, in
each case in accordance with the Project Business Plan.
"Permitted Investments" means (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case, maturing within six months from the date of acquisition thereof; (ii)
commercial paper, maturing not more than 270 days after the date of issue rated
P-1 by Moody's or A-1 by Standard & Poor's; (iii) certificates of deposit
maturing not more than 270 days after the date of issue, issued by commercial
banking institutions and money market or demand deposit accounts maintained at
commercial banking institutions, each of which is a member of the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000 (iv) repurchase agreements having maturities of not
more than 90 days from the date of acquisition which are entered into with major
money center banks included in the commercial banking institutions described in
clause (iii) above and which are secured by readily marketable direct
obligations of the United States Government or any agency thereof, (v) money
market accounts maintained with mutual funds having assets in excess of
$2,500,000,000; and (vi) tax exempt securities rated A or higher by Moody's or
A+ or higher by Standard & Poor's.
"Permitted Liens" means:
(a) Liens securing the Obligations;
(b) Liens for taxes, assessments and governmental charges the payment
of which is not required under Section 6.01(c);
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and other similar Liens arising (provided they are
subordinate to the Agent's Liens on Collateral) in the ordinary course of
business and securing obligations (other than Indebtedness for borrowed money)
that are not overdue by more than 30 days or are being contested in good faith
and by appropriate proceedings promptly initiated and diligently
-15-
conducted, and a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(d) to the extent not otherwise constituting Permitted Liens, Liens
described on Schedule 6.02(a), but not the extension of coverage thereof to
other property or the extension of maturity, refinancing or other modification
of the terms thereof or the increase of the Indebtedness secured thereby;
(e) (i) purchase money Liens on equipment acquired or held by any Loan
Party or any of its Subsidiaries in the ordinary course of its business to
secure the purchase price of such equipment or Indebtedness incurred solely for
the purpose of financing the acquisition of such equipment or (ii) Liens
existing on such equipment at the time of its acquisition; provided, however,
that (A) no such Lien shall extend to or cover any other property of any Loan
Party or any of its Subsidiaries, (B) the principal amount of the Indebtedness
secured by any such Lien shall not exceed the lesser of 80% of the fair market
value or the cost of the property so held or acquired and (C) the aggregate
principal amount of Indebtedness secured by any or all such Liens shall not
exceed $1,000,000 during the term of this Agreement;
(f) deposits and pledges of cash securing (i) obligations incurred in
respect of workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (ii) the performance of bids, tenders,
leases, contracts (other than for the payment of money) and statutory
obligations or (iii) obligations on surety or appeal bonds, but only to the
extent such deposits or pledges are made or otherwise arise in the ordinary
course of business and secure obligations not past due;
(g) easements, zoning restrictions and similar encumbrances on real
property and minor irregularities in the title thereto that do not (i) secure
obligations for the payment of money or (ii) materially impair the value of such
property or its use by any Loan Party or any of its Subsidiaries in the normal
conduct of such Person's business;
(h) Liens securing Indebtedness permitted by subsections (b) and (c)
of the definition of Permitted Indebtedness;
(i) [Intentionally Omitted]
(j) Liens in the Pokagon Account securing obligations of Lakes Gaming
Michigan under the Pokagon Development Agreement;
(k) [Intentionally Omitted]
(l) other Liens securing guaranties, other Contingent Obligations and
other Indebtedness permitted by subsection (e) of the definition of Permitted
Indebtedness, but only to the extent such Liens exist as of the Effective Date,
are thereafter granted as contemplated by or in accordance with the Business
Plan, or are otherwise granted with the written consent of the Required Lenders
(not to be unreasonably withheld if no Event of Default shall have occurred and
be continuing); and
-16-
(m) Liens securing Indebtedness permitted by subsection (i) of the
definition of Permitted Indebtedness.
"Periodic Project Development Report" has the meaning specified
therefor in Section 6.01(a).
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.
"Phase I ESA" has the meaning specified therefor in Section 4.01(d).
"Plan" means any Employee Plan or Multiemployer Plan.
"Plan Reconciliation Report" shall mean a report prepared by the
Parent listing the financial projections of the Parent and its Subsidiaries
delivered pursuant to Section 6.01(a)(vii) for the most recent Fiscal Quarter
along with actual financial results together with an summary and analysis
prepared by the chief financial officer of the Parent discussing the deviations,
if any.
"Pledge Agreement" means a Pledge and Security Agreement made by each
Loan Party in favor of the Agent for the benefit of the Lenders, substantially
in the form of Exhibit C, securing the Obligations and delivered to the Agent.
"Pokagon" shall mean that certain casino on the land of the Pokagon
Band of Potawatomi Indians in New Buffalo Township, Michigan.
"Pokagon Account" means the Account (account number 15522000 or
5522000) maintained at US Bank National Association referred to and as defined
in the Pokagon Development Agreement which at any time shall not contain an
amount in the aggregate in excess of $2,500,000.
"Pokagon Indians" shall mean the Pokagon Band of Potawatomi Indians, a
federally recognized tribe.
"Pokagon Development Agreement" shall mean that certain Third Amended
and Restated Development Agreement, dated as of January 25, 2006, between the
Pokagon Band of Potawatomi Indians, and Great Lakes Gaming of Michigan, LLC
"Pokagon Management Agreement" shall mean that certain Third Amended
and Restated Management Agreement, dated as of January 25, 2006, between the
Pokagon Band of Potawatomi Indians, and Great Lakes Gaming of Michigan, LLC.
"Post-Default Rate" means a rate of interest per annum equal to the
rate of interest otherwise in effect from time to time pursuant to the terms of
this Agreement plus 6.00%.
"Preferred Certificate of Designation" means the Parent's Preferred
Certificate of Designation, dated as of the date hereof.
-17-
"Preferred Shares" has the meaning specified therefor in the
Securities Purchase Agreement.
"Prentice" has the meaning specified therefor in the preamble hereto.
"Project Business Plan" shall mean the project business plan of the
Parent, dated as of the date hereof, and attached as Exhibit G hereto which
shall include development plans for each Project including, without limitation,
the square footage of each casino to be developed on each such Project, the
approximate number of slot machines and other gaming devices or tables to be
included in such Project and the amount of construction financing (it being
understood that a variance of up to 15% of any construction financing shall be
considered an acceptable variance in the amount of such construction financing),
by phase, to be required in respect of each such Project.
"Pro Rata Share" means (i) with respect to the initial $25,000,000
Loan made on the Effective Date, the percentage obtained by dividing (A) such
Lender's Commitment by (B) the Total Commitment; and (ii) otherwise, a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Lender's portion of the Loan and the denominator of which shall be the aggregate
unpaid principal amount of the Loan.
"Projects" shall mean the currently existing projects at Pokagon,
Shingle Springs, Vicksburg, Jamul, Iowa or Pawnee.
"Rating Agencies" has the meaning specified therefor in Section 2.07.
"Reference Bank" means JPMorgan Chase Bank, its successors or any
other commercial bank designated by the Agent to Parent from time to time.
"Reference Rate" means the rate of interest publicly announced by the
Reference Bank in New York, New York from time to time as its reference rate,
base rate or prime rate. The reference rate, base rate or prime rate is
determined from time to time by the Reference Bank as a means of pricing some
loans to its borrowers and neither is tied to any external rate of interest or
index nor necessarily reflects the lowest rate of interest actually charged by
the Reference Bank to any particular class or category of customers. Each change
in the Reference Rate shall be effective from and including the date such change
is publicly announced as being effective.
"Register" has the meaning specified therefor in Section 11.07(d).
"Registered Loan" has the meaning specified therefor in Section
11.07(d).
"Registration Rights Agreement" means the Registration Rights
Agreement, in form and substance satisfactory to the Agent, by and between the
Parent and the Lenders, with respect to certain registration rights of the
Lenders with respect to the Warrant Shares.
"Regulation T", "Regulation U" and "Regulation X" mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.
-18-
"Related Fund" means, with respect to any Person, an Affiliate of such
Person, or a fund or account managed by such Person or an Affiliate of such
Person.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
perform any other actions authorized by 42 U.S.C. Section 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
(other than an event not subject to the provision for 30-day notice to the PBGC
under the regulations promulgated under such Section).
"Required Lenders" means Lenders whose Pro Rata Shares of the Loan
aggregate at least 51%.
"SEC" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of the date hereof, among the Parent and the investors
listed on the Schedule of Buyers attached thereto.
"Securitization" has the meaning specified therefor in Section 2.07.
"Securitization Parties" has the meaning specified therefor in Section
2.07.
"Security Agreement" means a Security Agreement made by a Loan Party
in favor of the Agent for the benefit of the Agent and the Lenders,
substantially in the form of Exhibit B, securing the Obligations and delivered
to the Agent.
"Shingle Springs" shall mean that certain casino on the Rancheria of
the Shingle Springs Band of Miwok Indians in El Dorado County, California.
-19-
"Shingle Springs Indians" shall mean the Shingle Spring Band of Miwok
Indians, a federally recognized tribe.
"Shingle Springs Development and Management Agreement" shall mean that
certain First Amended and Restated Memorandum of Agreement regarding Gaming
Development and Management Agreement, dated as of October 13, 2003, between
Shingle Springs Indians and Lakes Shingle Springs, as amended by that certain
June 16, 2004 Amendment to First Amended and Restated Memorandum of Agreement
regarding Gaming Development and Management Agreement, dated June 16, 2004,
between the Shingle Springs Indians and Lakes Shingle Springs.
"Solvent" means, with respect to any Person on a particular date, that
on such date (i) the fair value of the property of such Person is not less than
the total amount of the liabilities of such Person, (ii) the present fair
salable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its existing debts
as they become absolute and matured, (iii) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. and any successor thereto.
"Subordinated Indebtedness" means Indebtedness of any Loan Party the
terms of which are satisfactory to the Agent and which has been expressly
subordinated in right of payment to all Indebtedness of such Loan Party under
the Loan Documents (i) by the execution and delivery of a subordination
agreement, in form and substance satisfactory to the Agent, or (ii) otherwise on
terms and conditions (including, without limitation, subordination provisions,
payment terms, interest rates, covenants, remedies, defaults and other material
terms) satisfactory to the Agent.
"Subsidiary" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity (i) the accounts of
which would be consolidated with those of such Person in such Person's
consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding
Capital Stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (C) in the case of a trust, estate, association, joint venture or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person. In no
event shall an Inactive Subsidiary be considered a Subsidiary unless pursuant to
Section 6.01(s) hereof. Notwithstanding the foregoing, except with respect to
the relevant
-20-
reporting obligations in Section 6.01(a), World Poker shall not be deemed a
Subsidiary under this Agreement (but for purposes of Section 6.01(a) only, World
Poker shall be deemed a Subsidiary only in each case where the applicable
reporting requirement has been historically prepared by the Parent on a
consolidated basis).
"Taxes" has the meaning specified therefor in Section 2.08(a).
"Termination Event" means (i) a Reportable Event with respect to any
Employee Plan, (ii) any event that causes any Loan Party or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Internal Revenue Code, (iii) the filing of a notice of intent to terminate an
Employee Plan or the treatment of an Employee Plan amendment as a termination
under Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to
terminate an Employee Plan, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Employee Plan.
"Title Insurance Policy" means a mortgagee's loan policy, in form and
substance satisfactory to the Agent, together with all endorsements made from
time to time thereto, including, but not limited to, a zoning endorsement,
issued by or on behalf of a title insurance company satisfactory to the Agent,
insuring the Lien created by a Mortgage in an amount and on terms satisfactory
to the Agent, delivered to the Agent.
"Total Commitment" means the sum of the amounts of the Lenders'
Commitments.
"Transferee" has the meaning specified therefor in Section 2.08(a).
"UCC Filing Authorization Letter" means a letter duly executed by each
Loan Party authorizing the Agent to file appropriate financing statements on
Form UCC-1 without the signature of such Loan Party in such office or offices as
may be necessary or, in the opinion of the Agent, desirable to perfect the
security interests purported to be created by each Security Agreement, each
Pledge Agreement and each Mortgage.
"Uniform Commercial Code" has the meaning specified therefor in
Section 1.03.
"Vicksburg" shall mean that certain casino owned by Lakes
Gaming-Mississippi, LLC on land near Vicksburg, Mississippi.
"WARN" has the meaning specified therefor in Section 5.01(aa).
"Warrants" has the meaning assigned to such term in the Securities
Purchase Agreement.
"Warrant Shares" has the meaning assigned to such term in the
Warrants.
"World Poker" means WPT Enterprises, Inc., a Delaware corporation.
-21-
"World Poker Collateral Shares" means 12,480,000 World Poker Shares
upon which a Lien is granted by Parent as security for all or any part of the
Obligations.
"World Poker Shares" means the Capital Stock of World Poker (as
adjusted for stock splits, stock dividends, reverse stock splits,
recapitalizations, reclassifications and similar events).
"WPT 25% Collateral Event" has the meaning specified therefor in the
Warrant.
"WPT 50% Collateral Event" has the meaning specified therefor in the
Warrant.
"WPT 75% Collateral Event" has the meaning specified therefor in the
Warrant.
"WPT Effective Date" has the meaning specified therefor in Section
6.01(q).
"WPT Legislation Event" has the meaning specified therefor in the
Warrant.
"WPT Registration Delay Payments" has the meaning specified therefor
in Section 6.01(q).
Section 1.02 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any right or interest in or to assets and properties of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
References in this Agreement to "determination" by the Agent include good faith
estimates by the Agent (in the case of quantitative determinations) and good
faith beliefs by the Agent (in the case of qualitative determinations).
Section 1.03 Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements. All terms used in this Agreement which are defined in
Article 8 or Article 9 of the Uniform Commercial Code as in effect from time to
time in the State of New York (the "Uniform Commercial Code") and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein, provided that terms used herein which are defined in the Uniform
Commercial Code as in effect in the State
-22-
of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the Agent
may otherwise determine.
Section 1.04 Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
of fees or interest payable to the Agent or any Lender, such period shall in any
event consist of at least one full day.
ARTICLE II
THE LOANS
Section 2.01 Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
severally agrees to make the Loans to the Borrowers at any time and from time to
time from the Effective Date to the Maturity Date, or until the earlier
reduction of its Commitment to zero in accordance with the terms hereof, in an
aggregate principal amount of Loans at any time outstanding not to exceed the
amount of such Lender's Commitment, as such Commitment may be terminated or
reduced in accordance with the provisions of this Agreement. Notwithstanding
anything to the contrary contained herein, the Lenders shall not be obligated to
make Loans in an aggregate principal amount in excess of $35,000,000 unless (i)
9,480,000 (plus any Initial Shares included as provided below) of the World
Poker Collateral Shares have a market value for a prior 10 day volume weighted
average of $50,000,000 (it being understood that (x) in computing such market
value, the Parent may contribute for purposes of such calculation all or part of
the Initial Shares to attain such $50,000,000 market value and (y) that all or
any part of such Initial Shares may be withdrawn after being computed for such
purpose for more than 45 days if and to the extent that for the 10 day period
prior to such proposed withdrawal, the volume weighted average of 9,480,000 of
the World Poker Collateral Shares is at least equal to $50,000,000), and (ii)
either (A) construction financing has been drawn upon for the commencement of
construction for at least one of the following casinos in accordance with the
Project Business Plan and no litigation, governmental or regulatory, labor,
tribal or other action has had the effect of enjoining or preventing in any
material respect to the actual construction thereof : Shingle Springs, Pokagon
or Jamul, or (B) the Parent has received gross proceeds in an aggregate amount
of not less than $20,000,000 since the Effective Date from the issuance of the
Common Stock.
(b) The aggregate principal amount of the Loan made by the
Lenders shall not exceed the Total Commitment (and in the case of the Loan made
on the Effective Date, $25,000,000). Any principal amount of a Loan which is
repaid or prepaid may not be reborrowed. The Total Commitment shall be reduced
dollar-for-dollar by:
(i) the proceeds of the sale of World Poker Collateral
Shares, net of customary and ordinary transaction costs (which for the avoidance
of doubt shall exclude any taxes other than transfer taxes due of a result of
such sale) for similar sales (which in no event shall exceed 4% of the gross
proceeds of such sale) in excess of 3,000,000 World Poker
-23-
Collateral Shares (such 3,000,000 shares as reduced by any shares contributed in
accordance with clause (a) above) (such shares, the "Initial Shares"), to the
extent, and in the amount, that such proceeds exceed the then outstanding
principal balance of the Loan; and
(ii) with respect to the Initial Shares, an amount, if any,
equal to the differential between the price at which such Initial Shares are
sold and $6.00 per share (as adjusted for stock splits, stock dividends, reverse
stock splits, recapitalizations, reclassifications and similar events) (such
that, by way of example, if 3,000,000 Initial Shares were sold at $5.00, the
reduction would be $3,000,000).
Section 2.02 Making the Loan. (a) The Parent shall give the Agent
prior telephonic notice (immediately confirmed in writing, in substantially the
form of Exhibit D hereto (a "Notice of Borrowing")), not later than 12:00 noon
(New York City time) on the date which is five (5) Business Days prior to the
date of the proposed Loan (or such shorter period as the Agent is willing to
accommodate from time to time, but in no event later than 12:00 noon (New York
City time) on the borrowing date of the proposed Loan). Such Notice of Borrowing
shall be irrevocable (and the Borrowers shall be bound to make a borrowing in
accordance therewith) and shall specify (i) the principal amount of the proposed
Loan (which, in the case of Loans requested on the Effective Date, shall be
$25,000,000, and in the case of Loans requested after the Effective Date, shall
be drawn in up to five additional draws each in a minimum amount of $5,000,000
and in multiples of $100,000 (or such smaller amount as the Agent is willing to
accommodate) in excess thereof), and (ii) the proposed borrowing date, which
must be a Business Day. The Agent and the Lenders may act without liability upon
the basis of written, telecopied or telephonic notice believed by the Agent in
good faith to be from Parent (or from any Authorized Officer thereof designated
in writing purportedly from Parent to the Agent). Each Borrower hereby waives
the right to dispute the Agent's record of the terms of any such telephonic
Notice of Borrowing. The Agent and each Lender shall be entitled to rely
conclusively on any Authorized Officer's authority to request a Loan on behalf
of the Borrowers until the Agent receives written notice to the contrary. The
Agent and the Lenders shall have no duty to verify the authenticity of the
signature appearing on any written Notice of Borrowing. The Borrowers hereby
agree that the Initial Purchase Price (as defined in the Securities Purchase
Agreement) of $10.00 for the Warrants and the Additional Purchase Price (as
defined in the Securities Purchase Agreement) of $44,577.51 for the Preferred
Shares shall be deemed paid in full as of the Effective Date as part of the net
funding from the initial Loan made on the Effective Date in accordance with the
Payment Direction Letter.
(b) Except as otherwise provided in this subsection 2.02(b), all
Loans under this Agreement shall be made by the Lenders simultaneously and
proportionately to their Pro Rata Shares of the Total Commitment, it being
understood that no Lender shall be responsible for any default by any other
Lender in that other Lender's obligations to make a Loan requested hereunder,
nor shall the Commitment of any Lender be increased or decreased as a result of
the default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder, and each Lender shall be obligated to make the Loans
required to be made by it by the terms of this Agreement regardless of the
failure by any other Lender.
-24-
Section 2.03 Repayment of Loans; Evidence of Debt.
(a) The outstanding principal of the Loans shall be due and
repayable on the Maturity Date (subject to earlier repayment as provided below)
together with any and all accrued and unpaid interest thereon.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the Borrowers to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrowers to each
Lender hereunder and (iii) the amount of any sum received by the Agent hereunder
for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (c) or (d) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein, absent manifest
error; provided that the failure of any Lender or the Agent to maintain such
accounts or any error therein shall not in any manner affect the obligation of
the Borrowers to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by
a promissory note. In such event, the Borrowers shall execute and deliver to
such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) in a form
furnished by the Agent and reasonably acceptable to Parent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 11.07) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
Section 2.04 Interest.
(a) Loan. Each Loan shall bear interest on the principal amount
thereof from time to time outstanding, from the date such Loan is made,
continued or converted, as the case may be, until such principal amount of such
Loan is paid in full, at a rate per annum equal to 12.00%. To the extent it is
determined by the Lenders upon advice of counsel that the issuance of Preferred
Shares, the exercise in the case of the Warrants or voting in the case of
Preferred Shares with respect to board rights requires consent or approval by
any state, federal or other gaming authority, the Parent will use reasonable
commercial efforts to obtain such consent or approval.
(b) Additional Interest. (i) Upon a WPT Legislation Event, (A)
the obligation to make additional loans under the Financing Facility may, at the
option of the Lenders, terminate and (B) the then outstanding balance of the
Loans shall bear interest at a rate 6% in excess of the rate then in effect
until the value of the World Poker Collateral Shares is
-25-
equal to or greater than 100% of the principal amount of the loans outstanding
under the Financing Facility.
(ii) without limiting any other section hereof, if a WPT 75%
Collateral Event has occurred and is continuing the then outstanding balance of
the loans shall bear interest at a rate 6% in excess of the rate then in effect
until the date on which, if any, a WPT 75% Collateral Event shall no longer be
occurring.
(iii) without limiting any other section hereof, if a WPT
50% Collateral Event has occurred and is continuing the then outstanding balance
of the loans shall bear interest at a rate 6% in excess of the rate then in
effect until the date on which, if any, a WPT 50% Collateral Event shall no
longer be occurring.
(iv) without limiting any other section hereof, if a WPT 25%
Collateral Event has occurred and is continuing the then outstanding balance of
the loans shall bear interest at a rate 6% in excess of the rate then in effect
until the date on which, if any, a WPT 25% Collateral Event shall no longer be
occurring.
(c) Default Interest. To the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default, the principal of,
and all accrued and unpaid interest on, all Loans, fees, indemnities or any
other Obligations of the Loan Parties under this Agreement and the other Loan
Documents, shall bear interest, from the date such Event of Default occurred
until the date such Event of Default is cured or waived in writing in accordance
herewith, at a rate per annum equal at all times to the Post-Default Rate.
(d) Interest Payment. Interest on each Loan shall be payable
monthly, in arrears, on the first day of each month, commencing on the first day
of the month following the month in which such Loan is made and at maturity
(whether upon demand, by acceleration or otherwise). Interest at the
Post-Default Rate shall be payable on demand. Each Borrower hereby authorizes
the Agent to, and the Agent may, from time to time, charge the Loan Account
pursuant to Section 3.01 with the amount of any interest payment due hereunder.
(e) General. All interest shall be computed on the basis of a
year of 360 days for the actual number of days, including the first day but
excluding the last day, elapsed.
Section 2.05 Reduction and Termination of Commitment; Prepayment of
Loans.
(a) Reduction and Termination of Commitments. The Total
Commitment and the Commitment of each Lender shall automatically and permanently
terminate at 5:00 p.m. (New York City time) on the Maturity Date. Each Loan will
permanently reduce the Total Commitment and each Lender's Pro Rata Share
thereof. Notwithstanding anything to the contrary contained herein, the Total
Commitment shall be permanently reduced on a dollar-for-dollar basis by the
proceeds of any World Poker Shares sold by any Loan Party after the Effective
Date in excess of the Initial Shares provided, however, that to the extent that
any portion of such Initial Shares are sold for less than $6.00 per share (as
adjusted for stock splits, stock dividends, reverse stock splits,
recapitalizations, reclassifications and similar events), the amount by which
the Total Commitment is reduced shall be the differential between the price at
which any such Initial Shares are sold and $6.00 per share (such that by way of
example, if
-26-
3,000,000 Initial Shares were sold at $5.00, the Total Commitment would be
reduced by $3,000,000).
(b) Optional Prepayment. The Borrowers may, upon at least five
(5) Business Days' prior written notice to the Agent, prepay, without penalty or
premium, the principal of the Loans, in whole or in part from time to time. Each
prepayment made pursuant to this clause (b) shall be accompanied by the payment
of accrued interest to the date of such payment on the amount prepaid.
(c) Mandatory Prepayment.
(i) Immediately upon any Disposition by any Loan Party or
its Subsidiaries pursuant to Section 6.02(c)(ii), the Borrowers shall prepay the
outstanding amount of the Loans in an amount equal to 100% of the Net Cash
Proceeds received by such Person in connection with such Disposition to the
extent that the aggregate amount of Net Cash Proceeds received by all Loan
Parties and their Subsidiaries (and not paid to the Agent as a prepayment of the
Loans) shall exceed for all such Dispositions since the Effective Date the sum
of $250,000. Nothing contained in this subsection (i) shall permit any Loan
Party or any of its Subsidiaries to make a Disposition of any property other
than in accordance with Section 6.02(c)(ii).
(ii) Upon the issuance or incurrence by any Loan Party or
any of its Subsidiaries of any Indebtedness (other than Indebtedness referred to
in clauses (a), (b), (c), (d), (e), (g), (h) and (i) of the definition of
Permitted Indebtedness), the Borrowers shall prepay the outstanding amount of
the Loans in an amount equal to 100% of the Net Cash Proceeds received by such
Person in connection therewith, provided that, if the Net Cash Proceeds received
by such Person in connection with any construction indebtedness exceed the costs
of such construction financed by such construction indebtedness, the Borrowers
shall prepay the outstanding amount of the Loans in an amount equal to 20% of
the excess amount of such Net Cash Proceeds. The provisions of this subsection
(ii) shall not be deemed to be implied consent to any such issuance or
incurrence otherwise prohibited by the terms and conditions of this Agreement.
(iii) Upon the sale by any Loan Party or any of its
Subsidiaries of any World Poker Shares (other than the Initial Shares), the
Borrowers shall prepay the outstanding amount of the Loans in an amount equal to
100% of the Net Cash Proceeds received by such Loan Party in connection
therewith.
(iv) Upon the receipt by any Loan Party or any of its
Subsidiaries of any Extraordinary Receipts, the Borrowers shall prepay the
outstanding Loans in an amount equal to 100% of such Extraordinary Receipts, net
of any reasonable expenses incurred in collecting such Extraordinary Receipts.
(v) Not less frequently than semi-annually, the Borrowers
(or any Loan Party in receipt of the following) shall prepay the outstanding
amount of the Loans in an amount equal to the Excess Cash Amount.
(vi) Notwithstanding the foregoing, the Loan Parties shall
be permitted, without being obligated to make a mandatory prepayment, to sell an
unlimited
-27-
numbers of shares of Capital Stock of the Parent, in each case, at not less than
the fair market value (it being understood that fair market value may be
impacted as a result of lack of liquidity and similar market factors impacting
the value of the securities sold) and such Net Cash Proceeds may be used for
general corporate purposes so long as not in violation of the terms of this
Agreement.
(vii) Without limiting any increased payments of interest or
fees hereunder as otherwise may be in effect, no prepayment made pursuant to
this subsection (c) shall be subject to penalty or premium.
(d) [Intentionally Omitted].
(e) Interest and Fees. The amount of any prepayment made pursuant
to this Section 2.05 shall be allocated between principal of the Loan and
accrued interest on the principal amount being prepaid to the date of prepayment
without the need for any additional payment by any Loan Party, unless such
prepayment would reduce the amount of the outstanding Loans to zero, in which
case such prepayment shall be accompanied by the payment of all fees accrued to
such date pursuant to Section 2.06. Notwithstanding the foregoing, however, in
no event shall the amount prepaid be less than the mandatory prepayment proceeds
unless all Obligations hereunder are paid in full.
(f) Cumulative Prepayments. Except as otherwise expressly
provided in this Section 2.05, payments with respect to any subsection of this
Section 2.05 are in addition to payments made or required to be made under any
other subsection of this Section 2.05.
Section 2.06 Fees.
(a) Closing Fee. On or prior to the Effective Date, the Borrowers
shall pay to Prentice Capital Management, LP for the account of the Lenders, in
accordance with their Pro Rata Shares, a non-refundable closing fee (the
"Closing Fee") equal to $1,500,000 which shall be deemed fully earned when paid.
(b) Loan Servicing Fee. From and after the Effective Date and
until the later of the date on which all Obligations are paid in full and the
date on which the Commitments are terminated, the Borrowers shall pay to
Prentice Capital Management, LP a non-refundable loan servicing fee (the "Loan
Servicing Fee") equal to $5,000 each month, which shall be deemed fully earned
when paid and which shall be due and payable on the Effective Date and monthly
in advance thereafter on the first day of each calendar month commencing on the
first day of the calendar month immediately following the Effective Date.
(c) Collateral Maintenance Fee. Commencing on the date that each
of a WPT Legislative Event, a WPT 25% Collateral Event, WPT 50% Collateral Event
or a WPT 75% Collateral Event shall occur, if any, the Borrowers shall pay to
Prentice Capital Management, LP a collateral maintenance fee equal to, 2.00% of
the aggregate principal amount of the Loans outstanding on such date on the date
of the first such event and an additional 2% of the aggregate principal amount
of the Loans outstanding on such date on the date of each such additional event
thereafter (it being understood that once a 2% fee is payable with respect to an
applicable event as aforesaid such fee shall not reduce if the percentage
increases). Such fee
-28-
shall be due and payable on each date that a WPT Legislative Event, a WPT 25%
Collateral Event, WPT 50% Collateral Event or a WPT 75% Collateral Event shall
occur.
(d) Audit and Collateral Monitoring Fees. The Borrowers
acknowledge that pursuant to Section 6.01(f), representatives of the Agent may
visit any or all of the Loan Parties and/or conduct audits, inspections,
valuations, appraisals and/or field examinations of any or all of the Loan
Parties at any time and from time to time, upon reasonable advance notice and at
reasonable times (it being understood that during the continuance of an Event of
Default, notice may be shorter), in a manner so as to not unduly disrupt the
business of the Loan Parties. The Borrowers agree to pay (i) $1,500 per day per
examiner plus the examiner's out-of-pocket costs and reasonable expenses
incurred in connection with all such visits, audits, inspections, valuations,
appraisals and field examinations and (ii) the cost of all visits, audits,
inspections, valuations, appraisals and field examinations conducted by a third
party on behalf of the Agent; provided, however, that payments under this
Section 2.07(d) shall not exceed an aggregate of $25,000 in any twelve (12)
month period prior to an Event of Default.
Section 2.07 Securitization. The Loan Parties hereby acknowledge that
the Lenders and their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's, Standard & Poor's or one or more other rating agencies (the "Rating
Agencies"). The Loan Parties shall cooperate with the Lenders and their
Affiliates to effect the Securitization including, without limitation, by (a)
amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by the Lenders in connection with
the Securitization, provided that (i) any such amendment or additional
documentation does not impose material additional costs on the Loan Parties and
(ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations, of the Loan
Parties under the Loan Documents or change or affect in a manner adverse to the
Loan Parties the financial terms of the Loans, (b) providing such information as
may be reasonably requested by the Lenders in connection with the rating of the
Loans or the Securitization, and (c) providing in connection with any rating of
the Loans a certificate (i) agreeing to indemnify the Lenders and their
Affiliates, any of the Rating Agencies, or any party providing credit support or
otherwise participating in the Securitization (collectively, the "Securitization
Parties"), in a manner that is customary for such transactions, for any losses,
claims, damages or liabilities (the "Liabilities") to which the Lenders, their
Affiliates or such Securitization Parties may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Loan Document or in any
writing delivered by or on behalf of any Loan Party to the Lenders in connection
with any Loan Document or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and such indemnity shall survive any
transfer by the Lenders or their successors or assigns of the Loans and (ii)
agreeing to reimburse the Lenders and their Affiliates for any legal or other
expenses reasonably incurred by such Persons in connection with defending the
Liabilities.
-29-
Section 2.08 Taxes. (a) Any and all payments by any Loan Party
hereunder shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on the net
income of the Agent or any Lender (or any transferee or assignee thereof (any
such entity, a "Transferee")) by the jurisdiction in which such Person is
organized or has its principal lending office (all such nonexcluded taxes,
levies, imposts, deductions, charges withholdings and liabilities, collectively
or individually, "Taxes"). If any Loan Party shall be required to deduct any
Taxes from or in respect of any sum payable hereunder to the Agent or any Lender
(or any Transferee), (i) the sum payable shall be increased by the amount (an
"additional amount") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.08) the Agent or such Lender (or such Transferee) shall receive an amount
equal to the sum it would have received had no such deductions been made, (ii)
such Loan Party shall make such deductions and (iii) such Loan Party shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.
(b) In addition, each Loan Party agrees to pay to the relevant
Governmental Authority in accordance with applicable law any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
("Other Taxes"). Each Loan Party shall deliver to the Agent, and each Lender
official receipts in respect of any Taxes or Other Taxes payable hereunder
promptly after payment of such Taxes or Other Taxes.
(c) The Loan Parties hereby jointly and severally indemnify and
agree to hold each Agent and each Lender harmless from and against Taxes and
Other Taxes (including, without limitation, Taxes and Other Taxes imposed on any
amounts payable under this Section 2.08) paid by such Person, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Such
indemnification shall be paid within 10 days from the date on which any such
Person makes written demand therefor specifying in reasonable detail the nature
and amount of such Taxes or Other Taxes.
(d) Each Lender (or Transferee) that is organized under the laws
of a jurisdiction other than the United States, any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Agent and Parent
two properly completed and duly executed copies of either U.S. Internal Revenue
Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8BEN, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that such
Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Internal
Revenue Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of the Parent and is not a controlled
foreign corporation related to the Parent (within the meaning of Section
864(d)(4) of the Internal Revenue Code)), in each case claiming complete
exemption from U.S. Federal withholding tax on payments by the Loan Parties
under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
-30-
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms within 20 days after receipt of a
written request therefor from Parent or the Agent. Notwithstanding any other
provision of this Section 2.08, a Non-U.S. Lender shall not be required to
deliver after the date hereof any form pursuant to this Section 2.08 that such
Non-U.S. Lender is not legally able to deliver.
(e) The Loan Parties shall not be required to indemnify any
Non-U.S. Lender, or pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to this Agreement to
the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became a
party to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this clause (i) shall not apply to the extent the indemnity payment or
additional amounts any Transferee, or Lender (or Transferee) through a New
Lending Office, would be entitled to receive (without regard to this clause (i))
do not exceed the indemnity payment or additional amounts that the person making
the assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation, or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of clause (d) above.
(f) Any Lender (or Transferee) claiming any indemnity payment or
additional payment amounts payable pursuant to this Section 2.08 shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document reasonably requested in writing by Parent or to
change the jurisdiction of its applicable lending office if the making of such a
filing or change would avoid the need for or reduce the amount of any such
indemnity payment or additional amount which may thereafter accrue, would not
require such Lender (or Transferee) to disclose any information such Lender (or
Transferee) deems confidential and would not, in the sole determination of such
Lender (or Transferee), be otherwise disadvantageous to such Lender (or
Transferee).
(g) The obligations of the Loan Parties under this Section 2.08
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
ARTICLE III
FEES, PAYMENTS AND OTHER COMPENSATION
Section 3.01 Payments; Computations and Statements. The Borrowers will
make each payment under this Agreement not later than 12:00 noon (New York City
time) on the day when due, in lawful money of the United States of America and
in immediately available funds, to the Agent's Account. All payments received by
the Agent after 12:00 noon (New York
-31-
City time) on any Business Day will be credited to the Loan Account on the next
succeeding Business Day. All payments shall be made by the Borrowers without
set-off, counterclaim, deduction or other defense to the Agent and the Lenders.
Except as provided in Section 2.02, after receipt, the Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal ratably to the Lenders in accordance with their Pro Rata Shares and
like funds relating to the payment of any other amount payable to any Lender to
such Lender, in each case to be applied in accordance with the terms of this
Agreement, provided that the Agent will cause to be distributed all interest and
fees received from or for the account of the Borrowers not less than once each
month and in any event promptly after receipt thereof. The Lenders and the
Borrowers hereby authorize the Agent to, and the Agent may, from time to time,
charge the Loan Account of the Borrowers with any amount due and payable by the
Borrowers under any Loan Document. The Lenders and the Borrowers confirm that
any charges which the Agent may so make to the Loan Account of the Borrowers as
herein provided will be made as an accommodation to the Borrowers and solely at
the Agent's discretion. Whenever any payment to be made under any such Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Agent on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such fees are
payable. Each determination by the Agent of an interest rate or fees hereunder
shall be conclusive and binding for all purposes in the absence of manifest
error.
Section 3.02 Sharing of Payments, Etc. Except as provided in Section
2.02 hereof, if any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Obligation in excess of its ratable share of payments on account
of similar obligations obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in such similar obligations
held by them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender of any interest or other
amount paid by the purchasing Lender in respect of the total amount so
recovered). The Borrowers agree that any Lender so purchasing a participation
from another Lender pursuant to this Section 3.02 may, to the fullest extent
permitted by law, exercise all of its rights (including the Lender's right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrowers in the amount of such participation.
Section 3.03 Apportionment of Payments. Subject to Section 2.02
hereof:
(a) all payments of principal and interest in respect of
outstanding Loans, all payments of fees (other than the audit and collateral
monitoring fee provided for in Section 2.06(d)) and all other payments in
respect of any other Obligations, shall be allocated by the Agent among such of
the Lenders as are entitled thereto, in proportion to their respective Pro
-32-
Rata Shares or otherwise as provided herein or, in respect of payments not made
on account of Loans, as designated by the Person making payment when the payment
is made.
(b) After the occurrence and during the continuance of an Event
of Default, the Agent may, and upon the direction of the Required Lenders shall,
apply all payments in respect of any Obligations and all proceeds of the
Collateral, subject to the provisions of this Agreement, (i) first, ratably to
pay the Obligations in respect of any fees, expense reimbursements, indemnities
and other amounts then due to the Agent until paid in full; (ii) second, ratably
to pay the Obligations in respect of any fees and indemnities then due to the
Lenders until paid in full; (iii) third, ratably to pay interest due in respect
of the Loans until paid in full; (iv) fourth, ratably to pay principal of the
Loans until paid in full; and (v) fifth, to the ratable payment of all other
Obligations then due and payable.
(c) For purposes of Section 3.03(b), "paid in full" with respect
to interest shall include interest accrued after the commencement of any
Insolvency Proceeding irrespective of whether a claim for such interest is
allowable in such Insolvency Proceeding.
(d) In the event of a direct conflict between the priority
provisions of this Section 3.03 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that both such priority
provisions in 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 this Section 3.03 shall control and govern.
Section 3.04 Increased Costs and Reduced Return. (a) If any Lender or
the Agent shall have determined that the adoption or implementation of, or any
change in, any law, rule, treaty or regulation, or any policy, guideline or
directive of, or any change in, the interpretation or administration thereof by,
any court, central bank or other administrative or Governmental Authority, or
compliance by any Lender or the Agent or any Person controlling such Lender or
the Agent with any directive of, or guideline from, any central bank or other
Governmental Authority or the introduction of, or change in, any accounting
principles applicable to any Lender or the Agent or any Person controlling such
Lender or the Agent (in each case, whether or not having the force of law)
(each, a "Change in Law"), shall (i) subject such Lender or the Agent, or any
Person controlling such Lender or the Agent to any tax, duty or other charge
with respect to this Agreement or any Loan made by such Lender or the Agent, or
change the basis of taxation of payments to such Lender or the Agent or any
Person controlling such Lender or the Agent of any amounts payable hereunder
(except for taxes on the overall net income of such Lender or the Agent or any
Person controlling such Lender or the Agent), (ii) impose, modify or deem
applicable any reserve, special deposit or similar requirement against any Loan
or against assets of or held by, or deposits with or for the account of, or
credit extended by, such Lender or the Agent or any Person controlling such
Lender or the Agent or (iii) impose on such Lender or the Agent or any Person
controlling such Lender or the Agent or any other condition regarding this
Agreement, and the result of any event referred to in clauses (i), (ii) or (iii)
above shall be to increase the cost to such Lender or the Agent of making any
Loan or agreeing to make any Loan or to reduce any amount received or receivable
by such Lender or the Agent hereunder, then, upon demand by any such Lender or
the Agent, the Borrowers shall pay
-33-
to such Lender or the Agent such additional amounts as will compensate such
Lender or the Agent for such increased costs or reductions in amount.
(b) If any Lender or the Agent shall have determined that any
Change in Law either (i) affects or would affect the amount of capital required
or expected to be maintained by such Lender or the Agent or any Person
controlling such Lender or the Agent, and such Lender or the Agent determines
that the amount of such capital is increased as a direct or indirect consequence
of any Loans made or maintained or any guaranty or participation with respect
thereto, such Lender's or the Agent's or such other controlling Person's other
obligations hereunder, or (ii) has or would have the effect of reducing the rate
of return on such Lender's or the Agent's or such other controlling Person's
capital to a level below that which such Lender or the Agent or such controlling
Person could have achieved but for such circumstances as a consequence of any
Loans made or maintained or any guaranty or participation with respect thereto
or any agreement to make Loans or such Lender's or the Agent's or such other
controlling Person's other obligations hereunder (in each case, taking into
consideration, such Lender's or the Agent's or such other controlling Person's
policies with respect to capital adequacy), then, upon demand by such Lender or
the Agent, the Borrowers shall pay to such Lender or the Agent from time to time
such additional amounts as will compensate such Lender or the Agent for such
cost of maintaining such increased capital or such reduction in the rate of
return on such Lender's or the Agent's or such other controlling Person's
capital.
(c) All amounts payable under this Section 3.04 shall bear
interest from the date that is ten (10) days after the date of demand by any
Lender or the Agent until payment in full to such Lender or the Agent at the
Reference Rate (provided, however, that if the Loans are voluntarily prepaid in
whole in accordance with Section 2.05(b) prior to the end of such ten (10) day
period, no amounts shall be payable under this Section 3.04). A certificate of
such Lender or the Agent claiming compensation under this Section 3.04,
specifying the event herein above described and the nature of such event shall
be submitted by such Lender or the Agent to Parent, setting forth the additional
amount due and an explanation of the calculation thereof, and such Lender's or
the Agent's reasons for invoking the provisions of this Section 3.04, and shall
be final and conclusive absent manifest error.
Section 3.05 Joint and Several Liability of the Borrowers. (a)
Notwithstanding anything in this Agreement or any other Loan Document to the
contrary, each of the Borrowers hereby accepts joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement
and the other Loan Documents, for the mutual benefit, directly and indirectly,
of each of the Borrowers and in consideration of the undertakings of the other
Borrowers to accept joint and several liability for the Obligations. Each of the
Borrowers, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Section 3.05), it being the intention of the parties hereto
that all of the Obligations shall be the joint and several obligations of each
of the Borrowers without preferences or distinction among them. If and to the
extent that any of the Borrowers shall fail to make any payment with respect to
any of the Obligations as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event, the other Borrowers
-34-
will make such payment with respect to, or perform, such Obligation. Subject to
the terms and conditions hereof, the Obligations of each of the Borrowers under
the provisions of this Section 3.05 constitute the absolute and unconditional,
full recourse Obligations of each of the Borrowers, enforceable against each
such Person to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement, the other Loan
Documents or any other circumstances whatsoever.
(b) The provisions of this Section 3.05 are made for the benefit
of the Agent, the Lenders and their successors and assigns, and may be enforced
by them from time to time against any or all of the Borrowers as often as
occasion therefor may arise and without requirement on the part of the Agent,
the Lenders or such successors or assigns first to marshal any of its or their
claims or to exercise any of its or their rights against any of the other
Borrowers or to exhaust any remedies available to it or them against any of the
other Borrowers or to resort to any other source or means of obtaining payment
of any of the Obligations hereunder or to elect any other remedy. The provisions
of this Section 3.05 shall remain in effect until all of the Obligations shall
have been paid in full or otherwise fully satisfied.
(c) Each of the Borrowers hereby agrees that it will not enforce
any of its rights of contribution or subrogation against the other Borrowers
with respect to any liability incurred by it hereunder or under any of the other
Loan Documents, any payments made by it to the Agent or the Lenders with respect
to any of the Obligations or any Collateral, until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to the Agent or the
Lenders hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations.
ARTICLE IV
CONDITIONS TO LOANS
Section 4.01 Conditions Precedent to Effectiveness. This Agreement
shall become effective as of the Business Day (the "Effective Date") when each
of the following conditions precedent shall have been satisfied in a manner
satisfactory to the Agent:
(a) Payment of Fees, Etc. The Borrowers shall have paid on or
before the date of this Agreement all fees, costs, expenses and taxes then
payable pursuant to Section 2.06 and Section 11.04 hereof.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true and correct: (i) the representations and
warranties contained in ARTICLE V and in each other Loan Document, certificate
or other writing delivered to the Agent or any Lender pursuant hereto or thereto
on or prior to the Effective Date are true and correct on and as of the
Effective Date as though made on and as of such date and (ii) no Default or
Event of Default shall have occurred and be continuing on the Effective Date or
would result from this Agreement or the other Loan Documents becoming effective
in accordance with its or their respective terms.
-35-
(c) Legality. The making of the initial Loans shall not
contravene any law, rule or regulation applicable to the Agent or any Lender.
(d) Delivery of Documents. The Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Agent in its sole discretion and, unless indicated otherwise, dated the
Effective Date:
(i) this Agreement, duly executed by each of the parties
thereto;
(ii) a Security Agreement, duly executed by each Loan Party;
(iii) a Pledge Agreement, duly executed by each Loan Party,
together with the original stock certificates representing all of the common
stock of such Loan Party's subsidiaries other than Excluded Subsidiaries,
accompanied by undated stock powers executed in blank and other proper
instruments of transfer, and a Notice of Pledge of Uncertificated Securities and
Control Agreement, duly executed by Lakes Entertainment, Inc., together with an
Acknowledgement in respect thereof executed by World Poker with respect to the
World Poker Collateral Shares;
(iv) a Mortgage with respect to each Facility, duly executed
by the applicable Loan Party and in suitable form for recording in an
appropriate office and creating a continuing first priority lien in favor of the
Lenders. The Agent shall be satisfied that if the Agent exercises remedies under
any Mortgage, upon acceleration, if any, of the Obligations under the Financing
Facility, the Agent may foreclose and sell to a third party free and clear of
any interest under any Indian Tribe party to any Material Contract;
(v) evidence of the recording of such Mortgages in such
office or offices as may be necessary or, in the opinion of the Agent, desirable
to perfect the Lien purported to be created thereby or to otherwise protect the
rights of the Agent and the Lenders thereunder;
(vi) a pro forma Title Insurance Policy with respect to the
property owned by the Parent in Minnesota, a pro forma Title Insurance Policy
with respect to Jamul, and a preliminary Title Insurance Policy with respect to
Shingle Springs;
(vii) an ALTA survey of the property owned by the Parent in
Minnesota, in form and substance satisfactory to the Agent, certified to the
issuer of the Title Insurance Policy;
(viii) a UCC Filing Authorization Letter, duly executed by
each Loan Party, together with appropriate financing statements on Form UCC-1
duly filed in such office or offices as may be necessary or, in the opinion of
the Agent, desirable to perfect the security interests purported to be created
by each Security Agreement, each Pledge Agreement and each Mortgage;
(ix) UCC search reports (which include tax and judgment lien
reports) listing all effective financing statements which name as debtor any
Loan Party and
-36-
which are filed in the offices referred to in paragraph (viii) above, together
with copies of such financing statements, none of which, except as otherwise
agreed in writing by the Agent, shall cover any of the Collateral and the
results of searches for any tax Lien and judgment Lien filed against such Person
or its property, which results, except as otherwise agreed to in writing by the
Agent, shall not show any such Liens;
(x) a copy of the resolutions of each Loan Party, certified
as of the Effective Date by an Authorized Officer thereof, authorizing (A) the
borrowings hereunder and the transactions contemplated by the Loan Documents to
which such Loan Party is or will be a party, and (B) the execution, delivery and
performance by such Loan Party of each Loan Document to which such Loan Party is
or will be a party and the execution and delivery of the other documents to be
delivered by such Person in connection herewith and therewith;
(xi) a certificate of an Authorized Officer of each Loan
Party, certifying the names and true signatures of the representatives of such
Loan Party authorized to sign each Loan Document to which such Loan Party is or
will be a party and the other documents to be executed and delivered by such
Loan Party in connection herewith and therewith, together with evidence of the
incumbency of such authorized officers;
(xii) except with respect to the State of Louisiana where a
dispute regarding taxes is currently ongoing and as to which the aggregate tax
liabilities with penalties shall not exceed $12,000,000 plus interest, fees and
penalties thereon accrued from the date hereof, a certificate of the appropriate
official(s) of the state of organization and each state of foreign qualification
of each Loan Party certifying as to the subsistence in good standing of, and the
payment of taxes by, such Loan Party in such states;
(xiii) a true and complete copy of the charter, certificate
of formation, certificate of limited partnership or other publicly filed
organizational document of each Loan Party certified as of a recent date not
more than 30 days prior to the Effective Date by an appropriate official of the
state of organization of such Loan Party which shall set forth the same complete
name of such Loan Party as is set forth herein and the organizational number of
such Loan Party, if an organized number is issued in such jurisdiction;
(xiv) a copy of the charter and by-laws, limited liability
company agreement, operating agreement, agreement of limited partnership or
other organizational document of each Loan Party, together with all amendments
thereto, certified as of the Effective Date by an Authorized Officer of such
Loan Party;
(xv) (A) an opinion of Gray Plant Mooty, counsel to the Loan
Parties, (B) local counsel opinions and (C) Hamilton Quigley & Twait, gaming
counsel to the Loan Parties, each substantially in the form of Exhibit E and
each as to such matters as the Agent may reasonably request, including, without
limitation, an opinion that the execution, delivery and performance under the
Mortgages set forth in subsection (iv) above does not violate any Material
Contracts;
(xvi) a certificate of an Authorized Officer of each Loan
Party, certifying as to the matters set forth in subsection (b) of this Section
4.01;
-37-
(xvii) a copy of the Financial Statements and the financial
projections described in Section 5.01(g)(ii) hereof, certified as of the
Effective Date as true and correct by an Authorized Officer of the Parent;
(xviii) the Project Business Plan, in form and substance
satisfactory to the Agent;
(xix) evidence of the insurance coverage required by Section
6.01 and the terms of each Security Agreement and each Mortgage and such other
insurance coverage with respect to the business and operations of the Loan
Parties as the Agent may reasonably request in each case, where requested by the
Agent, with such endorsements as to the named insureds or loss payees thereunder
as the Agent may request and providing that the issuer will endeavor to give,
before such policy may be terminated or canceled (by the insurer or the insured
thereunder), 30 days' prior written notice to the Agent and each such named
insured or loss payee, together with evidence of the payment of all premiums due
in respect thereof for such period as the Agent may request;
(xx) a certificate of an Authorized Officer of Parent,
certifying the names and true signatures of the persons that are authorized to
provide Notices of Borrowing and all other notices under this Agreement and the
other Loan Documents;
(xxi) copies of each Material Contract as in effect on the
Effective Date, certified as true and correct copies thereof by an Authorized
Officer of Parent, together with a certificate of an Authorized Officer of
Parent stating that such agreements remain in full force and effect and that
none of the Loan Parties has breached or defaulted in any of its obligations
under such agreements;
(xxii) to the extent already performed and in the possession
of the Parent and requested by the Agent, a Phase I Environmental Site
Assessment ("Phase I ESA") of each Facility, in form and substance and by an
independent firm satisfactory to the Agent;
(xxiii) such depository account, blocked account, lockbox
account and similar agreements and other documents, each in form and substance
satisfactory to the Agent, as the Agent may request with respect to the
Borrowers' cash management system;
(xxiv) the Warrants and the Preferred Shares required to be
delivered on or prior to the Effective Date pursuant to the Securities Purchase
Agreement, duly executed by the Parent;
(xxv) the Registration Rights Agreement, duly executed by
the Parent;
(xxvi) the Securities Purchase Agreement, duly executed by
the parties thereto;
(xxvii) The Certificate of Designations in the form attached
as Exhibit A to the Securities Purchase Agreement shall have been filed on or
prior to the Effective
-38-
Date with the Secretary of State of the State of Minnesota and shall be in full
force and effect, enforceable against the Parent in accordance with its terms
and shall not have been amended;
(xxviii) Evidence of the filing of a certificate of
designation in the State of Minnesota with respect to the Preferred Shares; and
(xxix) an employment contract with Lyle Berman in his
capacity as a senior executive officer of the Parent, which employment contract
shall be of a duration of at least three (3) years, satisfactory to the Agent in
form and substance (including with respect to non-competition provisions);
(xxx) such other agreements, instruments, approvals,
opinions and other documents, each satisfactory to the Agent in form and
substance, as the Agent may reasonably request.
(e) Material Adverse Effect. The Agent shall have determined, in
its sole judgment, that no event or development shall have occurred since
January 2, 2005, which could have a Material Adverse Effect, including, without
limitation, the commencement of any litigation that, if adversely determined
could reasonably be expected to result in a Material Adverse Effect.
(f) Approvals. All consents, authorizations and approvals of, and
filings and registrations with, and all other actions in respect of, any
Governmental Authority or other Person required in connection with the making of
the Loans or the conduct of the Loan Parties' business shall have been obtained
and shall be in full force and effect.
(g) Proceedings; Receipt of Documents. All proceedings in
connection with the making of the Loan and the other transactions contemplated
by this Agreement and the other Loan Documents, and all documents incidental
hereto and thereto, shall be satisfactory to the Agent and its counsel, and the
Agent and such counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents as the
Agent or such counsel may reasonably request.
(h) Due Diligence. The Agent shall have completed its business,
legal and collateral due diligence with respect to each Loan Party, including,
without limitation, (i) a review of Loan Parties' books and records, (ii) a
collateral field examination and audit, (iii) review of the results of the
financial and collateral due diligence conducted by third parties acceptable to
the Lender, (iv) Inventory and equipment appraisals, in each case performed by
an appraiser selected by the Lender, (v) review of the Business Plan and interim
financial statements, (vi) background checks on key management, (vii) review of
ERISA, regulatory, environmental, intellectual property, litigation, tax,
licensing, certification and permit matters and labor matters, with results
satisfactory to the Lender, in its sole discretion, (viii) review of accounting
procedures of the Loan Parties and World Poker, (ix) consultation with
specialized gaming counsel and (x) other diligence deemed necessary or desirable
by the Lender, and in each case the results thereof shall be acceptable to the
Agent, in its sole and absolute discretion. The Agent shall be satisfied in its
sole discretion with the results of its review of all Material
-39-
Contracts of the Loan Parties and no consent (or approval) of any third party to
the transactions contemplated hereby shall be required under such contracts.
(i) World Poker Shares.
(a) Public Pre-Announcement of Financials. World Poker shall have
made a formal public pre-announcement, in a manner reasonably satisfactory to
the Agent, of its estimated earnings, revenues and performance for any or all of
its business segment (including, without limitation, its online business
segment) for such period, which announcement shall be made not less than ten
(10) Business Days prior to the Effective Date.
(b) The 10 Business Day weighted average of World Poker Shares
prior to the Effective Date shall not have been less than $3.89 per share (as
adjusted for stock splits, stock dividends, reverse stock splits,
recapitalizations, reclassifications and similar events) on the Nasdaq National
Market and such share price shall not be less than $3.89 per share (as adjusted
for stock splits, stock dividends, reverse stock splits, recapitalizations,
reclassifications and similar events) on the date prior to the Effective Date.
(c) The Agent shall be satisfied that the World Poker Collateral
Shares pledged to the Lenders are not subject to securities law restrictions
(other than as a result of a failure to register such World Poker Collateral
Shares or with respect to prohibitions on trading while in possession of
material non-public information) which restrict the ability of such Lenders to
sell such shares based on the Parent's ownership of such shares or the fact that
officers of the Parent have seat on the board of directors of World Poker.
Section 4.02 Conditions Precedent to the Loans. The obligation of the
Agent or any Lender to make any Loan is subject to the fulfillment, in a manner
satisfactory to the Agent, of each of the following conditions precedent:
(a) Payment of Fees, Etc. The Borrowers shall have paid all fees,
costs, expenses and taxes then payable by the Borrowers pursuant to this
Agreement and the other Loan Documents, including, without limitation, Section
2.06 and Section 11.04 hereof.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true and correct, and the submission by Parent to
the Agent of a Notice of Borrowing with respect to each such Loan, and the
Borrowers' acceptance of the proceeds of such Loan shall each be deemed to be a
representation and warranty by each Loan Party on the date of such Loan that:
(i) the representations and warranties contained in ARTICLE V and in each other
Loan Document, certificate or other writing delivered to the Agent or any Lender
pursuant hereto or thereto on or prior to the date of such Loan are true and
correct in all material respects on and as of such date as though made on and as
of such date, (ii) at the time of and after giving effect to the making of such
Loan and the application of the proceeds thereof, no Default or Event of Default
has occurred and is continuing or would result from the making of the Loan to be
made on such date and (iii) the conditions set forth in this Section 4.02 have
been satisfied as of the date of such request.
(c) Legality. The making of such Loan shall not contravene any
law, rule or regulation applicable to the Agent or any Lender.
-40-
(d) Notices. The Agent shall have received a Notice of Borrowing
pursuant to Section 2.02 hereof.
(e) Delivery of Documents. The Agent shall have received such
other agreements, instruments, approvals, opinions and other documents, each in
form and substance satisfactory to the Agent, as the Agent may reasonably
request, including the most recent Plan Reconciliation Report.
(f) Proceedings; Receipt of Documents. All proceedings in
connection with the making of such Loan and the other transactions contemplated
by this Agreement and the other Loan Documents, and all documents incidental
hereto and thereto, shall be satisfactory to the Agent and its counsel, and the
Agent and such counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents, in form
and substance satisfactory to the Agent, as the Agent or such counsel may
reasonably request.
Section 4.03 Conditions Subsequent to the Initial Loans. The
obligation of the Lenders to continue to make or maintain Loans is subject to
the fulfillment of each of the conditions subsequent set forth below (the
failure by the Loan Parties to so perform or cause to be performed constituting
an Event of Default):
(a) Pledged Debt. Within one (1) Business Day of the Effective
Date, Agent shall have received the original Pledged Debt represented by
promissory notes in respect of Pokagon.
(b) Business Plan. Within ten (10) days of the Effective Date,
Agent shall have received the Business Plan in form and substance satisfactory
to the Agent.
(c) Goldman Sachs Account. Within thirty (30) days of the
Effective Date, Agent shall have received a securities account control
agreement, reasonably satisfactory to it, in respect of the Loan Parties account
020526281 maintained with Goldman Sachs.
(d) Life Insurance Policy. Within forty-five (45) days of the
Effective Date, Agent shall have received (i) a copy of the Life Insurance
Policy and (ii) a collateral assignment of life insurance policy, in respect of
the Life Insurance Policy.
(e) Surveys. Within sixty (60) days of the Effective Date, Agent
shall have received an ALTA survey of Jamul and Shingle Springs (which in the
case of Shingle Springs may be an affidavit of no change from a survey
engineer), in form and substance satisfactory to the Agent, certified to the
Agent and to the issuer of the Title Insurance Policy.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties. Each Loan Party hereby
represents and warrants to the Agent and the Lenders as follows (it being
understood that, with respect to each other Loan Document (other than the
Warrants, the Registration Rights
-41-
Agreement and the Securities Purchase Agreement) executed contemporaneously with
this Agreement, any representation or warranty in such other Loan Document that
is duplicative or otherwise substantially similar to any representation or
warranty contained in this Article V shall be deemed modified or otherwise
qualified to the extent the representation in this Article V is modified or
otherwise qualified, whether or not expressly so stated):
(a) Organization, Good Standing, Etc. Each Loan Party (i) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the state or
jurisdiction of its organization, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and, in the
case of the Borrowers, to make the borrowings hereunder, and to execute and
deliver each Loan Document to which it is a party, and to consummate the
transactions contemplated thereby, and (iii) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(b) Authorization, Etc. The execution, delivery and performance
by each Loan Party of each Loan Document to which it is or will be a party, (i)
have been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any Material Contract, (iii) do not and
will not result in or require the creation of any Lien (other than pursuant to
any Loan Document) upon or with respect to any of its properties, and (iv) do
not and will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization, or approval applicable to any operations or properties, including
the Projects.
(c) Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority is
required in connection with the due execution, delivery and performance by any
Loan Party of any Loan Document to which it is or will be a party.
(d) Enforceability of Loan Documents. This Agreement is, and each
other Loan Document to which any Loan Party is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws.
(e) Subsidiaries. Schedule 5.01(e) is a complete and correct
description of the name, jurisdiction of incorporation and ownership of the
outstanding Capital Stock of such Subsidiaries of the Parent in existence on the
date hereof. All of the issued and outstanding shares of Capital Stock of such
Subsidiaries have been validly issued and are fully paid and nonassessable, and
the holders thereof are not entitled to any preemptive, first refusal or other
similar rights. Except as indicated on such Schedule, all such Capital Stock is
owned by the Parent or one or more of its wholly-owned Subsidiaries, free and
clear of all Liens. Except as disclosed in Schedule 5.01(e), there are no
outstanding debt or equity securities of the Parent or any of its Subsidiaries
and no outstanding obligations of the Parent or any of its Subsidiaries
-42-
convertible into or exchangeable for, or warrants, options or other rights for
the purchase or acquisition from the Parent or any of its Subsidiaries, or other
obligations of any Subsidiary to issue, directly or indirectly, any shares of
Capital Stock of any Subsidiary of the Parent.
(f) Litigation; Commercial Tort Claims. Except as set forth in
Schedule 5.01(f), (i) there are no claims, actions, suits, investigations,
litigation or proceedings, pending or, to the knowledge of any Loan Party,
threatened, in any court or before any arbitrator or governmental
instrumentality which relate to the Financing Facility or which has any
reasonable likelihood of having a Material Adverse Effect on (A) the condition
(financial or otherwise), operations, performance, properties, assets,
liabilities, business or prospects of any Loan Party or any Subsidiary of a Loan
Party, (B) the ability of any Loan Party to perform its Obligations under the
Loan Documents or (C) the ability of the Agent to enforce the Loan documents,
(ii) as of the Effective Date, none of the Loan Parties holds any commercial
tort claims in respect of which a claim has been filed in a court of law or a
written notice by an attorney has been given to a potential defendant, and (iii)
no Loan Party has any continuing indemnification obligation pursuant to the
Grand Casino Litigation.
(g) Financial Condition.
(i) The Financial Statements, copies of which have been
delivered to the Agent and each Lender, fairly present the consolidated
financial condition of the Parent and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations of the Parent and its
Subsidiaries for the fiscal periods ended on such respective dates, all in
accordance with GAAP.
(ii) The Parent has heretofore furnished to the Agent and
each Lender the projected annual balance sheets, income statements and
statements of cash flows of the Parent and its Subsidiaries for the Fiscal Years
ending in 2006 through 2008, which projected financial statements shall be
updated from time to time pursuant to Section 6.01(a)(vii). Such projections, as
so updated, shall be believed by the Parent at the time furnished to be
reasonable, shall have been prepared on a reasonable basis and in good faith by
the Parent, and shall have been based on assumptions believed by the Parent to
be reasonable at the time made and upon the best information then reasonably
available to the Parent, and the Parent shall not be aware of any facts or
information that would lead it to believe that such projections, as so updated,
are incorrect or misleading in any material respect.
(h) Compliance with Law and Contract, Etc. No Loan Party is in
violation of its organizational documents, any law, rule, regulation, judgment
or order of any Governmental Authority applicable to it or any of its property
or assets, or any material term of any Material Contract) binding on or
otherwise affecting it or any of its properties, and no default or event of
default has occurred and is continuing with respect to such Material Contract.
(i) Compliance with Gaming Laws. Except as set forth in Schedule
5.01(i), no Loan Party is in violation of the Indian Gaming Regulatory Act of
1988 ("IGRA"), 25 U.S.C. Sec. 2701 et seq. or any regulations promulgated
thereunder by the National Indian Gaming Commission pursuant to IGRA, the
tribal-state gaming compact in any relevant state or any regulations referenced
therein, or any other federal or state law that relates or applies to
-43-
Indian gaming except for technical violations or those where a violation would
be of de minimus effect.
(j) ERISA. Except as set forth on Schedule 5.01(j), (i) each
Employee Plan is in substantial compliance with ERISA and the Internal Revenue
Code, (ii) no Termination Event has occurred nor is reasonably expected to occur
with respect to any Employee Plan, (iii) the most recent annual report (Form
5500 Series) with respect to each Employee Plan, including any required Schedule
B (Actuarial Information) thereto, copies of which have been filed with the
Internal Revenue Service and delivered to the Agent, is complete and correct and
fairly presents the funding status of such Employee Plan, and since the date of
such report there has been no material adverse change in such funding status,
(iv) copies of each agreement entered into with the PBGC, the U.S. Department of
Labor or the Internal Revenue Service with respect to any Employee Plan have
been delivered to the Agent, (v) no Employee Plan had an accumulated or waived
funding deficiency or permitted decrease which would create a deficiency in its
funding standard account or has applied for an extension of any amortization
period within the meaning of Section 412 of the Internal Revenue Code at any
time during the previous 60 months, and (vi) no Lien imposed under the Internal
Revenue Code or ERISA exists or is likely to arise on account of any Employee
Plan within the meaning of Section 412 of the Internal Revenue Code. Except as
set forth on Schedule 5.01(j), no Loan Party or any of its ERISA Affiliates has
incurred any withdrawal liability under ERISA with respect to any Multiemployer
Plan, or is aware of any facts indicating that it or any of its ERISA Affiliates
may in the future incur any such withdrawal liability. No Loan Party or any of
its ERISA Affiliates nor any fiduciary of any Employee Plan has (i) engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code that could have more than a de minimus effect, (ii)
failed to pay any required installment or other payment required under Section
412 of the Internal Revenue Code on or before the due date for such required
installment or payment, (iii) engaged in a transaction within the meaning of
Section 4069 of ERISA or (iv) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. There are no pending or, to the
best knowledge of any Loan Party, threatened claims, actions, proceedings or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (i) any Employee Plan or its assets, (ii) any fiduciary with
respect to any Employee Plan, or (iii) any Loan Party or any of its ERISA
Affiliates with respect to any Employee Plan. Except as required by Section
4980B of the Internal Revenue Code, no Loan Party or any of its ERISA Affiliates
maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA)
which provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of any Loan Party or any of its
ERISA Affiliates or coverage after a participant's termination of employment.
(k) Taxes, Etc. All Federal, state and local tax returns and
other reports required by applicable law to be filed before the Effective Date
by any Loan Party have been filed, or extensions have been obtained, and all
taxes, assessments and other governmental charges imposed upon any Loan Party or
any property of any Loan Party and which have become due and payable on or prior
to the Effective Date have been paid, except to the extent contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or
Lien resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof on the Financial Statements
in accordance with GAAP
-44-
(including, without limitation, with respect to an ongoing dispute with the
State of Louisiana and ongoing ordinary course audit being conducted by the
Internal Revenue Service regarding aggregate tax liabilities not to exceed
$12,000,000 plus interest, fees and penalties thereon accrued from the date
hereof).
(l) Regulations T, U and X. No Loan Party is or will be engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation T, U or X), and no proceeds of
any Loan will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
(m) Nature of Business. No Loan Party is engaged in any business
other than (i) developing and managing casino operations, (ii) creating
internally branded entertainment and consumer products driven by the
development, production and marketing of televised programming based on gaming
themes, (iii) buying, patenting and licensing rights for new table game concepts
to market/distribute and license to casinos and (iv) any business activity
reasonably related thereto and approved in writing by the Agent.
(n) Adverse Agreements, Etc. No Loan Party is a party to any
agreement or instrument, or subject to any charter, limited liability company
agreement, partnership agreement or other corporate, partnership or limited
liability company restriction or any judgment, order, regulation, ruling or
other requirement of a court or other Governmental Authority, which has, or
could reasonably be expected to have, a Material Adverse Effect.
(o) Permits, Etc. Each Loan Party has, and is in material
compliance with, all material permits, licenses, authorizations, approvals,
entitlements and accreditations required for such Loan Party lawfully to own,
lease, manage or operate or to acquire each business currently owned, leased,
managed or operated by such Person. No condition exists or event has occurred
which, in itself or with the giving of notice or lapse of time or both, would
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such permit, license, authorization, approval, entitlement or accreditation,
and there is no claim that any thereof is not in full force and effect.
(p) Properties. (i) Each Loan Party has good and marketable title
to, valid leasehold interests in, or valid licenses or other rights to use, all
property and assets material to its business, free and clear of all Liens,
except Permitted Liens. All such properties and assets are in good working order
and condition, ordinary wear and tear excepted.
(ii) Schedule 5.01(p) sets forth a complete and accurate
list, as of the Effective Date, of the location, by state and street address (or
if no street address is available, other identifying information), of all real
property owned or leased by each Loan Party. As of the Effective Date, each Loan
Party has valid leasehold interests in the Leases described on Schedule 5.01(p)
to which it is a party. Schedule 5.01(p) sets forth with respect to each such
Lease, the commencement date, termination date, renewal options (if any) and
annual base rents. Each such Lease is valid and enforceable in accordance with
its terms in all material respects and is in full force and effect. No consent
or approval of any landlord or other third party in connection with any such
Lease is necessary for any Loan Party to enter into and
-45-
execute the Loan Documents to which it is a party, except as set forth on
Schedule 5.01(p). To the best knowledge of any Loan Party, no other party to any
such Lease is in default of its obligations thereunder, and no Loan Party (or
any other party to any such Lease) has at any time delivered or received any
notice of default which remains uncured under any such Lease and, as of the
Effective Date, no event has occurred which, with the giving of notice or the
passage of time or both, would constitute a default under any such Lease.
(q) Full Disclosure. Each Loan Party has disclosed to the Agent
all agreements, instruments and corporate or other restrictions to which it is
subject, and all other matters known to it, that, individually or in the
aggregate, could result in a Material Adverse Effect. None of the other reports,
financial statements, certificates or other information furnished by or on
behalf of any Loan Party to the Agent in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which it was made, not misleading; provided that,
with respect to projected financial information, each Loan Party represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time prepared. There is no contingent liability or fact
that may have a Material Adverse Effect which has not been set forth in a
footnote included in the Financial Statements or a Schedule hereto.
(r) Operating Lease Obligations. On the Effective Date, none of
the Loan Parties has any Operating Lease Obligations other than the Operating
Lease Obligations set forth on Schedule 5.01(r).
(s) Environmental Matters. Except as set forth on Schedule
5.01(s), (i) the operations of each Loan Party are in material compliance with
all Environmental Laws; (ii) to the knowledge of any Loan Party, there has been
no Release at any of the properties owned or operated by any Loan Party or a
predecessor in interest, or at any disposal or treatment facility which received
Hazardous Materials generated by any Loan Party or any predecessor in interest
which could have a Material Adverse Effect; (iii) no Environmental Action has
been asserted against any Loan Party or, to the knowledge of any Loan Party, any
predecessor in interest nor does any Loan Party have knowledge or notice of any
threatened or pending Environmental Action against any Loan Party or any
predecessor in interest which could have a Material Adverse Effect; (iv) to the
knowledge of any Loan Party, no Environmental Actions have been asserted against
any facilities that may have received Hazardous Materials generated by any Loan
Party or any predecessor in interest which could have a Material Adverse Effect;
(v) to the knowledge of any Loan Party, no property now or formerly owned or
operated by a Loan Party has been used as a treatment or disposal site for any
Hazardous Material; (vi) no Loan Party has failed to report to the proper
Governmental Authority any Release which is required to be so reported by any
Environmental Laws which could have a Material Adverse Effect; (vii) each Loan
Party holds all licenses, permits and approvals required under any Environmental
Laws in connection with the operation of the business carried on by it, except
for such licenses, permits and approvals as to which a Loan Party's failure to
maintain or comply with could not have a Material Adverse Effect; and (viii) no
Loan Party has received any notification pursuant to any Environmental Laws that
(A) any work, repairs, construction or Capital Expenditures are required to be
made in respect as a condition of continued compliance
-46-
with any Environmental Laws, or any license, permit or approval issued pursuant
thereto or (B) any license, permit or approval referred to above is about to be
reviewed, made, subject to limitations or conditions, revoked, withdrawn or
terminated, in each case, except as could not have a Material Adverse Effect.
(t) Insurance. Each Loan Party keeps its property adequately
insured and maintains (i) insurance to such extent and against such risks,
including fire, as is customary with companies in the same or similar
businesses, (ii) worker's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by it, and (iv) such other insurance as may be
required by law or as may be reasonably required by the Agent (including,
without limitation, against larceny, embezzlement or other criminal
misappropriation). Schedule 5.01(t) sets forth a list of all insurance
maintained by each Loan Party on the Effective Date.
(u) Use of Proceeds. The proceeds of the Loan shall be used to
(a) pay the Berman Loan in full in the amount of $10,203,333.28, (b) fees and
expenses in connection with this Agreement and the transactions contemplated
hereby and (c) fund working capital of the Borrowers. The proceeds of the Loan
may not be used to purchase margin stock (within the meaning of Regulation T, U
or X).
(v) Solvency. After giving effect to the transactions
contemplated by this Agreement and immediately before and immediately after
giving effect to the Loan, the Loan Parties on a consolidated basis are and will
be Solvent.
(w) Location of Bank Accounts. Schedule 5.01(w) sets forth a
complete and accurate list as of the Effective Date of all deposit, checking and
other bank accounts, all securities and other accounts maintained with any
broker dealer and all other similar accounts maintained by each Loan Party,
together with a description thereof (i.e., the bank or broker dealer at which
such deposit or other account is maintained and the account number and the
purpose thereof).
(x) Intellectual Property. Except as set forth on Schedule
5.01(x), each Loan Party owns or licenses or otherwise has the right to use all
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
computer software, franchises, authorizations, non-governmental licenses and
permits and other intellectual property rights that are necessary for the
operation of its business, to the knowledge of any Loan Party without
infringement upon or conflict with the rights of any other Person with respect
thereto, except for such infringements and conflicts which, individually or in
the aggregate, could not have a Material Adverse Effect. Each Loan Party has
taken all action reasonably necessary to protect the secrecy, confidentiality
and value of all its material proprietary information, trade secrets and
know-how and to maintain and protect each item of intellectual property that
they own or use that is necessary for the operation of such Loan Party's
business. Set forth on Schedule 5.01(x) is a complete and accurate list as of
the Effective Date of each material agreement to which a Loan Party is a party
or is otherwise obligated with respect to any intellectual property, including
agreements with current or former
-47-
employees, consultants or contractors regarding the use, non-disclosure or
development of intellectual property, and all other licenses, permits, patents,
patent applications, trademarks, trademark applications, service marks,
tradenames, copyrights, copyright applications, computer software, franchises,
authorizations, non-governmental licenses and permits and other intellectual
property rights of each Loan Party. To the knowledge of any Loan Party, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by any Loan
Party infringes upon or conflicts with any rights owned by any other Person. No
claim or litigation regarding any of the foregoing is pending or threatened in
writing, except for such infringements and conflicts which could not have,
individually or in the aggregate, a Material Adverse Effect. To the best
knowledge of each Loan Party, no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or
proposed, which, individually or in the aggregate, could have a Material Adverse
Effect.
(y) Material Contracts. Set forth on Schedule 5.01(y) is a
complete and accurate list as of the Effective Date of all Material Contracts of
each Loan Party, showing the parties and subject matter thereof and amendments
and modifications thereto. Each such Material Contract (i) is in full force and
effect and is binding upon and enforceable against each Loan Party that is a
party thereto and, to the best knowledge of such Loan Party, all other parties
thereto in accordance with its terms, (ii) except as permitted by Section
6.02(r), has not been otherwise amended or modified, (iii) is not in default due
to the action of any Loan Party or, to the best knowledge of any Loan Party, any
other party thereto (other than the default of the Kickapoo Tribe in respect of
the Kickapoo Indebtedness), and (iv) no consent (or approval) of any third party
to the transactions contemplated hereby shall be required under such Material
Contracts.
(z) Holding Company and Investment Company Acts. None of the Loan
Parties is (i) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, or (ii) an
"investment company" or an "affiliated person" or "promoter" of, or "principal
underwriter" of or for, an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.
(aa) Employee and Labor Matters. There is (i) no unfair labor
practice complaint pending or, to the best knowledge of any Loan Party,
threatened against any Loan Party before any Governmental Authority and no
grievance or arbitration proceeding pending or threatened against any Loan Party
which arises out of or under any collective bargaining agreement, (ii) no
strike, labor dispute, slowdown, stoppage or similar action or grievance pending
or threatened against any Loan Party or (iii) to the best knowledge of any Loan
Party, no union representation question existing with respect to the employees
of any Loan Party and no union organizing activity taking place with respect to
any of the employees of any Loan Party. No Loan Party or any of its ERISA
Affiliates has incurred any liability or obligation under the Worker Adjustment
and Retraining Notification Act ("WARN") or similar state law, which remains
unpaid or unsatisfied. The hours worked and payments made to employees of any
Loan Party have not been in violation of the Fair Labor Standards Act or any
other applicable legal requirements. All material payments due from any Loan
Party on account of wages and
-48-
employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of such Loan Party.
(bb) Customers and Suppliers. There exists no actual or
threatened in writing, termination, cancellation or limitation of, or
modification to or change in, the business relationship between (i) any Loan
Party, on the one hand, and any customer or any group thereof, on the other
hand, whose agreements with any Loan Party are individually or in the aggregate
material to the business or operations of such Loan Party, or (ii) any Loan
Party, on the one hand, and any material supplier thereof, on the other hand;
and, to the knowledge of any Loan Party, there exists no present state of facts
or circumstances that could give rise to or result in any such termination,
cancellation, limitation, modification or change.
(cc) No Bankruptcy Filing. No Loan Party is contemplating either
an Insolvency Proceeding or the liquidation of all or a major portion of such
Loan Party's assets or property, and no Loan Party has any knowledge of any
Person contemplating an Insolvency Proceeding against it.
(dd) Separate Existence. No Loan Party has at all times since its
formation identified itself as being a division of any other Person.
(ee) Name; Jurisdiction of Organization; Organizational ID
Number; Chief Place of Business; Chief Executive Office; FEIN. Schedule 5.01(ee)
sets forth a complete and accurate list as of the date hereof of (i) the exact
legal name of each Loan Party, (ii) the jurisdiction of organization of each
Loan Party, (iii) the organizational identification number of each Loan Party
(or indicates that such Loan Party has no organizational identification number),
(iv) each place of business of each Loan Party, (v) the chief executive office
of each Loan Party and (vi) the federal employer identification number of each
Loan Party.
(ff) Tradenames. Schedule 5.01(ff) hereto sets forth a complete
and accurate list as of the Effective Date of all tradenames, business names or
similar appellations used by each Loan Party or any of its divisions or other
business units during the past five years.
(gg) Locations of Collateral. Other than Collateral consisting of
real property, there is no location at which any Loan Party has any Collateral
(except for Inventory in transit) other than (i) those locations listed on
Schedule 5.01(gg) and (ii) any other locations approved in writing by the Agent
from time to time. No tangible Collateral is stored at a warehouse.
(hh) Security Interests. The Security Agreement creates in favor
of the Agent, for the benefit of the Lenders, a legal, valid and enforceable
security interest in the Collateral secured thereby. Upon the filing of the
UCC-1 financing statements described in Section 4.01(d)(viii) and the recording
of the Collateral Assignments for Security referred to in each Security
Agreement in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, such security interests in and Liens on the
Collateral granted thereby shall be perfected, first priority security interests
(other than as to Permitted Liens that have priority) to the extent such
security interests can be perfected by such filing and recording, and no further
recordings or filings are or will be required in connection with the creation,
-49-
perfection or enforcement of such security interests and Liens, other than (i)
the filing of continuation statements in accordance with applicable law, (ii)
the recording of the Collateral Assignments for Security pursuant to each
Security Agreement in the United States Patent and Trademark Office and the
United States Copyright Office, as applicable, with respect to after-acquired
U.S. patent and trademark applications and registrations and U.S. copyrights and
(iii) the recordation of appropriate evidence of the security interest in the
appropriate foreign registry with respect to all foreign intellectual property.
(ii) Inactive Subsidiaries. No Inactive Subsidiary has any
operations or liabilities. The Inactive Subsidiaries have, in aggregate, assets
of which the fair market value is no greater than $100,000.
(jj) Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate in all material respects and does not omit to state any
information material thereto.
(kk) Representations and Warranties in Documents; No Default. All
representations and warranties set forth in this Agreement and the other Loan
Documents are true and correct in all respects at the time as of which such
representations were made and on the Effective Date. No Event of Default has
occurred and is continuing and no condition exists which constitutes a Default
or an Event of Default.
(ll) Pokagon Account. Schedule 5.01(ll) lists the balance in the
Pokagon Account on the date hereof and the amount required to be on deposit in
the Pokagon Account pursuant to the Pokagon Management Agreement on the last day
of each month during the term of this Agreement.
(mm) Certain Patent. Patent 6,118,490 is owned by Lakes Gaming,
Inc. (but is incorrectly registered in the name of International Learning Group,
Inc. with the United States Patent and Trademark Office), has no material
current or anticipated value as of the date hereof and is not material to the
business of the Loan Parties or any Projects.
ARTICLE VI
COVENANTS OF THE LOAN PARTIES
Section 6.01 Affirmative Covenants. So long as any principal of or
interest on any Loan or any other Obligation (whether or not due) shall remain
unpaid or any Lender shall have any Commitment hereunder, Parent will, and will
cause each Loan Party to (unless the requirement hereunder is expressly that of
the Parent) unless the Required Lenders shall otherwise consent in writing:
(a) Reporting Requirements. Furnish, through electronic mail,
facsimile, or delivery, to the Agent and each Lender:
(i) as soon as available and in any event within 30 days
after the end of each Fiscal Quarter of the Parent and its Subsidiaries
commencing with the first Fiscal Quarter of the Parent and its Subsidiaries
ending after the Effective Date, unaudited consolidated
-50-
and unaudited consolidating balance sheets, unaudited consolidated and unaudited
consolidating statements of operations and retained earnings and unaudited
consolidated and unaudited consolidating statements of cash flows of the Parent
and its Subsidiaries as at the end of such quarter, and for the period
commencing at the end of the immediately preceding Fiscal Year and ending with
the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding date or period of the immediately preceding Fiscal
Year, all in reasonable detail and certified by an Authorized Officer of the
Parent as fairly presenting, in all material respects, the financial position of
the Parent and its Subsidiaries as of the end of such quarter and the results of
operations and cash flows of the Parent and its Subsidiaries for such quarter,
in accordance with GAAP applied in a manner consistent with that of the most
recent audited financial statements of the Parent and its Subsidiaries furnished
to the Agent and the Lenders, subject to normal year-end adjustments;
(ii) as soon as available, and in any event within 90 days
after the end of each Fiscal Year of the Parent and its Subsidiaries, audited
consolidated and unaudited consolidating balance sheets, audited consolidated
and unaudited consolidating statements of operations and retained earnings and
audited consolidated and unaudited consolidating statements of cash flows of the
Parent and its Subsidiaries as at the end of such Fiscal Year, setting forth in
each case in comparative form the corresponding figures for the immediately
preceding Fiscal Year, all in reasonable detail and prepared in accordance with
GAAP, and accompanied by a report and an unqualified opinion, prepared in
accordance with generally accepted auditing standards, of independent certified
public accountants of recognized standing selected by the Parent and
satisfactory to the Agent (which opinion shall be without (A) a "going concern"
or like qualification or exception, or (B) any qualification or exception as to
the scope of such audit, together with a written statement of such accountants
(1) to the effect that, in making the examination necessary for their
certification of such financial statements, they have not obtained any knowledge
of the existence of an Event of Default or a Default and (2) if such accountants
shall have obtained any knowledge of the existence of an Event of Default or
such Default, describing the nature thereof;
(iii) [Intentionally Omitted];
(iv) as soon as available, and in any event within 30 days
after the end of each fiscal month of the Parent and its Subsidiaries commencing
with the first fiscal month of the Parent and its Subsidiaries ending after the
Effective Date, internally prepared unaudited consolidated and unaudited
consolidating balance sheets, unaudited consolidated and unaudited consolidating
statements of operations and retained earnings and unaudited consolidated and
unaudited consolidating statements of cash flows as at the end of such fiscal
month, and for the period commencing at the end of the immediately preceding
Fiscal Year and ending with the end of such fiscal month, all in reasonable
detail and certified by an Authorized Officer of the Parent as fairly
presenting, in all material respects, the financial position of the Parent and
its Subsidiaries as at the end of such fiscal month and the results of
operations, retained earnings and cash flows of the Parent and its Subsidiaries
for such fiscal month, in accordance with GAAP applied in a manner consistent
with that of the most recent audited financial statements furnished to the Agent
and the Lenders, subject to normal year-end adjustments;
-51-
(v) simultaneously with the delivery of the financial
statements of the Parent and its Subsidiaries required by clauses (i), (ii) and
(iii) of this Section 6.01(a), a certificate of an Authorized Officer of the
Parent stating that such Authorized Officer has reviewed the provisions of this
Agreement and the other Loan Documents and has made or caused to be made under
his or her supervision a review of the condition and operations of the Parent
and its Subsidiaries during the period covered by such financial statements with
a view to determining whether the Parent and its Subsidiaries were in compliance
with all of the provisions of this Agreement and such Loan Documents at the
times such compliance is required hereby and thereby, and that such review has
not disclosed, and such Authorized Officer has no knowledge of, the existence
during such period of an Event of Default or Default or, if an Event of Default
or Default existed, describing the nature and period of existence thereof and
the action which the Parent and its Subsidiaries propose to take or have taken
with respect thereto;
(vi) [Intentionally Omitted].
(vii) (A) as soon as available and in any event not later
than 60 days prior to the end of each Fiscal Year, financial projections,
supplementing and superseding the financial projections referred to in Section
5.01(g)(ii), prepared on a monthly basis and otherwise in form and substance
satisfactory to the Agent, for the immediately succeeding Fiscal Year for the
Parent and its Subsidiaries and (B) as soon as available and in any event not
later than 30 days prior to the end of each Fiscal Quarter, financial
projections, supplementing and superseding the financial projections referred to
in Section 5.01(g)(ii), prepared on a monthly basis and otherwise in form and
substance satisfactory to the Agent, for each remaining quarterly period in such
Fiscal Year, all such financial projections to be reasonable, to be prepared on
a reasonable basis and in good faith, and to be based on assumptions believed by
the Parent to be reasonable at the time made and from the best information then
available to the Parent;
(viii) as soon as available and in any event within 10 days
of the end of each Fiscal Quarter, a (x) Periodic Project Development Report
with respect to the Projects (which shall include the same general type of
information as in the Project Business Plan in addition to an update with
respect to each Project or new project developed in accordance herewith on (A)
litigation and legislation that may affect the completion or progress of any
such Project or project, (B) the financing of such Project or project, (C) a
construction update on such Project or project (including with respect to
subcontractors) and (D) if construction on such Project or project has been
completed, an update on the financial performance of such Project or project
(including a comparison against the projections)) in form and substance
satisfactory to the Agent (a "Periodic Project Development Report"), and all
such Periodic Project Development Reports to be reasonably acceptable to the
Agent, to be prepared on a reasonable basis and in good faith, and to be based
on assumptions believed by the Parent to be reasonable at the time made and from
the best information then available to the Parent and (y) a Plan Reconciliation
Report.
(ix) as soon as possible, and in any event within 3 days
after the occurrence of a breach under or a termination of any of the Management
and Consulting Agreements, any other loan agreement or other agreement with
Indian Tribes, or any Material Contract, in each case by any party thereto, the
written statement of an Authorized Officer of
-52-
Parent setting forth the details of breach or termination and the action which
the affected Loan Party proposes to take with respect thereto
(x) promptly after submission to any Governmental Authority,
all documents and information furnished to such Governmental Authority in
connection with any investigation of any Loan Party other than routine inquiries
by such Governmental Authority;
(xi) as soon as possible, and in any event within 3 days
after the occurrence of an Event of Default or Default or the occurrence of any
event or development that could have a Material Adverse Effect, the written
statement of an Authorized Officer of Parent setting forth the details of such
Event of Default or Default or other event or development having a Material
Adverse Effect and the action which the affected Loan Party proposes to take
with respect thereto;
(xii) (A) as soon as possible and in any event within 10
days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that (1) any Reportable Event with respect to any Employee Plan has
occurred, (2) any other Termination Event with respect to any Employee Plan has
occurred, or (3) an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or
an extension of any amortization period under Section 412 of the Internal
Revenue Code with respect to an Employee Plan, a statement of an Authorized
Officer of Parent setting forth the details of such occurrence and the action,
if any, which such Loan Party or such ERISA Affiliate proposes to take with
respect thereto, (B) promptly and in any event within three days after receipt
thereof by any Loan Party or any ERISA Affiliate thereof from the PBGC, copies
of each notice received by any Loan Party or any ERISA Affiliate thereof of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (C) promptly and in any event within 10 days after the
filing thereof with the Internal Revenue Service if requested by the Agent,
copies of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Employee Plan and Multiemployer Plan, (D)
promptly and in any event within 10 days after any Loan Party or any ERISA
Affiliate thereof knows or has reason to know that a required installment within
the meaning of Section 412 of the Internal Revenue Code has not been made when
due with respect to an Employee Plan, (E) promptly and in any event within 3
days after receipt thereof by any Loan Party or any ERISA Affiliate thereof from
a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice
received by any Loan Party or any ERISA Affiliate thereof concerning the
imposition or amount of withdrawal liability under Section 4202 of ERISA or
indicating that such Multiemployer Plan may enter reorganization status under
Section 4241 of ERISA, and (F) promptly and in any event within 10 days after
any Loan Party or any ERISA Affiliate thereof sends notice of a plant closing or
mass layoff (as defined in WARN) to employees, copies of each such notice sent
by such Loan Party or such ERISA Affiliate thereof;
(xiii) promptly after the commencement thereof but in any
event not later than 5 days after service of process with respect thereto on, or
the obtaining of knowledge thereof by, any Loan Party, notice of each action,
suit or proceeding before any court or other Governmental Authority or other
regulatory body or any arbitrator which, if adversely determined, could have a
Material Adverse Effect;
-53-
(xiv) as soon as possible and in any event within 5 days
after execution, receipt or delivery thereof, copies of any material notices
that any Loan Party executes or receives in connection with any Material
Contract;
(xv) as soon as possible and in any event within 5 days
after execution, receipt or delivery thereof, copies of any material notices
that any Loan Party executes or receives in connection with the sale or other
Disposition of the Capital Stock of, or all or substantially all of the assets
of, any Loan Party;
(xvi) promptly after the sending or filing thereof, copies
of all statements, reports and other information any Loan Party sends to any
holders of its Indebtedness or its securities or files with the SEC or any
national (domestic or foreign) securities exchange;
(xvii) promptly upon receipt thereof, copies of all
financial reports (including, without limitation, management letters), if any,
submitted to any Loan Party by its auditors in connection with any annual or
interim audit of the books thereof; and
(xviii) promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of any Loan
Party as the Agent may from time to time may reasonably request.
(b) Additional Guaranties and Collateral Security. Cause:
(i) each Subsidiary of any Loan Party not in existence on
the Effective Date, to execute and deliver to the Agent promptly and in any
event within 3 days after the formation, acquisition or change in status thereof
(A) a Guaranty guaranteeing the Obligations, (B) a Security Agreement, (C) if
such Subsidiary has any Subsidiaries, a Pledge Agreement together with (x)
certificates evidencing all of the Capital Stock of any Person (other than an
Excluded Subsidiary) owned by such Subsidiary, (y) undated stock powers executed
in blank with signature guaranteed, and (z) such opinion of counsel and such
approving certificate of such Subsidiary as the Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares, (D) one or more Mortgages creating on the real property
of such Subsidiary a perfected, first priority Lien on such real property
(subject only to Permitted Liens), a Title Insurance Policy covering such real
property, a current ALTA survey thereof and a surveyor's certificate, each in
form and substance satisfactory to the Agent, together with such other
agreements, instruments and documents as the Agent may require whether
comparable to the documents required under Section 6.01(o) or otherwise, and (E)
such other agreements, instruments, approvals, legal opinions or other documents
reasonably requested by the Agent in order to create, perfect, establish the
first priority (subject only to Permitted Liens) of or otherwise protect any
Lien purported to be covered by any such Security Agreement, Pledge Agreement or
Mortgage or otherwise to effect the intent that such Subsidiary shall become
bound by all of the terms, covenants and agreements contained in the Loan
Documents and that all property and assets of such Subsidiary shall become
Collateral for the Obligations; and
(ii) each owner of the Capital Stock of any such Subsidiary
(other than an Excluded Subsidiary) to execute and deliver promptly and in any
event within 3
-54-
days after the formation or acquisition of such Subsidiary a Pledge Agreement,
together with (A) certificates evidencing all of the Capital Stock of such
Subsidiary, (B) undated stock powers or other appropriate instruments of
assignment executed in blank with signature guaranteed, (C) such opinion of
counsel and such approving certificate of such Subsidiary as the Agent may
reasonably request in respect of complying with any legend on any such
certificate or any other matter relating to such shares and (D) such other
agreements, instruments, approvals, legal opinions or other documents requested
by the Agent.
(c) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws
(including, without limitation, IGRA and any regulations promulgated thereunder
by the National Indian Gaming Commission pursuant thereto, the tribal-state
gaming compact in any relevant state and any regulations referenced therein, and
any other federal or state law that relates or applies to Indian gaming), rules,
regulations, orders (including, without limitation, all Environmental Laws
judgments and awards (including any settlement of any claim that, if breached,
could give rise to any of the foregoing), such compliance to include, without
limitation, (i) paying before the same become delinquent all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or upon any of its properties, and (ii) paying all lawful claims which if unpaid
might become a Lien or charge upon any of its properties, except to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof in
accordance with GAAP.
(d) Preservation of Existence, Etc. Except as otherwise permitted
by Section 6.02(c), maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, its existence, rights and privileges and become or
remain, and cause each of its Subsidiaries to become or remain, duly qualified
and in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(e) Keeping of Records and Books of Account. Keep, and cause each
of its Subsidiaries to keep, adequate records and books of account, with
complete entries made to permit the preparation of financial statements in
accordance with GAAP.
(f) Inspection Rights. Permit, and cause each of its Subsidiaries
to permit, the agents and representatives of the Agent at any time and from time
to time during normal business hours and upon reasonable advance notice (it
being understood that during the continuance of an Event of Default such notice
may be shorter), at the expense of the Borrowers, to examine and make copies of
and abstracts from its records and books of account, to visit and inspect its
properties, to verify materials, leases, notes, accounts receivable, deposit
accounts and its other assets, to conduct audits, physical counts, valuations,
appraisals, Phase I ESAs or examinations and to discuss its affairs, finances
and accounts with any of its directors, officers, managerial employees,
independent accountants or any of its other representatives. In furtherance of
the foregoing, each Loan Party hereby authorizes its independent accountants,
and the independent accountants of each of its Subsidiaries, to discuss the
affairs, finances and accounts of such Person (independently or together with
representatives of such Person) with the agents and representatives of the Agent
in accordance with this Section 6.01(f).
-55-
(g) Maintenance of Properties, Etc. Except as otherwise permitted
by Section 6.02(c), maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties which are necessary or useful in
the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted, and comply, and cause each of its Subsidiaries to comply
in all material respects, at all times with the provisions of all leases to
which it is a party as lessee or under which it occupies property, so as to
prevent any loss or forfeiture thereof or thereunder.
(h) Maintenance of Insurance. (i) Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any Governmental
Authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and in any event in amount, adequacy and scope reasonably
satisfactory to the Agent, and (ii) cause the Life Insurance Policy to be fully
paid and in full force and effect at all times. All policies covering the
Collateral are to be made payable to the Agent for the benefit of the Lenders,
as its interests may appear, in case of loss, under a standard non-contributory
"lender" or "secured party" clause and are to contain such other provisions as
the Agent may require to fully protect the Lenders' interest in the Collateral
and to any payments to be made under such policies. All certificates of
insurance are to be delivered to the Agent and the policies are to be premium
prepaid, with the loss payable and additional insured endorsement in favor of
the Agent and such other Persons as the Agent may designate from time to time,
and shall provide that the insurer shall endeavor to give not less than 30 days'
prior written notice to the Agent of the exercise of any right of cancellation.
If any Loan Party or any of its Subsidiaries fails to maintain such insurance,
the Agent may arrange for such insurance, but at the Borrowers' expense and
without any responsibility on the Agent's part for obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the sole right, in the name of the Lenders, any
Loan Party and its Subsidiaries, to file claims under any insurance policies, to
receive, receipt and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies. The Borrowers shall maintain the Life Insurance Policy.
(i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and
cause each of its Subsidiaries to obtain, maintain and preserve, and take all
necessary action to timely renew, all material permits, licenses,
authorizations, approvals, entitlements and accreditations which are necessary
or useful in the proper conduct of its business.
(j) Environmental. (i) Keep any property either owned or operated
by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply,
and cause each of its Subsidiaries to comply, in all material respects with
Environmental Laws and provide to the Agent any documentation of such compliance
which the Agent may reasonably request; (iii) provide the Agent written notice
within five (5) Business Days of any Release of a
-56-
Hazardous Material in excess of any reportable quantity from or onto property at
any time owned or operated by it or any of its Subsidiaries and take any
Remedial Actions required to abate said Release; (iv) provide the Agent with
written notice within ten (10) Business Days of the receipt of any of the
following: (A) notice that an Environmental Lien has been filed against any
property of any Loan Party or any of its Subsidiaries; (B) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Loan Party or any of its Subsidiaries; and (C) notice of a
violation, citation or other administrative order which could have a Material
Adverse Effect and (v) defend, indemnify and hold harmless the Agent and the
Lenders and their transferees, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the generation,
presence, disposal, Release or threatened Release of any Hazardous Materials on,
under, in, originating or emanating from any property at any time owned or
operated by any Loan Party or any of its Subsidiaries (or its predecessors in
interest or title), (B) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials, (D) any violation of any Environmental Law and/or (E) any
Environmental Action filed against the Agent or any Lender.
(k) Further Assurances. Take such action and execute, acknowledge
and deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as the Agent may require from time to time in
order (i) to carry out more effectively the purposes of this Agreement and the
other Loan Documents, (ii) to subject to valid and perfected first priority
Liens, subject to Permitted Liens, any of the Collateral, (iii) to establish and
maintain the validity and effectiveness of any of the Loan Documents and the
validity, perfection and priority of the Liens intended to be created thereby,
and (iv) to better assure, convey, grant, assign, transfer and confirm unto the
Agent and each Lender the rights now or hereafter intended to be granted to it
under this Agreement or any other Loan Document. In furtherance of the
foregoing, to the maximum extent permitted by applicable law, each Loan Party
(i) authorizes the Agent to execute any such agreements, instruments or other
documents in such Loan Party's name and to file such agreements, instruments or
other documents in any appropriate filing office, (ii) authorizes the Agent to
file any financing statement required hereunder or under any other Loan
Document, and any continuation statement or amendment with respect thereto, in
any appropriate filing office without the signature of such Loan Party, and
(iii) ratifies the filing of any financing statement, and any continuation
statement or amendment with respect thereto, filed without the signature of such
Loan Party prior to the date hereof.
(l) Change in Collateral; Collateral Records. (i) Give the Agent
not less than 30 days' prior written notice of any change in the location of any
Collateral, other than to locations set forth on Schedule 5.01(gg) and with
respect to which the Agent has filed financing statements and otherwise fully
perfected its Liens thereon, (ii) advise the Agent promptly, in sufficient
detail, of any material adverse change relating to the type, quantity or quality
of the Collateral or the Lien granted thereon and (iii) execute and deliver, and
cause each of its Subsidiaries to execute and deliver, to the Agent for the
benefit of the Lenders from time to time,
-57-
solely for the Agent's convenience in maintaining a record of Collateral, such
written statements and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral.
(m) Landlord Waivers; Collateral Access Agreements. (i) At any
time any Collateral with a book value in excess of $200,000 (when aggregated
with all other Collateral at the same location) is located on any real property
of a Loan Party (whether such real property is now existing or acquired after
the Effective Date) which is not owned by a Loan Party, use commercially
reasonable efforts to obtain written subordinations or waivers, in form and
substance satisfactory to the Agent, of all present and future Liens to which
the owner or lessor of such premises may be entitled to assert against the
Collateral.
(n) Subordination. Cause all Indebtedness and other obligations
now or hereafter owed by it to any of its Affiliates, to be subordinated in
right of payment and security to the Obligations owing to the Agent and the
Lenders in accordance with a subordination agreement in form and substance
satisfactory to the Agent.
(o) After Acquired Real Property. Upon the acquisition by it or
any of its Subsidiaries after the date hereof of any fee-owned interest (whether
fee or leasehold) in any real property (wherever located) (each such fee-owned
interest being an "After Acquired Property") with a Current Value (as defined
below) in excess of $500,000, immediately so notify the Agent, setting forth
with specificity a description of the fee-owned interest acquired, the location
of the real property, any structures or improvements thereon and either an
appraisal or such Loan Party's good-faith estimate of the current value of such
real property (for purposes of this Section, the "Current Value"). The Agent
shall notify such Loan Party whether it intends to require a Mortgage and the
other documents referred to below. Upon receipt of such notice requesting a
Mortgage, the Person which has acquired such After Acquired Property shall
promptly furnish to the Agent the following, each in form and substance
satisfactory to the Agent: (i) a Mortgage with respect to such real property and
related assets located at the After Acquired Property, each duly executed by
such Person and in recordable form; (ii) evidence of the recording of the
Mortgage referred to in clause (i) above in such office or offices as may be
necessary or, in the opinion of the Agent, desirable to create and perfect a
valid and enforceable first priority lien (subject to Permitted Liens) on the
property purported to be covered thereby or to otherwise protect the rights of
the Agent and the Lenders thereunder, (iii) a Title Insurance Policy, (iv) a
survey of such real property, certified to the Agent and to the issuer of the
Title Insurance Policy by a licensed professional surveyor reasonably
satisfactory to the Agent, (v) Phase I ESAs with respect to such real property,
certified to the Agent by a company reasonably satisfactory to the Agent, and
(vi) such other documents or instruments (including guarantees and opinions of
counsel) as the Agent may reasonably require. The Borrowers shall pay all fees
and expenses, including reasonable attorneys' fees and expenses, and all title
insurance charges and premiums, in connection with each Loan Party's obligations
under this Section 6.01(o).
(p) Fiscal Year. Maintain the existing Fiscal Year-end of the
Parent and its Subsidiaries.
(q) World Poker Collateral Shares.
-58-
(i) If at any time (A) an Event of Default shall have
occurred and be continuing or (B) during the occurrence of a WPT 75% Collateral
Event, a WPT 50% Collateral Event, a WPT 25% Collateral Event, or a WPT
Legislative Event, or (c) at any time, the Agent, in its reasonable and good
faith judgment believes an Event of Default or the occurrence of a WP 75%
Collateral Event, a WPT 50% Collateral Event, a WPT 25% Collateral Event or a
WPT Legislative Event is likely to occur within the next 90 days, then upon
receipt by the Parent from the Agent of a written request that World Poker
register all or a portion of the World Poker Shares (a "WPT Demand Notice", and
the date of such notice, the "WPT Demand Notice Date"), then the Parent shall
use its reasonable best efforts to cause World Poker to prepare, and, as soon as
practicable but in no event later than the 30 days after the WPT Demand Notice
Date, (such date, the "Filing Deadline"), file with the SEC a registration
statement on Form S-3 (or Form S-1, if Form S-3 is not available) under the
Securities Act (the "WPT Registration Statement") covering the resale of all of
the World Poker Collateral Shares (the "Filing Covenant"). The Parent shall use
its best efforts to have the WPT Registration Statement declared effective (the
"WPT Effective Date") by the SEC as soon as practicable, but in no event later
than the 90 days after the Filing Deadline (unless the WPT Registration
Statement is subject to a full review by the SEC, in which case no later than
120 days after the Filing Deadline) (the "Effectiveness Covenant"). If the
Parent fails to comply in all respects with the Filing Covenant or the
Effectiveness Covenant at any time, then, as partial relief for the damages to
any holder by reason of any such delay in or reduction of its ability to sell
the World Poker Collateral Shares (which remedy shall not be exclusive of any
other remedies available at law or in equity), upon the occurrence and
continuance of an Event of Default, the Borrowers shall pay to each Lender on
each of the following dates relating to such WPT Registration Statement an
amount in cash equal to one percent (1.0%) of the principal amount of the Loan
drawn by any of the Borrowers pursuant to this Agreement on or prior to such
date: (A) the initial day of any breach of the Filing Covenant and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until the WPT Registration Statement has been filed with the SEC; and (B) the
initial day of any breach of the Effectiveness Covenant and on every thirtieth
day (pro rated for periods totaling less than thirty days) thereafter until the
WPT Registration Statement has been declared effective by the SEC (it being
understood that such 1% payment is payable whether or not the best efforts
requirements set forth above have been complied with and such payment
requirement shall terminate on the WPT Effective Date).
(ii) On any day after the WPT Effective Date sales of all of
the World Poker Collateral Shares required to be included on such WPT
Registration Statement cannot be made pursuant to such WPT Registration
Statement (including, without limitation, because of a failure to keep such WPT
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to such WPT Registration Statement or to register
a sufficient number of shares of World Poker Shares) (a "Maintenance Covenant
Failure") then, as partial relief for the damages to any holder by reason of any
such delay in or reduction of its ability to sell the World Poker Collateral
Shares (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Borrowers shall pay to the Lender on each of the
following dates relating to such WPT Registration Statement an amount in cash
equal to one percent (1.0%) of the outstanding principal amount of the Loan
drawn by any of the Borrowers pursuant to this Agreement on or prior to such
date: (A) the initial day of a Maintenance Covenant Failure and (B) on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until such Maintenance Covenant Failure is cured.
-59-
(iii) The payments to which a holder shall be entitled
pursuant to clause (q)(i) and (ii) are referred to herein as the "WPT
Registration Delay Payments." WPT Registration Delay Payments shall be paid on
the earlier of (A) the last day of the calendar month during which such WPT
Registration Delay Payments are incurred and (B) the third Business Day after
the event or failure giving rise to the WPT Registration Delay Payments is
cured. In the event the Borrowers fail to make within three (3) days after the
date payable WPT Registration Delay Payments in a timely manner, such WPT
Registration Delay Payments shall bear interest at the rate of two percent
(2.0%) per month (prorated for partial months) until paid in full.
(r) Equity Rights. The Parent and/or any Loan Party, if relevant,
hereby grant to the Lenders (x) a right of first refusal to purchase any equity
or equity linked security of the Parent proposed to be issued or sold to any
Person (based on a bona fide offer of same) upon the same terms and conditions
as such proposed issuance or sale upon which such shares were to be sold to such
Person and all agreements to sell shares of the Parent shall be subject to the
Agent's right of first refusal (which shall be exercised with twenty-four (24)
hours of notice of such offer) on behalf of the Lender and (y) a right of first
offer to purchase any World Poker Shares proposed to be sold by any Loan Party
(which shall be exercised with twenty-four (24) hours of notice of such offer)
(it being understood that if the Agent declines to purchase such shares, such
shares may not be sold at a price lower than 10% of the original price without
triggering another offer to the Lenders). Notwithstanding the foregoing, the
following are excluded from the right of first refusal hereunder: (w) any sale,
the proceeds of which are to pay off in full all obligations pursuant to
Financing Facility, (x) the sale of up to 2,000,000 World Poker Shares to a
strategic buyer (which shall include a buyer with whom World Poker is seeking a
business alliance including, without limitation, International Game Technology),
(y) rights to acquire equity of a Loan Party outstanding as of the Effective
Date and listed on Schedule 5.01(e); and (z) rights to acquire equity pursuant
to options granted after the Effective Date to any Loan Party's officers,
directors, employees, or consultants and listed on Schedule 5.01(e).
(s) Inactive Subsidiaries. In the event the Inactive Subsidiaries
have assets, the aggregate fair market value of which exceeds $100,000, cause
one or more Inactive Subsidiaries to execute and deliver a Guaranty to the Agent
such that the aggregate fair market value of the assets of the remaining
Inactive Subsidiaries does not exceed $100,000. Upon delivery of such Guaranty,
such Inactive Subsidiary shall be deemed to be a Subsidiary and a Loan Party.
(t) New Subsidiaries. In the event a Loan Party shall create,
form, acquire or otherwise own an additional or new Subsidiary, the Parent shall
give notice to the Agent of its creation, formation, acquisition or other
ownership such new Subsidiary. If such new Subsidiary is formed for the purpose
of being a party to or a beneficiary of a contract, instrument or other
agreement with an Indian Tribe and the Parent desires that such new Subsidiary
be an Excluded Subsidiary, then such notice shall contain a representation of
the Parent that the Parent has consulted with reputable law firm with an
expertise in Indian gaming matters and that upon advice of such counsel, a
pledge of the Capital Stock of such new Subsidiary would reasonably be expected
to require the review or approval of an Indian gaming authority.
-60-
(u) Change Relating to Jamul. Notwithstanding anything herein to
the contrary, in the event that Lakes Jamul Development, LLC is no longer the
holder of the Management and Consulting Agreement related to the Jamul project,
then the holder of such Management and Consulting Agreement shall immediately
grant a security interest to the Agent in and to the Payment Rights (as defined
in the Security Agreement) with respect to such agreement.
Section 6.02 Negative Covenants. So long as any principal of or
interest on any Loan or any other Obligation (whether or not due) shall remain
unpaid or any Lender shall have any Commitment hereunder, each Loan Party shall
not, unless the Required Lenders shall otherwise consent in writing:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon or with respect to any of its properties, whether now owned or
hereafter acquired; file or suffer to exist under the Uniform Commercial Code or
any similar law or statute of any jurisdiction, a financing statement (or the
equivalent thereof) that names it or any of its Subsidiaries as debtor; sign or
suffer to exist any security agreement authorizing any secured party thereunder
to file such financing statement (or the equivalent thereof); sell any of its
property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable) with recourse to it or any of its Subsidiaries or assign or
otherwise transfer, or permit any of its Subsidiaries to assign or otherwise
transfer, any account or other right to receive income; other than, as to all of
the above, Permitted Liens.
(b) Indebtedness.
(i) Create, incur, assume, guarantee or suffer to exist, or
otherwise become or remain liable with respect to, or permit any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness.
(ii) Forgiveness of any Indebtedness owed to any Loan Party
on the date hereof unless otherwise consented to by the Required Lenders.
(c) Fundamental Changes; Dispositions. Wind-up, liquidate or
dissolve, or merge, consolidate or amalgamate with any Person, or convey, sell,
lease or sublease, transfer or otherwise dispose of, whether in one transaction
or a series of related transactions, all or any part of its business, property
or assets, whether now owned or hereafter acquired (or agree to do any of the
foregoing), or purchase or otherwise acquire, whether in one transaction or a
series of related transactions, all or substantially all of the assets of any
Person (or any division thereof) (or agree to do any of the foregoing), or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
that
(i) any wholly-owned Subsidiary of any Loan Party (other
than a Borrower) may be merged into such Loan Party or another wholly-owned
Subsidiary of such Loan Party, or may consolidate with another wholly-owned
Subsidiary of such Loan Party, so long as (A) no other provision of this
Agreement would be violated thereby, (B) such Loan
-61-
Party gives the Agent at least 60 days' prior written notice of such merger or
consolidation, (C) no Default or Event of Default shall have occurred and be
continuing either before or after giving effect to such transaction, (D) the
Lenders' rights in any Collateral, including, without limitation, the existence,
perfection and priority of any Lien thereon, are not adversely affected by such
merger or consolidation and (E) if not a Loan Party, the surviving Subsidiary,
if any, is a party to a Guaranty and a Security Agreement and the Capital Stock
of which Subsidiary (other than an Excluded Subsidiary) is the subject of a
Pledge Agreement, in each case, which is in full force and effect on the date of
and immediately after giving effect to such merger or consolidation;
(ii) any Loan Party and its Subsidiaries may (A) sell
Inventory in the ordinary course of business, and (B) dispose of obsolete or
worn-out equipment in the ordinary course of business;
(iii) (A) Parent may sell any number of shares of the
Capital Stock of the Parent as permitted by Section 2.05(c)(vi), and (B)
notwithstanding any provision in any Loan Document to the contrary, unless, a
Default or Event of Default shall have occurred and be continuing, the Loan
Parties may sell World Poker Shares (and the Agent shall release such shares for
such purpose so long as the proceeds of such sale shall be immediately used to
prepay the Loans hereunder subject to Section 2.05(c)(iii)).
(iv) the Loan Parties may release, transfer, or convey the
properties referenced in Section 7.04 as contemplated thereby and other real
property not constituting Collateral.
(d) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any change in the nature of its business as described in
Section 5.01(m).
(e) Loans, Advances, Investments, Etc. Make or commit or agree to
make any loan, advance, guarantee of obligations, other extension of credit or
capital contributions to, or hold or invest in or commit or agree to hold or
invest in, or purchase or otherwise acquire or commit or agree to purchase or
otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or
other securities of, or make or commit or agree to make any other investment in,
any other Person, or purchase or own any futures contract or otherwise become
liable for the purchase or sale of currency or other commodities at a future
date in the nature of a futures contract, or permit any of its Subsidiaries to
do any of the foregoing, except for: (i) in connection with one or more Projects
or new projects in accordance with the terms hereof, any loan, advance,
guarantee of obligations or other extension of credit (A) outstanding as of the
Effective Date as listed on Schedule 6.02(e), (B) to be made following the
Effective Date as contemplated by and in accordance with the Business Plan (but
not including any Contingent Obligation of any Loan Party related to the
Projects or other projects developed in accordance herewith except the Pawnee
Guaranty) (which together with Capital Expenditures pursuant to clause (g) below
shall not exceed $5,000,000 in respect of new projects developed in accordance
with the terms hereof), or (C) otherwise made with the written consent of the
Required Lenders (not to be unreasonably withheld if no Event of Default shall
have occurred and be continuing), (ii) the Pawnee Guaranty, (iii) investments
existing on the date hereof, as set forth on Schedule 6.02(e) hereto, but not
any increase in the amount thereof as set forth in such Schedule or any other
-62-
modification of the terms thereof, (iv) temporary loans and advances by the
Parent to a Subsidiary (in accordance with the Business Plan) that owns the
Projects or a new project to be developed in accordance herewith, (v) Permitted
Investments (vi) Investments in Subsidiaries (other than Inactive Subsidiaries,
provided each such Subsidiary is a Loan Party) and Investments in Inactive
Subsidiaries in an aggregate amount for all such Inactive Subsidiaries not to
exceed $100,000 at any one time, and (vii) loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary course
of business not to exceed $250,000 in the aggregate at any time outstanding.
(f) Lease Obligations. Create, incur or suffer to exist, or
permit any of its Subsidiaries to create, incur or suffer to exist, any
obligations as lessee (i) for the payment of rent for any real or personal
property in connection with any sale and leaseback transaction, or (ii) for the
payment of rent for any real or personal property under leases or agreements to
lease other than (A) Capitalized Lease Obligations which would not cause the
aggregate amount of all obligations under Capitalized Leases entered into after
the Effective Date owing by all Loan Parties and their Subsidiaries in any
Fiscal Year to exceed the amounts set forth in Section 6.02(g), and (B)
Operating Lease Obligations which would not cause the aggregate amount of all
Operating Lease Obligations owing by all Loan Parties and their Subsidiaries in
any Fiscal Year to exceed $200,000.
(g) Capital Expenditures. Make or commit or agree to make, or
permit any of its Subsidiaries to make or commit or agree to make, (i) any
Capital Expenditure (by purchase or Capitalized Lease) that would cause the
aggregate amount of all Capital Expenditures made by the Loan Parties and their
Subsidiaries to exceed (A) $2,500,000 in any Fiscal Year or (B) together with
any loans, advances, guarantees of obligations or other extensions of credit
pursuant to clause (e)(i) above in respect of new projects developed in
accordance with the terms hereof, $5,000,000 in aggregate during the term of the
Loan, and (ii) any Capital Expenditures not disclosed to the Agent with respect
to any Project or other project permitted under the terms hereof prior to the
date hereof unless otherwise consented to by the Required Lenders, which consent
shall not be unreasonably withheld.
(h) Restricted Payments. (i) Declare or pay any dividend or other
distribution, direct or indirect, on account of any Capital Stock of any Loan
Party or any of its Subsidiaries, now or hereafter outstanding, (ii) make any
repurchase, redemption, retirement, defeasance, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any Capital
Stock of any Loan Party or any direct or indirect parent of any Loan Party, now
or hereafter outstanding, (iii) make any payment to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights for the purchase
or acquisition of shares of any class of Capital Stock of any Loan Party, now or
hereafter outstanding, (iv) return any Capital Stock to any shareholders or
other equity holders of any Loan Party or any of its Subsidiaries, or make any
other distribution of property, assets, shares of Capital Stock, warrants,
rights, options, obligations or securities thereto as such or (v) pay any
management fees or any other fees or expenses (including the reimbursement
thereof by any Loan Party or any of its Subsidiaries) pursuant to any
management, consulting or other services agreement to any of the shareholders or
other equityholders of any Loan Party or any of its Subsidiaries or other
Affiliates, or to any other Subsidiaries or Affiliates of any Loan Party;
provided, however, (A) any Loan Party may pay dividends to the Parent (1) in
amounts necessary to pay customary
-63-
expenses of the Parent in the ordinary course of its business as a public
holding company (including salaries and related reasonable and customary
expenses incurred by employees of the Parent) and (2) in amounts necessary to
pay taxes when due and owing by the Parent and (B) any Subsidiary of any
Borrower may pay dividends to such Borrower, and (C) any Loan Party may fulfill
its contractual obligations owing to Kevin M. Kean and/or Jerry A. Argovitz
under agreements existing as of the Effective Date, as they may be amended from
time to time (such amendments shall not increase the Loan Parties' obligations
to such Persons by more than $500,000, without the written consent of the
Required Lenders) ), provided that, in each case of clauses (A) and (B) above,
at the election of the Agent, which the Agent may and, upon the direction of the
Required Lenders, shall make by notice to Parent, no such payment shall be made
if an Event of Default shall have occurred and be continuing or would result
from the making of any such payment.
(i) Federal Reserve Regulations. Permit any Loan or the proceeds
of any Loan under this Agreement to be used for any purpose that would cause
such Loan to be a margin loan under the provisions of Regulation T, U or X of
the Board.
(j) Transactions with Affiliates. Enter into, renew, extend or be
a party to, or permit any of its Subsidiaries to enter into, renew, extend or be
a party to, any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease, transfer or exchange of property
or assets of any kind or the rendering of services of any kind) with any
Affiliate, except (i) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to it or its Subsidiaries than would be obtainable in a comparable arm's length
transaction with a Person that is not an Affiliate thereof, (ii) transactions
with another Loan Party, including, without limitation, transactions involving
Permitted Indebtedness and (iii) transactions permitted by Section 6.02(e).
(k) Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries. Create or otherwise cause, incur, assume, suffer or
permit to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Subsidiary of any Loan Party (i) to pay dividends
or to make any other distribution on any shares of Capital Stock of such
Subsidiary owned by any Loan Party or any of its Subsidiaries, (ii) to pay or
prepay or to subordinate any Indebtedness owed to any Loan Party or any of its
Subsidiaries, (iii) to make loans or advances to any Loan Party or any of its
Subsidiaries or (iv) to transfer any of its property or assets to any Loan Party
or any of its Subsidiaries, or permit any of its Subsidiaries to do any of the
foregoing; provided, however, that nothing in any of clauses (i) through (iv) of
this Section 6.02(k) shall prohibit or restrict compliance with:
(A) this Agreement and the other Loan Documents;
(B) any agreements in effect on the date of this
Agreement and described on Schedule 6.02(k);
(C) any applicable law, rule or regulation (including,
without limitation, applicable currency control laws and applicable state
corporate statutes restricting the payment of dividends in certain
circumstances);
-64-
(D) in the case of clause (iv) any agreement setting
forth customary restrictions on the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract of similar
property or assets; or
(E) in the case of clause (iv) any agreement,
instrument or other document evidencing a Permitted Lien from restricting on
customary terms the transfer of any property or assets subject thereto.
(l) Limitation on Issuance of Capital Stock. Issue or sell or
enter into any agreement or arrangement for the issuance and sale of, or permit
any of its Subsidiaries to issue or sell or enter into any agreement or
arrangement for the issuance and sale of, any shares of its Capital Stock, any
securities convertible into or exchangeable for its Capital Stock or any
warrants, except as permitted under Section 6.02(c).
(m) Modifications of Indebtedness, Organizational Documents and
Certain Other Agreements; Etc. (i) Amend, modify or otherwise change (or permit
the amendment, modification or other change in any manner of) any of the
material provisions of any of its or its Subsidiaries' Indebtedness or of any
instrument or agreement (including, without limitation, any purchase agreement,
indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would shorten the final
maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on such Indebtedness, would increase
the interest rate applicable to such Indebtedness, would change the
subordination provision, if any, of such Indebtedness, or would otherwise be
adverse to the Lenders or the issuer of such Indebtedness in any respect, (ii)
except for the Obligations, make any voluntary or optional payment, prepayment,
redemption, defeasance, sinking fund payment or other acquisition for value of
any of its or its Subsidiaries' Indebtedness (including, without limitation, by
way of depositing money or securities with the trustee therefor before the date
required for the purpose of paying any portion of such Indebtedness when due),
or refund, refinance, replace or exchange any other Indebtedness for any such
Indebtedness (except to the extent such Indebtedness is otherwise expressly
permitted by the definition of "Permitted Indebtedness"), or make any payment,
prepayment, redemption, defeasance, sinking fund payment or repurchase of any
outstanding Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any
notice with respect to any of the foregoing, (iii) except as permitted by
Section 6.02(c), amend, modify or otherwise change its name, jurisdiction of
organization, organizational identification number or FEIN or (iv) amend, modify
or otherwise change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or
modification of any certificate of designation, or any agreement or arrangement
entered into by it, with respect to any of its Capital Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Capital Stock, except any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this clause (iv) that either
individually or in the aggregate, could not have a Material Adverse Effect.
(n) Investment Company Act of 1940. Engage in any business, enter
into any transaction, use any securities or take any other action or permit any
of its Subsidiaries to do any of the foregoing, that would cause it or any of
its Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being
-65-
an "investment company" or a company "controlled" by an "investment company" not
entitled to an exemption within the meaning of such Act.
(o) Compromise of Accounts Receivable or Notes Receivable.
Without limiting Section 6.02(b) hereunder, compromise or adjust any Account
Receivable or note receivable (or extend the time of payment thereof) or grant
any discounts, allowances or credits or permit any of its Subsidiaries to do so
other than, provided no Default or Event of Default has occurred and is
continuing, in the ordinary course of its business; provided, however, in no
event shall any such discount, allowance or credit exceed $1,000,000 in the
aggregate. Notwithstanding the foregoing, the Loan Parties may compromise,
adjust, or grant any discounts, allowances or credits with respect to the
Kickapoo Indebtedness.
(p) ERISA. (i) Engage, or permit any ERISA Affiliate to engage,
in any transaction described in Section 4069 of ERISA; (ii) engage, or permit
any ERISA Affiliate to engage, in any prohibited transaction described in
Section 406 of ERISA or 4975 of the Internal Revenue Code for which a statutory
or class exemption is not available or a private exemption has not previously
been obtained from the U.S. Department of Labor if such transaction could have
more than a de minimus effect on the Loan Party's ability to make payments under
this Agreement; (iii) adopt or permit any ERISA Affiliate to adopt any employee
welfare benefit plan within the meaning of Section 3(1) of ERISA which provides
benefits to employees after termination of employment other than as required by
Section 601 of ERISA or applicable law; (iv) fail to make any contribution or
payment to any Multiemployer Plan which it or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer Plan, or any
law pertaining thereto; or (v) fail, or permit any ERISA Affiliate to fail, to
pay any required installment or any other payment required under Section 412 of
the Internal Revenue Code on or before the due date for such installment or
other payment.
(q) Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of Hazardous Materials at any property owned or
leased by it or any of its Subsidiaries, except in compliance with Environmental
Laws and so long as such use, handling, generation, storage, treatment, Release
or disposal of Hazardous Materials does not result in a Material Adverse Effect.
(r) Certain Agreements.
(i) Agree to any amendment or modification, termination, or
other change to or waiver of any of its rights under any Material Contract or
the Berman Employment Agreement, except for (A) any amendment or modification,
termination, or other change to or waiver that is de minimus or of de minimus
effect, or (B) any amendment, modification, or other change to or waiver of any
of its rights under any Material Contract relating to or executed in connection
with a Project or other project permitted hereby, to the extent any such
amendment, modification or other change to or waiver of rights is necessary in
response to commentary or requirements of any Governmental Authority, including,
without limitation, the National Indian Gaming Commission or to ensure the
compliance of such Material Contract with applicable law.
-66-
(ii) Enter into any additional Material Contracts for a
project other than the Projects which would require the expenditure (via loans,
payments or otherwise), in excess of $5,000,000 in the aggregate for the term
hereof provided, that no such additional Materials Contract shall be entered
into when an Event of Default hereunder has occurred or is continuing.
(s) Inactive Subsidiaries. Permit any Inactive Subsidiaries to
(i) have any operations or engage in any business or activity or (ii) have
assets, the fair market value of which is, in aggregate, more than $100,000.
(t) Pokagon Account. In no event shall the Pokagon Account have a
balance as of the last day of each fiscal month greater than $2,500,000.
ARTICLE VII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
Section 7.01 Collection of Accounts Receivable; Management of
Collateral. (a) On or prior to the Effective Date, the Loan Parties shall
maintain one or more deposit accounts as identified on Schedule 7.01 hereto
(collectively, the "Blocked Accounts") with the financial institutions set forth
on Schedule 7.01 hereto or such other financial institutions selected by the
Loan Parties and acceptable to the Agent in its sole discretion (each being
referred to as a "Blocked Account Bank") which Blocked Accounts together with
the securities accounts referred to below shall be under the "control" (as
defined in Section 9-104(a) of the Uniform Commercial Code) of the Agent. No
Loan Party, may, without the written consent of the Agent, maintain any deposit
account or securities account not subject to a Blocked Account Agreement (other
than the Pokagon Account and the other Excluded Accounts) or a securities
account control agreement (except with respect to the Goldman Sachs account
referred to in Section 4.03(a), but only until such time as such control
agreement is required to be in place pursuant to Section 4.03(a)), as the case
may be, and all current deposit and securities accounts other than the Pokagon
Account and other Excluded Accounts are disclosed on Schedule 7.01. Until the
Agent has advised the Loan Parties to the contrary after the occurrence and
during the continuance of an Event of Default, the Loan Parties may and will
enforce, collect and receive all amounts owing on the Collateral (including
proceeds of material contacts set forth in Schedule 7.01) of the Loan Parties
for the Agent's benefit and on the Agent's behalf, but at the Loan Parties'
expense; such privilege shall terminate, at the election of the Agent, upon the
occurrence and during the continuance of an Event of Default. All checks,
drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness received directly by the Loan Parties, shall be held by the Loan
Parties in trust for the Agent and the Lenders and upon receipt be deposited by
the Loan Parties in original form and no later than the next Business Day after
receipt thereof into a Blocked Account. To the extent the Agent has exercised
its rights in respect of the Blocked Accounts following an Event of Default,
Agent shall charge the Loan Account on the last day of each month with two (2)
collection days for all such collections and under such circumstances no checks,
drafts or other instruments received by the Agent shall constitute final payment
to the Agent unless and until such checks, drafts or instruments have actually
been collected.
-67-
(b) After the occurrence and during the continuance of an Event
of Default, the Agent may send a notice of assignment and/or notice of the
Lenders' security interest to any and all Account Debtors or third parties
holding or otherwise concerned with any of the Collateral, and thereafter the
Agent shall have the sole right to collect the Accounts Receivable and/or take
possession of the Collateral and the books and records relating thereto. The
Loan Parties shall not, without prior written consent of the Agent, grant any
extension of time of payment of any Account Receivable, compromise or settle any
Account Receivable for less than the full amount thereof, release, in whole or
in part, any Person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon, except, in the absence of a continuing
Event of Default, as permitted by Section 6.02(o).
(c) Each Loan Party hereby appoints the Agent or its designee on
behalf of the Agent as the Loan Parties' attorney-in-fact with power exercisable
during the continuance of an Event of Default to endorse any Loan Party's name
upon any notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral and to do all other acts and things necessary
to carry out this Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of omission or commission (other than acts of omission or commission
constituting gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction), or for any error of judgment or
mistake of fact or law; this power being coupled with an interest is irrevocable
until all of the Loans and other Obligations under the Loan Documents are paid
in full and all of the Loan Documents are terminated.
(d) The Agent shall not, under any circumstance or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment with respect to the
Collateral (other than acts of omission or commission constituting gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction). The Agent, by anything herein or in any assignment or
otherwise, do not assume any of the obligations under any contract or agreement
assigned to the Agent and shall not be responsible in any way for the
performance by any Loan Party of any of the terms and conditions thereof.
(e) If any Collateral includes a charge for any tax payable to
any Governmental Authority, the Agent is hereby authorized (but in no event
obligated) in its discretion to pay the amount thereof to the proper taxing
authority for the Loan Parties' account and to charge the Loan Parties therefor.
The Loan Parties shall notify the Agent if any Collateral includes any taxes due
to any such Governmental Authority and, in the absence of such notice, the Agent
shall have the right to retain the full proceeds of such Collateral and shall
not be liable for any taxes that may be due by reason of the sale and delivery
creating such Collateral.
(f) Notwithstanding any other terms set forth in the Loan
Documents, the rights and remedies of the Agent and the Lenders herein provided,
and the obligations of the Loan Parties set forth herein, are cumulative of, may
be exercised singly or concurrently with, and are not exclusive of, any other
rights, remedies or obligations set forth in any other Loan Document or as
provided by law.
-68-
Section 7.02 Status of Collateral. With respect to Collateral of any
Loan Party at the time the Collateral becomes subject to the Agent's Lien, each
Loan Party covenants, represents and warrants: (a) such Loan Party shall be the
sole owner, free and clear of all Liens (except for the Liens granted in the
favor of the Agent for the benefit of the Lenders and Permitted Liens), and
shall be fully authorized to sell, transfer, pledge and/or grant a security
interest in each and every item of said Collateral; (b) [Intentionally Omitted];
(c) none of the transactions underlying or giving rise to any Material Contract
shall violate any applicable state or federal laws or regulations, except for
technical violations or those where a violation would be of de minimus effect,
and all documents relating thereto shall be legally sufficient under such laws
or regulations and shall be legally enforceable by the Loan Party that is a
party thereto in accordance with their terms; (d) no agreement under which any
deduction or offset of any kind, may be granted or shall have been made by such
Loan Party at or before the time such Material Contract is created; (e) all
agreements, instruments and other documents relating to any Material Contract
shall be true and correct and in all material respects what they purport to be;
(f) all signatures and endorsements that appear on all material agreements,
instruments and other documents relating to any Material Contract shall be
genuine and all signatories and endorsers shall have full capacity to contract;
(g) such Loan Party shall maintain books and records pertaining to said
Collateral in such detail, form and scope as the Agent shall reasonably require;
and (h) if any amount payable under or in connection with any Material Contract
(other than with respect to Excluded Debt, as defined in the Pledge Agreement)
is evidenced by a promissory note or other instrument, such promissory note or
instrument shall be immediately pledged, endorsed, assigned and delivered to the
Agent for the benefit of the Lenders as additional Collateral.
Section 7.03 Collateral Custodian. Upon the occurrence and during the
continuance of any Default or Event of Default, the Agent may at any time and
from time to time employ and maintain on the premises of any Loan Party a
custodian selected by the Agent who shall have full authority to do all acts
necessary to protect the Agent's and the Lenders' interests. Each Loan Party
hereby agrees to, and to cause its Subsidiaries to, cooperate with any such
custodian and to do whatever the Agent may reasonably request to preserve the
Collateral. All costs and expenses incurred by the Agent by reason of the
employment of the custodian shall be the responsibility of the Borrowers and
charged to the Loan Account.
Section 7.04 Release of Certain Properties. Notwithstanding anything
to the contrary contained herein or in any other Loan Document, to the extent
the Parent currently has any obligation to release properties in Jamul and
Shingle Springs, in each case, upon the happening of certain events or on
specific dates, the Lenders shall release such properties or mortgages thereon
upon such events or at such dates.
Section 7.05 Negative Pledge. No Loan Party shall grant a security
interest to any party other than Agent in and to (a) any Management and
Consulting Agreement or any rights thereunder (other than related to Jamul) (b)
any promissory note made by any Indian Tribe in favor of any Loan Party (other
than related to Jamul to the extent required by a construction lender to Lakes
Jamul Development, LLC), (c) the stock of any Excluded Subsidiary or (d) any
real property not subject to a mortgage in favor of the Agent.
-69-
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01 Events of Default. If any of the following Events of
Default shall occur and be continuing:
(a) any Borrower or any Guarantor shall fail to pay any principal
of any Loan, payable under this Agreement or any other Loan Document when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) (including with respect to increased rates and fees upon the
occurrence of certain events set forth hereunder);
(b) any Borrower or any Guarantor shall fail to pay any interest
on any Loan, any Agent Advance, or any fee, (including, without limitation,
under 6.01(q) hereof), indemnity or other amount payable under this Agreement or
any other Loan Document within 3 Business Days when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) (including
with respect to increased rates and fees upon the occurrence of certain events
set forth hereunder);
(c) any representation or warranty made or deemed made by or on
behalf of any Borrower or any Guarantor or by any officer of the foregoing under
or in connection with any Loan Document or under or in connection with any
report, certificate, or other document delivered to the Agent or any Lender
pursuant to any Loan Document shall have been incorrect in any material respect
when made or deemed made;
(d) any Borrower or any Guarantor shall fail to perform or comply
with any covenant or agreement contained in Sections 6.01(q), 6.02 or 7.01 or
any Borrower or any Guarantor shall fail to perform or comply with any covenant
or agreement contained in any Security Agreement to which it is a party, any
Pledge Agreement to which it is a party or any Mortgage to which it is a party
(and any such failure shall continue beyond any grace period applicable
thereto);
(e) any Borrower or any Guarantor shall fail to perform or comply
with any other term, covenant or agreement contained in (i) any Loan Document
(other than the Securities Purchase Agreement and the Registration Rights
Agreement) to be performed or observed by it and, except as set forth in
subsections (a), (b), (c) and (d) of this Section 8.01, such failure, if capable
of being remedied, shall remain unremedied for thirty (30) days or (ii) the
Securities Purchase Agreement or the Registration Rights Agreement to be
performed and observed by it (other than (x) as a result of a failure as to
which there is an additional fee or higher interest rate payable as a result
thereof or additional warrants to be issued hereunder or thereunder or (y) or
that is not otherwise material to the rights under such agreements), and such
failure, if capable of being remedied, shall remain unremedied for the forty
(40) days;
(f) any Borrower or any Guarantor shall fail to pay any principal
of or interest or premium on any of its Indebtedness (excluding Indebtedness
evidenced by this Agreement), to the extent that the aggregate principal amount
of all such Indebtedness exceeds $500,000, when due (whether by scheduled
maturity, required prepayment, acceleration, demand
-70-
or otherwise) and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Indebtedness,
or any other default under any agreement or instrument relating to any such
Indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased
or an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case, prior to the stated maturity thereof;
(g) any Borrower or any Guarantor (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for any such Person or for any
substantial part of its property, (ii) shall be generally not paying its debts
as such debts become due or shall admit in writing its inability to pay its
debts generally, (iii) shall make a general assignment for the benefit of
creditors, or (iv) shall take any action to authorize or effect any of the
actions set forth above in this subsection (g);
(h) any proceeding shall be instituted against any Borrower or
any Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
any such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of sixty (60) days
or any of the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against any such Person or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur;
(i) any material provision (as determined by the Agent) of any
Loan Document shall at any time for any reason (other than pursuant to the
express terms thereof) cease to be valid and binding on or enforceable against
any Borrower or any Guarantor intended to be a party thereto, or the validity or
enforceability thereof shall be contested by any party thereto, or a proceeding
shall be commenced by any Borrower or any Guarantor or any Governmental
Authority having jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof, or any Borrower or any Guarantor shall
deny in writing that it has any liability or obligation purported to be created
under any Loan Document;
(j) any Security Agreement, any Pledge Agreement, any Mortgage or
any other security document, after delivery thereof pursuant hereto, 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 and subject to Permitted Liens,
first priority Lien in favor of the Agent for the benefit of the Lenders on any
Collateral purported to be covered thereby;
-71-
(k) any bank at which any deposit account, blocked account, or
lockbox account of any Loan Party constituting Collateral is maintained shall
fail to comply with any of the terms of any deposit account, blocked account,
lockbox account or similar agreement to which such bank is a party or any
securities intermediary, commodity intermediary or other financial institution
at any time in custody, control or possession of any investment property of any
Loan Party shall fail to comply with any of the terms of any investment property
control agreement to which such Person is a party;
(l) one or more judgments, orders or awards (or any settlement of
any claim that, if breached, could result in a judgment, order or award) for the
payment of money exceeding $2,000,000 in the aggregate shall be rendered against
any Borrower or any Guarantor and remain unsatisfied and either (i) enforcement
proceedings shall have been commenced by any creditor upon any such judgment,
order, award or settlement, or (ii) there shall be a period of 10 consecutive
days after entry thereof during which a stay of enforcement of any such
judgment, order, award or settlement, by reason of a pending appeal or
otherwise, shall not be in effect; or (iii) at any time during which a stay of
enforcement of any such judgment, order, award or settlement, by reason of a
pending appeal or otherwise, is in effect, such judgment, order, award or
settlement, by reason of a pending appeal or otherwise, is in effect, such
judgment, order, award or settlement is not bonded in the full amount of such
judgment, order, award or settlement; provided, however, that any such judgment,
order, award or settlement shall not give rise to an Event of Default under this
subsection (l) if and for so long as (A) the amount of such judgment, order,
award or settlement is covered by a valid and binding policy of insurance
between the defendant and the insurer covering full payment thereof and (B) such
insurer has been notified, and has not disputed the claim made for payment, of
the amount of such judgment, order, award or settlement;
(m) [Intentionally Omitted];
(n) any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty which
causes, for more than fifteen (15) consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility of any
Loan Party, if any such event or circumstance could reasonably be expected to
have a Material Adverse Effect;
(o) any cessation of a substantial part of the business of any
Borrower or Guarantor for a period which materially and adversely affects the
ability of such Person to continue its business;
(p) any Change of Control occurs;
(q) the loss, suspension or revocation of, or failure to renew,
any license or permit now held or hereafter acquired by any Borrower or any
Guarantor, if such loss, suspension, revocation or failure to renew could
reasonably be expected to have a Material Adverse Effect;
-72-
(r) the indictment, or the threatened indictment of any Borrower
or any Guarantor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against any Borrower or any
Guarantor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture to any Governmental Authority of any
material portion of the property of such Person;
(s) any Borrower or any Guarantor or any of its ERISA Affiliates
shall have made a complete or partial withdrawal from a Multiemployer Plan, and,
as a result of such complete or partial withdrawal, any Borrower or any
Guarantor or any of its ERISA Affiliates incurs a withdrawal liability in an
annual amount exceeding $200,000; or a Multiemployer Plan enters reorganization
status under Section 4241 of ERISA, and, as a result thereof any Borrower's or
any Guarantor's or any of its ERISA Affiliates' annual contribution requirements
with respect to such Multiemployer Plan increases in an annual amount exceeding
$200,000;
(t) any Termination Event with respect to any Employee Plan shall
have occurred, and, 30 days after notice thereof shall have been given to any
Borrower or any Guarantor by the Agent, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Employee Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Employee Plan by more than $200,000 (or, in
the case of a Termination Event involving liability under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971
or 4975 of the Internal Revenue Code, the liability is in excess of such
amount);
(u) any Borrower or any Guarantor shall be liable for any
Environmental Liabilities and Costs the payment of which could reasonably be
expected to have a Material Adverse Effect;
(v) failure to commence the construction of at least one of
Shingle Springs, Pokagon or Jamul by March 1, 2007 in accordance with the
Project Business Plan (it being understood that the Parent shall be deemed to
have commenced such construction if the construction financing has been drawn
upon for one such Project and no litigation, governmental or regulatory, labor,
tribal or other action has had the effect of enjoining or preventing in any
material respect, the actual construction thereof); or
(w) an event or development occurs which could reasonably be
expected to have a Material Adverse Effect;
then, and in any such event, the Agent may, and shall at the request
of the Required Lenders, by notice to Parent, (i) terminate or reduce all
Commitments, whereupon all Commitments shall immediately be so terminated or
reduced, (ii) declare all or any portion of the Loans then outstanding to be due
and payable, whereupon all or such portion of the aggregate principal of all
Loans, all accrued and unpaid interest thereon, all fees and all other amounts
payable under this Agreement and the other Loan Documents shall become due and
payable immediately, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by each Loan Party and (iii)
exercise any and all of its other rights and remedies under applicable law,
hereunder and under the other Loan Documents; provided, however, that upon the
occurrence of any Event of Default described in subsection (g) or (h) of
-73-
this Section 8.01 with respect to any Loan Party, without any notice to any Loan
Party or any other Person or any act by the Agent or any Lender, all Commitments
shall automatically terminate and all Loans then outstanding, together with all
accrued and unpaid interest thereon, all fees and all other amounts due under
this Agreement and the other Loan Documents shall become due and payable
automatically and immediately, without presentment, demand, protest or notice of
any kind, all of which are expressly waived by each Loan Party.
ARTICLE IX
AGENT
Section 9.01 Appointment. Each Lender (and each subsequent maker of
any Loan by its making thereof) hereby irrevocably appoints and authorizes the
Agent to perform the duties of the Agent as set forth in this Agreement
including: (i) to receive on behalf of each Lender any payment of principal of
or interest on the Loans outstanding hereunder and all other amounts accrued
hereunder for the account of the Lenders and paid to the Agent, and, subject to
Section 2.02 of this Agreement, to distribute promptly to each Lender its Pro
Rata Share of all payments so received; (ii) to distribute to each Lender copies
of all material notices and agreements received by the Agent and not required to
be delivered to each Lender pursuant to the terms of this Agreement, provided
that the Agent shall not have any liability to the Lenders for the Agent's
inadvertent failure to distribute any such notices or agreements to the Lenders;
(iii) to maintain, in accordance with its customary business practices, ledgers
and records reflecting the status of the Obligations, the Loans, and related
matters and to maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Collateral and related matters;
(iv) to execute or file any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to this Agreement or any other
Loan Document; (v) to make the Loans and Agent Advances, for the Agent or on
behalf of the applicable Lenders as provided in this Agreement or any other Loan
Document; (vi) to perform, exercise, and enforce any and all other rights and
remedies of the Lenders with respect to the Loan Parties, the Obligations, or
otherwise related to any of same to the extent reasonably incidental to the
exercise by the Agent of the rights and remedies specifically authorized to be
exercised by the Agent by the terms of this Agreement or any other Loan
Document; (vii) to incur and pay such fees necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to this
Agreement or any other Loan Document; and (viii) subject to Section 9.03 of this
Agreement, to take such action as the Agent deems appropriate on its behalf to
administer the Loans and the Loan Documents and to exercise such other powers
delegated to the Agent by the terms hereof or the other Loan Documents
(including, without limitation, the power to give or to refuse to give notices,
waivers, consents, approvals and instructions and the power to make or to refuse
to make determinations and calculations) together with such powers as are
reasonably incidental thereto to carry out the purposes hereof and thereof. As
to any matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Loans), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions of the Required Lenders shall be
binding upon all Lenders and all makers of Loans.
-74-
Section 9.02 Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any other Loan Document, express or implied, is
intended to or shall be construed to impose upon the Agent any obligations in
respect of this Agreement or any other Loan Document except as expressly set
forth herein or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of the Loan Parties in
connection with the making and the continuance of the Loans hereunder and shall
make its own appraisal of the creditworthiness of the Loan Parties and the value
of the Collateral, and the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the initial Loan hereunder or at any time or times thereafter, provided
that, upon the reasonable request of a Lender, the Agent shall provide to such
Lender any documents or reports delivered to the Agent by the Loan Parties
pursuant to the terms of this Agreement or any other Loan Document. If the Agent
seeks the consent or approval of the Required Lenders to the taking or
refraining from taking any action hereunder, the Agent shall send notice thereof
to each Lender. The Agent shall promptly notify each Lender any time that the
Required Lenders have instructed the Agent to act or refrain from acting
pursuant hereto.
Section 9.03 Rights, Exculpation, Etc. The Agent and its directors,
officers, agents or employees shall not be liable for any action taken or
omitted to be taken by them under or in connection with this Agreement or the
other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agent (i)
may treat the payee of any Loan as the owner thereof until the Agent receives
written notice of the assignment or transfer thereof, pursuant to Section 11.07
hereof, signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including, without limitation, counsel to the Agent
or counsel to the Loan Parties), independent public accountants, and other
experts selected by any of them and shall not be liable for any action taken or
omitted to be taken in good faith by any of them in accordance with the advice
of such counsel or experts; (iii) make no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
certificates, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Person, the existence or possible existence of any Default or Event of Default,
or to inspect the Collateral or other property (including, without limitation,
the books and records) of any Person; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; and (vi) shall not
be deemed to have made any representation or warranty regarding the existence,
value or collectibility of the Collateral, the existence, priority or perfection
of the Agent's Lien thereon, or any certificate prepared by any Loan Party in
connection therewith, nor shall the Agent be responsible or liable to the
Lenders for any failure to monitor or maintain any portion of the Collateral.
The Agent shall not be liable for any apportionment or distribution of payments
made in good faith pursuant to Section 3.03, and if
-75-
any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not
made, shall be to recover from other Lenders any payment in excess of the amount
which they are determined to be entitled. The Agent may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Agreement or of any of the other Loan Documents the Agent is
permitted or required to take or to grant, and if such instructions are promptly
requested, the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Loan Documents until it
shall have received such instructions from the Required Lenders. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of the Required Lenders.
Section 9.04 Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
Section 9.05 Indemnification. To the extent that the Agent is not
reimbursed and indemnified by any Loan Party, the Lenders will reimburse and
indemnify the Agent from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the other Loan Documents or any action taken or
omitted by the Agent under this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share, including, without limitation,
advances and disbursements made pursuant to Section 9.08; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements for which there has been a final judicial determination that
such liability resulted from the Agent's gross negligence or willful misconduct.
The obligations of the Lenders under this Section 9.05 shall survive the payment
in full of the Loans and the termination of this Agreement.
Section 9.06 Agent Individually. With respect to its Pro Rata Share of
the Total Commitment hereunder and the Loans made by it, the Agent shall have
and may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender or maker of a Loan. The terms "Lenders" or "Required Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity as a Lender or one of the Required Lenders. The
Agent and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with any Borrower as if
it were not acting as the Agent pursuant hereto without any duty to account to
the other Lenders.
Section 9.07 Successor Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and under the other Loan
Documents at any time by giving at least thirty (30) Business Days' prior
written notice to the Parent and each
-76-
Lender. Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to clauses (b) and (c) below or as otherwise
provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
Agent, and the Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After the Agent's resignation
hereunder as the Agent, the provisions of this ARTICLE IX shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement and the other Loan Documents.
(c) If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the Agent shall then appoint a successor
Agent who shall serve as the Agent until such time, if any, as the Required
Lenders appoint a successor Agent as provided above.
Section 9.08 Collateral Matters.
(a) The Agent may from time to time make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve, protect, prepare for sale or lease or
dispose of the Collateral or any portion thereof, to enhance the likelihood or
maximize the amount of repayment by the Borrowers of the Loans and other
Obligations or to pay any other amount chargeable to the Borrowers pursuant to
the terms of this Agreement, including, without limitation, costs, fees and
expenses as described in Section 11.04. The Agent Advances shall be repayable on
demand and be secured by the Collateral. The Agent Advances shall constitute
Obligations hereunder which may be charged to the Loan Account in accordance
with Section 3.01. The Agent shall notify each Lender and Parent in writing of
each such Agent Advance, which notice shall include a description of the purpose
of such Agent Advance. Without limitation to its obligations pursuant to Section
9.05, each Lender agrees that it shall make available to the Agent, upon the
Agent's demand, in Dollars in immediately available funds, the amount equal to
such Lender's Pro Rata Share of each such Agent Advance. If such funds are not
made available to the Agent by such Lender, the Agent shall be entitled to
recover such funds on demand from such Lender, together with interest thereon
for each day from the date such payment was due until the date such amount is
paid to the Agent, at the Federal Funds Rate for three Business Days and
thereafter at the Reference Rate.
(b) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral upon termination of the Total Commitment and payment
and satisfaction of all Loans all other Obligations; or constituting property
being sold or disposed of in compliance with the terms of this Agreement and the
other Loan Documents or which the Lenders have otherwise agreed to release in
compliance with the terms of this Agreement or any other Loan Document;; or
constituting property in which the Loan Parties owned no interest at the time
the Lien was granted or at any time thereafter; or if approved, authorized or
ratified in writing by the Lenders.
-77-
Upon request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 9.08(b).
(c) Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Lenders (as set
forth in Section 9.08(b)), each Lender agrees to confirm in writing, upon
request by the Agent, the authority to release Collateral conferred upon the
Agent under Section 9.08(b). Upon receipt by the Agent of confirmation from the
Lenders of its authority to release any particular item or types of Collateral,
and upon prior written request by any Loan Party, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to the Agent for the
benefit of the Lenders upon such Collateral; provided, however, that (i) the
Agent shall not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any obligations
or entail any consequence other than the release of such Liens without recourse
or warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Lien upon (or obligations of any Loan Party in
respect of) all interests in the Collateral retained by any Loan Party.
(d) The Agent shall have no obligation whatsoever to any Lender
to assure that the Collateral exists or is owned by the Loan Parties or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Agent pursuant to this Agreement or any other Loan Document has been properly or
sufficiently or lawfully created, perfected, protected or enforced or is
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
the Agent in this Section 9.08 or in any other Loan Document, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its sole discretion, given the Agent's own interest in the Collateral as one
of the Lenders and that the Agent shall have no duty or liability whatsoever to
any other Lender, except as otherwise provided herein.
Section 9.09 Agency for Perfection. Each Lender hereby appoints the
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected only
by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and the Agent and each Lender hereby acknowledges that it holds
possession of or otherwise controls any such Collateral for the benefit of the
Agent and the Lenders as secured party. Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor shall deliver such Collateral to the
Agent or in accordance with the Agent's instructions. In addition, the Agent
shall also have the power and authority hereunder to appoint such other
sub-agents as may be necessary or required under applicable state law or
otherwise to perform its duties and enforce its rights with respect to the
Collateral and under the Loan Documents. Each Loan Party by its execution and
delivery of this Agreement hereby consents to the foregoing.
-78-
ARTICLE X
[INTENTIONALLY OMITTED]
ARTICLE XI
MISCELLANEOUS
Section 11.01 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telecopied or
delivered, if to any Loan Party, at the following address:
Lakes Entertainment, Inc.
130 Cheshire Lane, Suite 101
Minnetonka, Minnesota 55305
Attention: Damon E. Schramm, Esq. and Timothy J. Cope
Telephone: (952) 449-9092
Telecopier: (952) 449-9353
with a copy to:
Gray Plant Mooty Mooty & Bennett, PA
500 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attention: Daniel Tenenbaum, Esq.
Telephone: (612) 632-3000
Telecopier: (612) 632-4050
if to the Agent, to it at the following address:
c/o Prentice Capital Management, LP
623 Fifth Avenue, 32nd Floor
New York, New York 10022
Attention: Michael Weiss
Telephone: (212) 756-8045
Telecopier: (212) 756-1480
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Nancy R. Finkelstein, Esq.
Telephone: 212-756-2419
Telecopier: 212-593-5955
-79-
or, as to each party, at such other address as shall be designated by
such party in a written notice to the other parties complying as to delivery
with the terms of this Section 11.01. All such notices and other communications
shall be effective, (i) if mailed, when received or three days after deposited
in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered, upon delivery, except that notices
to the Agent pursuant to ARTICLE II and shall not be effective until received by
the Agent.
Section 11.02 Amendments, Etc. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by any Loan Party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders or by the Agent with the consent of the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given, provided, however, that
no amendment, waiver or consent shall (i) increase the Commitment of any Lender,
reduce the principal of, or interest on, the Loans payable to any Lender, reduce
the amount of any fee payable for the account of any Lender, or postpone or
extend any date fixed for any payment of principal of, or interest or fees on,
the Loans payable to any Lender without the written consent of any Lender
affected thereby, (ii) increase the Total Commitment without the written consent
of each Lender, (iii) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that is required for the Lenders
or any of them to take any action hereunder, (iv) amend the definition of
"Required Lenders" or "Pro Rata Share", or (v) release all or a substantial
portion of the Collateral (except as otherwise provided in this Agreement and
the other Loan Documents), subordinate any Lien granted in favor of the Agent
for the benefit of the Lenders, or release any Borrower or any Guarantor, (vi)
amend, modify or waive Section 3.02 or this Section 11.02 of this Agreement.
Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent (but
not in its capacity as a Lender) under this Agreement or the other Loan
Documents.
Section 11.03 No Waiver; Remedies, Etc. No failure on the part of the
Agent or any Lender to exercise, and no delay in exercising, any right hereunder
or under any other Loan Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agent and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agent and the Lenders
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agent and the Lenders to exercise any of their
rights under any other Loan Document against such party or against any other
Person.
Section 11.04 Expenses; Taxes; Attorneys' Fees. The Borrowers will pay
on demand, all costs and expenses incurred by or on behalf of the Agent (and, in
the case of clauses (b) through (m) below, each Lender), regardless of whether
the transactions contemplated hereby are consummated, including, without
limitation, reasonable fees, costs, client charges and expenses of counsel for
the Agent (and, in the case of clauses (b) through (m) below, each Lender),
accounting, due diligence, periodic field audits, physical counts, valuations,
investigations, searches and filings, monitoring of assets, appraisals of
Collateral, title searches and reviewing environmental assessments,
miscellaneous disbursements, examination, travel,
-80-
lodging and meals, arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Loan Documents (including, without limitation, the
preparation of any additional Loan Documents pursuant to Section 6.01(b) or the
review of any of the agreements, instruments and documents referred to in
Section 6.01(f)), (b) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given, (c) the preservation and protection of any of the
Lenders' rights under this Agreement or the other Loan Documents, (d) the
defense of any claim or action asserted or brought against the Agent or any
Lender by any Person that arises from or relates to this Agreement, any other
Loan Document, the Agent's or the Lenders' claims against any Loan Party, or any
and all matters in connection therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Loan Document, (f) the filing of any petition, complaint, answer,
motion or other pleading by the Agent or any Lender, or the taking of any action
in respect of the Collateral or other security, in connection with this
Agreement or any other Loan Document, (g) the protection, collection, lease,
sale, taking possession of or liquidation of, any Collateral or other security
in connection with this Agreement or any other Loan Document, (h) any attempt to
enforce any Lien or security interest in any Collateral or other security in
connection with this Agreement or any other Loan Document, (i) any attempt to
collect from any Loan Party, (j) all liabilities and costs arising from or in
connection with the past, present or future operations of any Loan Party
involving any damage to real or personal property or natural resources or harm
or injury alleged to have resulted from any Release of Hazardous Materials on,
upon or into such property, (k) any Environmental Liabilities and Costs incurred
in connection with the investigation, removal, cleanup and/or remediation of any
Hazardous Materials present or arising out of the operations of any facility of
any Loan Party, (l) any Environmental Liabilities and Costs incurred in
connection with any Environmental Lien; or (m) the receipt by the Agent or any
Lender of any advice from professionals with respect to any of the foregoing.
Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrowers agree to pay all stamp, document, transfer, recording or
filing taxes or fees and similar impositions now or hereafter determined by the
Agent or any Lender to be payable in connection with this Agreement or any other
Loan Document, and the Borrowers agree to save the Agent and each Lender
harmless from and against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or delay in paying
any such taxes, fees or impositions, (y) the Borrowers agree to pay all broker
fees that may become due in connection with the transactions contemplated by
this Agreement and the other Loan Documents, and (z) if the Borrowers fail to
perform any covenant or agreement contained herein or in any other Loan
Document, the Agent may itself perform or cause performance of such covenant or
agreement, and the expenses of the Agent incurred in connection therewith shall
be reimbursed on demand by the Borrowers.
Section 11.05 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Agent or any Lender may, and is hereby
authorized to, at any time and from time to time, without notice to any Loan
Party (any such notice being expressly waived by the Loan Parties) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by the Agent or such Lender to or for the credit
or the account of any Loan Party against any and all obligations of the Loan
Parties either now or hereafter existing under any Loan Document, irrespective
of whether or not the Agent or such
-81-
Lender shall have made any demand hereunder or thereunder and although such
obligations may be contingent or unmatured. The Agent and each Lender agrees to
notify such Loan Party promptly after any such set-off and application made by
the Agent or such Lender provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Agent and
the Lenders under this Section 11.05 are in addition to the other rights and
remedies (including other rights of set-off) which the Agent and the Lenders may
have under this Agreement or any other Loan Documents of law or otherwise.
Section 11.06 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.07 Assignments and Participations.
(a) This Agreement and the other Loan Documents shall be binding
upon and inure to the benefit of each Loan Party and the Agent and each Lender
and their respective successors and assigns; provided, however, that none of the
Loan Parties may assign or transfer any of its rights hereunder or under the
other Loan Documents without the prior written consent of each Lender and any
such assignment without the Lenders' prior written consent shall be null and
void.
(b) Each Lender may assign, upon 45 days prior written notice to
the Parent (it being understood this is only a notification requirement not a
consent right and that such obligation to notify shall not apply to PLKS Funding
LLC, Prentice Capital Management, LP or its affiliates), to one or more other
lenders or other entities all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitments, the Loans made by it); provided, however, that (i) such assignment
is in an amount which is at least $1,000,000 or a multiple of $1,000,000 in
excess thereof (or the remainder of such Lender's Commitment) (except such
minimum amount shall not apply to an assignment by a Lender to (x) an Affiliate
of such Lender or a Related Fund of such Lender or (y) a group of new Lenders,
each of whom is an Affiliate or Related Fund of each other to the extent the
aggregate amount to be assigned to all such new Lenders is at least $1,000,000
or a multiple of $1,000,000 in excess thereof), (ii) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance, an
Assignment and Acceptance, together with any promissory note subject to such
assignment and such parties shall deliver to the Agent a processing and
recordation fee of $5,000 (except the payment of such fee shall not be required
in connection with an assignment by a Lender to an Affiliate of such Lender or
Related Fund of such Lender), (iii) except as provided in Section 11.07(b)(iv),
any such assignment shall be made with the written consent of the Agent, and
(iv) no written consent of the Agent shall be required (1) in connection with
any assignment by a Lender to an Affiliate of such Lender or a Related Fund of
such Lender or (2) if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender. Upon such execution,
delivery and acceptance, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least three Business
Days after the delivery thereof to the Agent (or such shorter period as shall be
agreed to by the Agent and the parties to such assignment), (A) the assignee
thereunder shall
-82-
become a "Lender" hereunder and, in addition to the rights and obligations
hereunder held by it immediately prior to such effective date, have the rights
and obligations hereunder that have been assigned to it pursuant to such
Assignment and Acceptance and (B) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
furnished pursuant hereto; (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or any of its Subsidiaries or the performance or observance by
any Loan Party of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement and the other Loan Documents, together with
such other documents and information it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the assigning
Lender, the Agent or any Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the other Loan
Documents; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agent by the terms hereof
and thereof, together with such powers as are reasonably incidental hereto and
thereto; and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Loan Documents are required to be performed by it as a Lender.
(d) The Agent shall, acting solely for this purpose as a
non-fiduciary agent of the Borrowers, maintain, or cause to be maintained at the
Payment Office, a copy of each Assignment and Acceptance delivered to and
accepted by it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitments of, and the principal amount of
the Loans (and stated interest thereon) (the "Registered Loans") owing to each
Lender from time to time. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers, the Agent
and the Lenders shall treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Parent and any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee, together with any promissory notes subject
to such assignment, the Agent shall, if the Agent consents to such assignment
and if such Assignment
-83-
and Acceptance has been completed (i) accept such Assignment and Acceptance and
(ii) record the information contained therein in the Register.
(f) A Registered Loan (and the registered note, if any,
evidencing the same) may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register (and each registered
note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the registered note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new registered notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the registered note, if any, evidencing the same), the
Agent shall treat the Person in whose name such Registered Loan (and the
registered note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(g) In the event that any Lender sells participations in a
Registered Loan, such Lender shall maintain a register for this purpose as a non
fiduciary agent of the Borrowers on which it enters the name of all participants
in the Registered Loans held by it and the principal amount (and stated
interests thereon) of the portion of the Registered Loan that is the subject of
the participation (the "Participant Register"). A Registered Loan (and the
registered note, if any, evidencing the same) may be participated in whole or in
part only by registration of such participation on the Participant Register (and
each registered note shall expressly so provide). Any participation of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by the registration of such participation on the Participant
Register.
(h) Any foreign Person who purchases or is assigned or
participates in any portion of such Registered Loan shall comply with Section
2.08(d).
(i) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or a portion of its Commitments and the Loans made by it); provided, that (i)
such Lender's obligations under this Agreement (including without limitation,
its Commitments hereunder) and the other Loan Documents shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and the Borrowers, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents; and (iii) a participant shall not be entitled to
require such Lender to take or omit to take any action hereunder except (A)
action directly effecting an extension of the maturity dates or decrease in the
principal amount of the Loans, (B) action directly effecting an extension of the
due dates or a decrease in the rate of interest payable on the Loans or the fees
payable under this Agreement, or (C) actions directly effecting a release of all
or a substantial portion of the Collateral or any Loan Party (except as set
forth in Section 9.08 of this Agreement or any other Loan Document). The Loan
Parties agree that each participant shall be entitled to the benefits of Section
2.08 and Section 3.04 of this
-84-
Agreement with respect to its participation in any portion of the Commitments
and the Loans as if it was a Lender.
Section 11.08 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of this Agreement by telecopier 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 telecopier 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. The foregoing shall apply to each other Loan
Document mutatis mutandis.
Section 11.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
Section 11.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH LOAN PARTY HEREBY IRREVOCABLY
APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR
SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARENT AT ITS ADDRESS FOR
NOTICES AS SET FORTH IN SECTION 11.01 AND TO THE SECRETARY OF STATE OF THE STATE
OF NEW YORK, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE LENDERS TO SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN
PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
-85-
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 11.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT
AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT,
DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN
CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN
PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT
OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK
TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS AGREEMENT.
Section 11.12 Consent by the Agent and Lenders. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of the Agent or any Lender shall be permitted or required pursuant to
any provision hereof or any provision of any other agreement to which any Loan
Party is a party and to which the Agent or any Lender has succeeded thereto,
such Action shall be required to be in writing and may be withheld or denied by
the Agent or such Lender, in its sole discretion, with or without any reason,
and without being subject to question or challenge on the grounds that such
Action was not taken in good faith.
Section 11.13 No Party Deemed Drafter. Each of the parties hereto
agrees that no party hereto shall be deemed to be the drafter of this Agreement.
Section 11.14 Reinstatement; Certain Payments. If any claim is ever
made upon the Agent or any Lender for repayment or recovery of any amount or
amounts received by the Agent or such Lender in payment or on account of any of
the Obligations, the Agent or such Lender shall give prompt notice of such claim
to each other Lender and Parent, and if the Agent or such Lender repays all or
part of such amount by reason of (i) any judgment, decree or order of any court
or administrative body having jurisdiction over the Agent or such Lender or any
of its property, or (ii) any good faith settlement or compromise of any such
claim effected by the Agent or such Lender with any such claimant, then and in
such event each Loan Party agrees that (A) any such judgment, decree, order,
settlement or compromise shall be binding upon it notwithstanding the
cancellation of any Indebtedness hereunder or under the other Loan Documents or
the termination of this Agreement or the other Loan Documents, and (B) it shall
-86-
be and remain liable to the Agent or such Lender hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by the Agent or such Lender.
Section 11.15 Indemnification.
(a) General Indemnity. In addition to each Loan Party's other
Obligations under this Agreement, each Loan Party agrees to, jointly and
severally, defend, protect, indemnify and hold harmless the Agent and each
Lender and all of their respective officers, directors, employees, attorneys,
consultants and agents (collectively called the "Indemnitees") from and against
any and all losses, damages, liabilities, obligations, penalties, fees,
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to or from and after the Effective Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement, any other Loan Document or of any
other document executed in connection with the transactions contemplated by this
Agreement, (ii) the Agent's or any Lender's furnishing of funds to the Borrowers
under this Agreement or the other Loan Documents, including, without limitation,
the management of any such Loans, (iii) any matter relating to the financing
transactions contemplated by this Agreement or the other Loan Documents or by
any document executed in connection with the transactions contemplated by this
Agreement or the other Loan Documents, or (iv) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto (collectively, the "Indemnified Matters");
provided, however, that the Loan Parties shall not have any obligation to any
Indemnitee under this subsection (a) for any Indemnified Matter caused by the
gross negligence or willful misconduct of such Indemnitee, as determined by a
final judgment of a court of competent jurisdiction.
(b) Environmental Indemnity. Without limiting Section 11.15(a)
hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and
hold harmless the Indemnitees against any and all Environmental Liabilities and
Costs and all other claims, demands, penalties, fines, liability (including
strict liability), losses, damages, costs and expenses (including without
limitation, reasonable legal fees and expenses, consultant fees and laboratory
fees), arising out of (i) any Releases or threatened Releases (x) at any
property presently or formerly owned or operated by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest, or (y) of any
Hazardous Materials generated and disposed of by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest; (ii) any
violations of Environmental Laws; (iii) any Environmental Action relating to any
Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iv) any personal injury (including wrongful death) or property damage (real or
personal) arising out of exposure to Hazardous Materials used, handled,
generated, transported or disposed by any Loan Party or any Subsidiary of any
Loan Party, or any predecessor in interest; and (v) any breach of any warranty
or representation regarding environmental matters made by the Loan Parties in
Section 5.01(s) or the breach of any covenant made by the Loan Parties in
Section 6.01(j). Notwithstanding the foregoing, the Loan Parties shall not have
any obligation to any Indemnitee under this subsection (b) regarding any
potential environmental matter covered hereunder which is caused by the gross
-87-
negligence or willful misconduct of such Indemnitee, as determined by a final
judgment of a court of competent jurisdiction.
(c) The indemnification for all of the foregoing losses, damages,
fees, costs and expenses of the Indemnitees are chargeable against the Loan
Account. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section 11.15 may be unenforceable because it is violative of
any law or public policy, each Loan Party shall, jointly and severally,
contribute the maximum portion which it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees. The indemnities set forth in this Section 11.15
shall survive the repayment of the Obligations and discharge of any Liens
granted under the Loan Documents.
Section 11.16 Parent as Agent for Borrowers. Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for the
Borrowers which appointment shall remain in full force and effect unless and
until the Agent shall have received prior written notice signed by all of the
Borrowers that such appointment has been revoked and that another Borrower has
been so appointed. Each Borrower hereby irrevocably appoints and authorizes
Parent (i) to provide to the Agent and receive from the Agent all notices with
respect to Loans obtained for the benefit of any Borrower and all other notices
and instructions under this Agreement and (ii) to take such action as Parent
deems appropriate on its behalf to obtain Loans and to exercise such other
powers as are reasonably incidental thereto to carry out the purposes of this
Agreement. It is understood that the handling of the Loan Account and Collateral
of the Borrowers in a combined fashion, as more fully set forth herein, is done
solely as an accommodation to the Borrowers in order to utilize the collective
borrowing powers of the Borrowers in the most efficient and economical manner
and at their request, and that neither the Agent nor the Lenders shall incur
liability to the Borrowers as a result hereof. Each of the Borrowers expects to
derive benefit, directly or indirectly, from the handling of the Loan Account
and the Collateral in a combined fashion since the successful operation of each
Borrower is dependent on the continued successful performance of the integrated
group. To induce the Agent and the Lenders to do so, and in consideration
thereof, each of the Borrowers hereby jointly and severally agrees to indemnify
the Indemnitees and hold the Indemnitees harmless against any and all liability,
expense, loss or claim of damage or injury, made against such Indemnitee by any
of the Borrowers or by any third party whosoever, arising from or incurred by
reason of (a) the handling of the Loan Account and Collateral of the Borrowers
as herein provided, (b) the Agent and the Lenders relying on any instructions of
Parent, or (c) any other action taken by the Agent or any Lender hereunder or
under the other Loan Documents.
Section 11.17 Records. The unpaid principal of and interest on the
Loans, the interest rate or rates applicable to such unpaid principal and
interest, the duration of such applicability, the Commitments, and the accrued
and unpaid fees payable pursuant to Section 2.06 hereof, including, without
limitation, shall at all times be ascertained from the records of the Agent,
which shall be conclusive and binding absent manifest error.
Section 11.18 Binding Effect. This Agreement shall become effective
when it shall have been executed by each Loan Party, the Agent and each Lender
and when the conditions precedent set forth in Section 4.01 hereof have been
satisfied or waived in writing by the Agent, and thereafter shall be binding
upon and inure to the benefit of each Loan Party, the
-88-
Agent and each Lender, and their respective successors and assigns, except that
the Loan Parties shall not have the right to assign their rights hereunder or
any interest herein without the prior written consent of each Lender, and any
assignment by any Lender shall be governed by Section 11.07 hereof.
Section 11.19 Interest. It is the intention of the parties hereto that
the Agent and each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby or by any other Loan
Document would be usurious as to the Agent or any Lender under laws applicable
to it (including the laws of the United States of America and the State of New
York or any other jurisdiction whose laws may be mandatorily applicable to the
Agent or such Lender notwithstanding the other provisions of this Agreement),
then, in that event, notwithstanding anything to the contrary in this Agreement
or any other Loan Document or any agreement entered into in connection with or
as security for the Obligations, it is agreed as follows: (i) the aggregate of
all consideration which constitutes interest under law applicable to the Agent
or any Lender that is contracted for, taken, reserved, charged or received by
the Agent or such Lender under this Agreement or any other Loan Document or
agreements or otherwise in connection with the Obligations shall under no
circumstances exceed the maximum amount allowed by such applicable law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by the Agent or such Lender on the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by the Agent or such Lender, as applicable, to
the Borrowers); and (ii) in the event that the maturity of the Obligations is
accelerated by reason of any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Agent or any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by the Agent or such Lender, as applicable, as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by the Agent or such Lender, as applicable, on the principal amount of
the Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by the Agent or such
Lender to the Borrowers). All sums paid or agreed to be paid to the Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by law applicable to the Agent or such Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (x) the amount of interest payable to the
Agent or any Lender on any date shall be computed at the Highest Lawful Rate
applicable to the Agent or such Lender pursuant to this Section 11.19 and (y) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to the Agent or such Lender would be less than the amount of
interest payable to the Agent or such Lender computed at the Highest Lawful Rate
applicable to the Agent or such Lender, then the amount of interest payable to
the Agent or such Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to
the Agent or such Lender until the total amount of interest payable to the Agent
or such Lender shall equal the total amount of interest which would have been
payable to the Agent or such Lender if the total amount of interest had been
computed without giving effect to this Section 11.19.
-89-
For purposes of this Section 11.19, the term "applicable law" shall
mean that law in effect from time to time and applicable to the loan transaction
between the Borrowers, on the one hand, and the Agent and the Lenders, on the
other, that lawfully permits the charging and collection of the highest
permissible, lawful non-usurious rate of interest on such loan transaction and
this Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.
The right to accelerate the maturity of the Obligations does not
include the right to accelerate any interest that has not accrued as of the date
of acceleration.
Section 11.20 Confidentiality. The Agent and each Lender agrees (on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives) to use its best efforts to keep confidential, in accordance
with its reasonable and customary procedures for handling confidential
information of this nature and in accordance with safe and sound practices of
comparable lenders, any non-public information supplied to it by the Loan
Parties pursuant to this Agreement or the other Loan Documents which is
identified in writing by the Loan Parties as being confidential at the time the
same is delivered to such Person (and which at the time is not, and does not
thereafter become, publicly available or available to such Person from another
source not known to be subject to a confidentiality obligation to such Person
not to disclose such information), provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for the Agent or any Lender,
(iii) to examiners, auditors, accountants or Securitization Parties, (iv) in
connection with any litigation to which the Agent or any Lender is a party or
(v) to any assignee or participant (or prospective assignee or participant) so
long as such assignee or participant (or prospective assignee or participant)
first agrees, in writing, to be bound by confidentiality provisions similar in
substance to this Section 11.20. Notwithstanding the foregoing, the Agent and
each Lender may disclose to any and all Persons, without limitation of any kind,
the tax treatment and tax structure of the financing contemplated by this
Agreement, and all materials of any kind (including opinions or other tax
analyses) that are provided to the Agent or any Lender relating to such tax
treatment and tax structure. The Agent and each Lender agrees that, upon receipt
of a request or identification of the requirement for disclosure pursuant to
clause (iv) hereof, it will make reasonable efforts to keep the Loan Parties
informed of such request or identification; provided that the each Loan Party
acknowledges that the Agent and each Lender may make disclosure as required or
requested by any Governmental Authority or representative thereof and that the
Agent and each Lender may be subject to review by Securitization Parties or
other regulatory agencies and may be required to provide to, or otherwise make
available for review by, the representatives of such parties or agencies any
such non-public information. The Agent and Lenders agree not to trade in the
Capital Stock of the Parent at any time they shall be in receipt of material,
non-public information
Section 11.21 Integration. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-90-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS:
LAKES ENTERTAINMENT, INC.
By: /S/ Timothy J. Cope
------------------------------------
Name: Timothy J. Cope
Title: President and Chief Financial
Officer
BORDERS LAND COMPANY, LLC
GREAT LAKES GAMING OF MICHIGAN, LLC
LAKES CLOVERDALE, LLC
LAKES GAMING AND RESORTS, LLC
LAKES GAME DEVELOPMENT, LLC
LAKES GAMING-MISSISSIPPI, LLC
LAKES IOWA CONSULTING, LLC
LAKES IOWA MANAGEMENT, LLC
LAKES JAMUL, INC.
LAKES JAMUL DEVELOPMENT, LLC
LAKES KAR SHINGLE SPRINGS, L.L.C.
LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA,
L.L.C.
LAKES KICKAPOO CONSULTING, LLC
LAKES KICKAPOO MANAGEMENT, LLC
LAKES NIPMUC, LLC
LAKES PAWNEE CONSULTING, LLC
LAKES PAWNEE MANAGEMENT, LLC
LAKES POKER TOUR, LLC
LAKES SHINGLE SPRINGS, INC.
By: /S/ Timothy J. Cope
------------------------------------
Name: Timothy J. Cope
Title: Chief Financial Officer of each
of the above listed entities.
Signature Page to Loan Agreement
AGENT AND LENDER:
PLKS FUNDING, LLC
BY: PRENTICE CAPITAL MANAGEMENT, LP AS
MANAGER
By: /S/ Michael Weiss
------------------------------------
Name: Michael Weiss
Title: Chief Financial Officer
Signature Page to Loan Agreement
FINANCING AGREEMENT
DATED AS OF FEBRUARY 15, 2006
BY AND AMONG
LAKES ENTERTAINMENT, INC.
AND
THE SUBSIDIARIES OF LAKES ENTERTAINMENT, INC. LISTED AS A
"BORROWER" ON THE SIGNATURE PAGES HERETO
AS BORROWERS,
EACH OTHER SUBSIDIARY OF LAKES ENTERTAINMENT, INC. THAT BECOMES
A "GUARANTOR" IN ACCORDANCE WITH THE TERMS HEREOF,
AS GUARANTORS,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
AS LENDERS,
AND
PLKS FUNDING, LLC,
AS AGENT
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS; CERTAIN TERMS..................................... 1
Section 1.01 Definitions.......................................... 1
Section 1.02 Terms Generally...................................... 22
Section 1.03 Accounting and Other Terms........................... 22
Section 1.04 Time References...................................... 23
ARTICLE II THE LOANS..................................................... 23
Section 2.01 Commitments.......................................... 23
Section 2.02 Making the Loan...................................... 24
Section 2.03 Repayment of Loans; Evidence of Debt................. 25
Section 2.04 Interest............................................. 25
Section 2.05 Reduction and Termination of Commitment;
Prepayment of Loans.................................. 26
Section 2.06 Fees................................................. 28
Section 2.07 Securitization....................................... 29
Section 2.08 Taxes................................................ 30
ARTICLE III FEES, PAYMENTS AND OTHER COMPENSATION........................ 31
Section 3.01 Payments; Computations and Statements................ 31
Section 3.02 Sharing of Payments, Etc............................. 32
Section 3.03 Apportionment of Payments............................ 32
Section 3.04 Increased Costs and Reduced Return................... 33
Section 3.05 Joint and Several Liability of the Borrowers......... 34
ARTICLE IV CONDITIONS TO LOANS........................................... 35
Section 4.01 Conditions Precedent to Effectiveness................ 35
Section 4.02 Conditions Precedent to the Loans.................... 40
Section 4.03 Conditions Subsequent to the Initial Loans........... 41
ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 41
Section 5.01 Representations and Warranties....................... 41
ARTICLE VI COVENANTS OF THE LOAN PARTIES................................. 50
Section 6.01 Affirmative Covenants................................ 50
Section 6.02 Negative Covenants................................... 61
ARTICLE VII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND
OTHER COLLATERAL..................................... 67
Section 7.01 Collection of Accounts Receivable; Management of
Collateral........................................... 67
Section 7.02 Status of Collateral................................. 69
Section 7.03 Collateral Custodian................................. 69
Section 7.04 Release of Certain Properties........................ 69
Section 7.05 Negative Pledge...................................... 69
-i-
ARTICLE VIII EVENTS OF DEFAULT........................................... 70
Section 8.01 Events of Default.................................... 70
ARTICLE IX AGENT......................................................... 74
Section 9.01 Appointment.......................................... 74
Section 9.02 Nature of Duties..................................... 75
Section 9.03 Rights, Exculpation, Etc............................. 75
Section 9.04 Reliance............................................. 76
Section 9.05 Indemnification...................................... 76
Section 9.06 Agent Individually................................... 76
Section 9.07 Successor Agent...................................... 76
Section 9.08 Collateral Matters................................... 77
Section 9.09 Agency for Perfection................................ 78
ARTICLE X [INTENTIONALLY OMITTED]........................................ 79
ARTICLE XI MISCELLANEOUS................................................. 79
Section 11.01 Notices, Etc......................................... 79
Section 11.02 Amendments, Etc...................................... 80
Section 11.03 No Waiver; Remedies, Etc............................. 80
Section 11.04 Expenses; Taxes; Attorneys' Fees..................... 80
Section 11.05 Right of Set-off..................................... 81
Section 11.06 Severability......................................... 82
Section 11.07 Assignments and Participations....................... 82
Section 11.08 Counterparts......................................... 85
Section 11.09 GOVERNING LAW........................................ 85
Section 11.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND
VENUE................................................ 85
Section 11.11 WAIVER OF JURY TRIAL, ETC............................ 86
Section 11.12 Consent by the Agent and Lenders..................... 86
Section 11.13 No Party Deemed Drafter.............................. 86
Section 11.14 Reinstatement; Certain Payments...................... 86
Section 11.15 Indemnification...................................... 87
Section 11.16 Parent as Agent for Borrowers........................ 88
Section 11.17 Records.............................................. 88
Section 11.18 Binding Effect....................................... 88
Section 11.19 Interest............................................. 89
Section 11.20 Confidentiality...................................... 90
Section 11.21 Integration.......................................... 90
-ii-
SCHEDULE AND EXHIBITS
Schedule 1.01(A) Lenders and Lenders' Commitments
Schedule 1.01(B) Inactive Subsidiaries
Schedule 1.01(C) Excluded Subsidiaries
Schedule 5.01(e) Capital Stock of Subsidiaries
Schedule 5.01(f) Litigation; Commercial Tort Claims
Schedule 5.01(i) Violations of Gaming Laws
Schedule 5.01(j) ERISA
Schedule 5.01(p) Real Property
Schedule 5.01(r) Operating Lease Obligations
Schedule 5.01(s) Environmental Matters
Schedule 5.01(t) Insurance
Schedule 5.01(w) Bank Accounts
Schedule 5.01(x) Intellectual Property
Schedule 5.01(y) Material Contracts
Schedule 5.01(ee) Name; Jurisdiction of Organization; Organizational
ID Number; Chief Place of Business; Chief Executive
Office; FEIN
Schedule 5.01(ff) Tradenames
Schedule 5.01(gg) Collateral Locations
Schedule 5.01(ll) Pokagon Account
Schedule 6.02(a) Existing Liens
Schedule 6.02(b) Existing Indebtedness
Schedule 6.02(e) Existing Investments
Schedule 6.02(k) Limitations on Dividends and Other Payment Restrictions
Schedule 7.01 Blocked Account Banks and Blocked Accounts
Exhibit A Form of Guaranty
Exhibit B Form of Security Agreement
Exhibit C Form of Pledge Agreement
Exhibit D Form of Notice of Borrowing
Exhibit E Form of Opinion of Counsel
Exhibit F Form of Assignment and Acceptance
Exhibit G Project Business Plan
Exhibit I Form of Warrant Certificate
-iii-
SCHEDULE 1.01(A)
LENDERS AND LENDERS' COMMITMENTS
Lender Commitment
------ ----------
PLKS Funding, LLC $50,000,000