-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VNnNn2mySUiJK1vrHswzd7Khg3cjh52bdF9eQfRI3X1KCmM88gMOfKXDCr44NSTW J5T+43xyejzCi41nIqbIcw== 0000950124-99-004857.txt : 19990818 0000950124-99-004857.hdr.sgml : 19990818 ACCESSION NUMBER: 0000950124-99-004857 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990704 FILED AS OF DATE: 19990817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKES GAMING INC CENTRAL INDEX KEY: 0001071255 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 411913991 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24993 FILM NUMBER: 99694712 BUSINESS ADDRESS: STREET 1: 130 CHESHIERE LANE CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 6124499092 MAIL ADDRESS: STREET 1: 130 CHESHIRE LANE CITY: MINNETONKA STATE: MN ZIP: 55305 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 4, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File No. 1-12962 LAKES GAMING, INC. (Exact name of registrant as specified in its charter) Minnesota 41-1913991 --------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 130 Cheshire Lane Minnetonka, Minnesota 55305 --------------------- ----- (Address of principal executive offices) (Zip Code) (612) 449-9092 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ As of August 13, 1999, there were 10,604,034 shares of Common Stock, $0.01 par value per share, outstanding. Page 1 of 32 2 LAKES GAMING, INC. AND SUBSIDIARIES INDEX
PAGE OF FORM 10-Q PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of 3 July 4, 1999 and January 3, 1999 Consolidated Statements of Earnings 4 for the three months ended July 4, 1999 and June 28, 1998 Consolidated Statements of Earnings for 5 the six months ended July 4, 1999 and June 28, 1998. Consolidated Statements of Cash Flows 6 for the six months ended July 4, 1999 and June 28, 1998 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND 12 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 20 ITEM 5. Other Information 28 ITEM 6. Exhibits and Reports On Form 8-K 29
- 2 - 3 LAKES GAMING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JULY 4, 1999 JANUARY 3, 1999 (UNAUDITED) - ---------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 49,266 $ 56,774 Current installments of notes receivable 13,729 8,561 Accounts receivable 15,251 15,217 Other current assets 9,364 8,126 -------- -------- Total Current Assets 87,610 88,678 -------- -------- Property and Equipment-Net 1,406 1,265 -------- -------- Other Assets: Land held for development 36,679 26,647 Notes receivable-less current installments 22,496 25,118 Cash and cash equivalents-restricted 4,649 4,992 Investments in and notes from unconsolidated affiliates 14,846 8,590 Other long-term assets 5,553 6,079 -------- -------- Total Other Assets 84,223 71,426 -------- -------- TOTAL ASSETS $173,239 $161,369 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 191 $ - Income taxes payable 7,352 10,811 Litigation and claims accrual 9,053 10,554 Other accrued expenses 4,425 4,625 -------- -------- Total Current Liabilities 21,021 25,990 -------- -------- Long-term Liabilities: Long-term debt-less current installments 975 975 Deferred income taxes 2,557 2,733 -------- -------- Total Long-Term Liabilities 3,532 3,708 -------- -------- TOTAL LIABILITIES 24,553 29,698 -------- -------- COMMITMENTS AND CONTINGENCIES Shareholders' Equity: Capital stock, $.01 par value; authorized 100,000 shares; 10,591 and 10,576 common shares issued and outstanding at July 4, 1999, and January 3, 1999, respectively 106 106 Additional paid-in-capital 131,040 130,929 Accumulated other comprehensive earnings 356 636 Retained earnings 17,184 - -------- -------- Total Shareholders' Equity 148,686 131,671 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $173,239 $161,369 ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -3- 4 LAKES GAMING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
THREE MONTHS ENDED JULY 4, 1999 JUNE 28, 1998 (UNAUDITED) REVENUES: Management fee income $14,892 $19,718 COSTS AND EXPENSES: Selling, general and administrative 2,892 1,112 Depreciation and amortization 479 278 -------- --------- Total Costs and Expenses 3,371 1,390 -------- --------- EARNINGS FROM OPERATIONS 11,521 18,328 -------- --------- OTHER INCOME (EXPENSE): Interest income 2,423 1,262 Interest expense (24) (25) Equity in loss of unconsolidated affiliates (109) (177) Other 877 29 -------- --------- Total other income, net 3,167 1,089 -------- --------- Earnings before income taxes 14,688 19,417 Provision for income taxes 6,066 7,098 -------- --------- NET EARNINGS $ 8,622 $12,319 ======== ========= BASIC EARNINGS PER SHARE $ 0.81 $ 1.17 ======== ========= DILUTED EARNINGS PER SHARE $ 0.80 $ 1.14 ======== ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,587 10,534 DILUTIVE EFFECT OF STOCK COMPENSATION PROGRAMS 192 311 -------- --------- WEIGHTED AVERAGE COMMON AND DILUTED SHARES OUTSTANDING 10,779 10,845 ======== =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -4- 5 LAKES GAMING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
SIX MONTHS ENDED JULY 4, 1999 JUNE 28, 1998 (UNAUDITED) REVENUES: Management fee income $30,001 $42,748 COSTS AND EXPENSES: Selling, general and administrative 4,602 5,988 Depreciation and amortization 955 649 ------- ------- Total Costs and Expenses 5,557 6,637 ------- ------- EARNINGS FROM OPERATIONS 24,444 36,111 ------- ------- OTHER INCOME (EXPENSE): Interest income 4,059 2,600 Interest expense (49) (49) Equity in loss of unconsolidated affiliates (364) (225) Other 1,288 228 ------- ------- Total other income, net 4,934 2,554 ------- ------- Earnings before income taxes 29,378 38,665 Provision for income taxes 12,194 14,643 ------- ------- NET EARNINGS $17,184 $24,022 ======= ======= BASIC EARNINGS PER SHARE $ 1.62 $ 2.28 ======= ======= DILUTED EARNINGS PER SHARE $ 1.60 $ 2.22 ======= ======= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,582 10,525 DILUTIVE EFFECT OF STOCK COMPENSATION PROGRAMS 153 282 ------- ------- WEIGHTED AVERAGE COMMON AND DILUTED SHARES OUTSTANDING 10,735 10,807 ======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 5 - 6 LAKES GAMING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JULY 4, 1999 JUNE 28, 1998 (UNAUDITED) OPERATING ACTIVITIES: Net earnings 17,184 24,022 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 955 649 Gain on sale of investment (875) - Changes in operating assets and liabilities: Current assets (1,272) (3,262) Income taxes (3,459) 14,785 Accounts payable 191 (77) Accrued expenses (1,701) 85 Other 364 (503) ------- ------- Net Cash Provided by Operating Activities 11,387 35,699 ------- ------- INVESTING ACTIVITIES: Payments for property and equipment (209) (36) Payments for notes receivable (6,764) (2,727) Proceeds from repayment of notes receivable 5,093 3,125 Decrease (increase) in restricted cash 343 (4,017) Investment in and notes receivable from unconsolidated affiliates (6,639) - Payments for land held for development (10,032) (6,610) Increase in other long-term assets (798) (694) ------- ------- Net Cash Used in Investing Activities (19,006) (10,959) ------- ------- FINANCING ACTIVITIES: Distribution to Grand - (24,830) Proceeds from issuance of common stock 111 - Payments on long-term debt - (6) ------- ------- Net Cash Provided by (Used in) Financing Activities 111 (24,836) ------- ------- Net decrease in cash and cash equivalents (7,508) (96) Cash and cash equivalents - beginning of period 56,774 33,208 ------- ------- CASH AND CASH EQUIVALENTS - END OF PERIOD 49,266 33,112 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 49 $ 49 Income taxes 12,665 -
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 6 - 7 LAKES GAMING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. UNAUDITED FINANCIAL STATEMENTS: Lakes Gaming, Inc., a Minnesota corporation ("Lakes" or the "Company") was established as a public corporation on December 31,1998, via a distribution (the "Distribution") of its common stock, par value $.01 per share (the "Common Stock") to the shareholders of Grand Casinos, Inc. ("Grand"). Pursuant to the terms of a Distribution Agreement entered into between Grand and Lakes and dated as of December 31, 1998 (the "Distribution Agreement"), Grand shareholders received .25 shares of Lakes common stock for each share held in Grand. Historical references to the Company which predate the Distribution give pro forma effect to the Distribution as if it had already occurred. Immediately following the Distribution, Grand merged with a subsidiary of Park Place Entertainment Corporation, a Delaware corporation ("Park Place"), pursuant to which Grand became a wholly owned subsidiary of Park Place (the "Merger"). Grand shareholders received one share of Park Place common stock in the Merger for each share they held in Grand. The Merger and Distribution received all necessary shareholder and regulatory approvals and was completed on December 31, 1998. Grand obtained a ruling from the Internal Revenue Service (IRS) that the Distribution qualified as a tax-free transaction, solely with respect to Grand shareholders except to the extent that Grand shareholders received cash in lieu of fractional shares. Lakes manages Indian-owned casinos and owns certain other assets related to potential gaming-related development. The Company manages two Indian-owned casinos in Louisiana and previously managed two Minnesota casinos through April 4, 1998 and November 30, 1998, respectively. On May 12, 1999, the Company announced that it has agreed to form a partnership for the purpose of developing a gaming facility on Indian-owned land near San Diego, California. Pursuant to the agreement, Lakes formed a limited liability company with Kean Argovitz Resorts ("KAR"), a limited liability company based in Houston, Texas. The partnership between Lakes and KAR will hold a contract to develop and manage a casino resort facility with a Tribe in California. The contract is subject to approval by the National Indian Gaming Association and placement of the land where the gaming facility is to be located into trust with the Bureau of Indian Affairs. Development of the casino resort will not begin until the Tribe has entered into a compact with the state of California. On June 22, 1999, the Company announced that it has been selected by the Pokagon Band of Potawatomi Indians (the "Band") to serve as the exclusive developer and manager of a proposed casino gaming resort facility to be owned by the Band in the state of Michigan. - 7 - 8 LAKES GAMING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) In connection with its selection, Lakes Gaming and the Band have executed a development and management agreement governing their relationship during the development, construction and management of the casino. This agreement is subject to ratification by the tribal council. Various regulatory approvals are needed prior to commencement of development activities. Casino construction cannot start until land is accepted into trust status by the Secretary of the Interior and the agreements are approved by the Chairman of the National Indian Gaming Commission ("NIGC"). MANAGEMENT CONTRACTS OF LIMITED DURATION The ownership, management and operation of gaming facilities are subject to extensive federal, state, provincial, tribal and/or local laws, regulation, and ordinances, which are administered by the relevant regulatory agency or agencies in each jurisdiction. These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally concern the responsibility, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations. The Company is prohibited by the Indian Gaming Regulatory Act ("IGRA") from having an ownership interest in any casino it manages for Indian tribes. Management contracts for the two previously managed Minnesota casinos, Grand Casino Mille Lacs and Grand Casino Hinckley concluded during 1998. Management contracts for Grand Casino Avoyelles and Grand Casino Coushatta expire June 3, 2001 and January 16, 2002, respectively. There can be no assurance that the Louisiana management contracts will be renewed upon expiration or approved by "NIGC" upon any such renewal. The failure to renew the Company's management contracts would result in the loss of revenues to the Company derived from such contracts, which would have a material adverse effect on the Company's results of operations. The Coushatta Tribe and the Tunica-Biloxi Tribe each entered into tribal-state compacts with the State of Louisiana on September 29, 1992. These compacts were approved in November 1992 by the Secretary of the Interior. Each compact expires in November 1999 and the State of Louisiana has delivered a written notice of non-renewal. The Coushatta Tribe and the Tunica-Biloxi Tribe are actively negotiating with the State of Louisiana terms for a new compact. The Company's management agreements with the Tunica-Biloxi Tribe and the Coushatta Tribe expire after November 1999. In the event the compacts are not renewed, legal gaming may not be permitted at Grand Casino Avoyelles or Grand Casino Coushatta. There can be no assurance that these compacts will be renewed on acceptable terms and conditions. See Part II, Item 5. Other Information. The accompanying unaudited consolidated financial statements include the accounts of Lakes and its wholly-owned and majority-owned subsidiaries. Investments in unconsolidated affiliates representing between 20% and 50% of voting interests are accounted for on the equity method. All material intercompany balances and transactions have been eliminated in consolidation. - 8 - 9 LAKES GAMING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) The consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information, in accordance with the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the six months ended July 4, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 2000. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended January 3, 1999. 2. COMMITMENTS AND CONTINGENCIES: LEASES The Company leases certain property and equipment under non-cancelable operating leases. Future minimum lease payments, excluding contingent rentals, due under non-cancelable operating leases as of July 4, 1999 are as follows (in thousands):
Operating Leases ---------------- 1999 $ 1,841 2000 3,225 2001 2,981 2002 3,109 2003 3,176 Thereafter 47,550 ------- $61,882 =======
As a condition to the Merger, the Company has agreed to exercise its call option to purchase the Shark Club property in Las Vegas, Nevada, not prior to April 9, 2000 and not later than January 10, 2001. The option purchase price would be approximately $10.1 million. The Company also has an option to purchase the Travelodge property in Las Vegas, Nevada for the purchase price of $30 million on October 31, 2017, and an option to purchase the Cable property in Las Vegas, Nevada for the purchase price of $18 million any time prior to October 31, 2000. - 9 - 10 LAKES GAMING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Loan Guaranty Agreements The Company has guaranteed a loan and security agreement entered into by the Tunica-Biloxi Tribe of Louisiana for $16.5 million for the purpose of purchasing a hotel and additional casino equipment. The agreement extends through 2000, and as of July 4, 1999, the amount outstanding was $5.0 million. On May 1, 1997, the Company entered into a guaranty agreement related to a loan agreement entered into by the Coushatta Tribe of Louisiana in the amount of $25.0 million, for the purpose of constructing a hotel and acquiring additional casino equipment. The guaranty will remain in effect until the loan is paid. The loan term is approximately five years. As of July 4, 1999, the amount outstanding was $21.9 million. The Company has entered into a guaranty agreement related to a construction loan agreement entered into by Nevada Resort Properties Polo Plaza Limited Partnership. The guaranty will remain in effect until the loan is paid. The maturity date is October 31, 2000, and as of July 4, 1999, the outstanding principal balance was $6.2 million. Indemnification Agreement As a part of the Transaction, the Company has agreed to indemnify Grand against all costs, expenses and liabilities incurred in connection with or arising out of certain pending and threatened claims and legal proceedings to which Grand and certain of its subsidiaries are likely to be parties. The Company's indemnification obligations include the obligation to provide the defense of all claims made in proceedings against Grand and to pay all related settlements and judgments (see Item 1. Legal Proceedings). As security to support Lakes' indemnification obligations to Grand under each of the Distribution Agreement and the Agreement and Plan of Merger dated as of June 30, 1998, by and among Hilton Hotels Corporation, Park Place, Gaming Acquisition Corporation, Lakes and Grand (the "Merger Agreement"), and as a condition to the consummation of the Merger, Lakes has agreed to deposit, in trust for the benefit of Grand, as a wholly owned subsidiary of Park Place, an aggregate of $30 million, to cover various commitments and contingencies related to or arising out of, Grand's non-Mississippi business and assets (including by way of example, but not limitation, tribal loan guarantees, real property lease guarantees for Lakes' subsidiaries and director and executive officer indemnity obligations) consisting of four annual installments of $7.5 million, on each annual anniversary of the Distribution and Merger. Any surplus proceeds remaining after all the secured obligations are indefeasibly paid in full and discharged shall be paid over to Lakes. - 10 - 11 LAKES GAMING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) As part of the indemnification agreement, Lakes has agreed that it will not declare or pay any dividends, make any distribution of Lakes' equity interests, or otherwise purchase, redeem, defease or retire for value any equity interests in Lakes without the written consent of Park Place. 3. SUBSEQUENT EVENTS On July 15, 1999, the Company announced that it has agreed to form a partnership for the purpose of developing a gaming facility on Indian-owned land near Sacramento, California. Pursuant to the agreement, Lakes has formed a limited liability company with KAR, a limited liability company based in Houston, Texas. The partnership between Lakes and KAR has been awarded a contract to develop and manage a casino resort facility with a tribe in California. The contract is subject to approval by the National Indian Gaming Association and placement of the land where the gaming facility is to be located into trust with the Bureau of Indian Affairs. Development of the casino resort will not begin until the tribe has entered into a compact with the state of California. - 11 - 12 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Lakes was established as a public corporation on December 31, 1998, via a distribution of its common stock, par value $.01 per share to the shareholders of Grand. Pursuant to the terms of the Distribution Agreement entered into between Grand and Lakes and dated as of December 31, 1998, Grand shareholders received .25 shares of Lakes Common Stock for each share held in Grand. Historical references to the Company which predate the distribution give pro forma effect to the Distribution as if it had already occurred. Immediately following the Distribution, Grand merged with a subsidiary of Park Place pursuant to which Grand became a wholly owned subsidiary of Park Place (the "Merger"). Grand shareholders received one share of Park Place common stock in the Merger for each share they held in Grand. As a result of the Distribution, Lakes operates the Indian casino management business and holds various other assets previously owned by Grand. The Company's revenues are derived almost exclusively from management fees. Lakes manages two land-based, Indian-owned casinos in Louisiana: Grand Casino Avoyelles, in Marksville, Louisiana ("Grand Casino Avoyelles"), owned by the Tunica-Biloxi Tribe of Louisiana (the "Tunica-Biloxi Tribe") and Grand Casino Coushatta, in Kinder, Louisiana ("Grand Casino Coushatta"), owned by the Coushatta Tribe of Louisiana (the "Coushatta Tribe"). Both management contracts expire seven years from the date the casino opened. For a portion of fiscal 1998, and prior to the Distribution, Grand also had management contracts for Indian-owned casinos located at Grand Casino Hinckley and Grand Casino Mille Lacs in Minnesota. The management contract at Grand Casino Mille Lacs expired at the end of the first quarter of 1998, and the management of Grand Casino Hinckley ended in December 1998, with the buyout of the remaining contract term. Lakes develops, constructs and manages casinos and related hotel and entertainment facilities in emerging and established gaming jurisdictions. Lakes' revenues are derived from management fee income from Grand Casino Avoyelles and Grand Casino Coushatta. Grand commenced operations in September 1990, and opened its first casino, Grand Casino Mille Lacs, in April 1991. Grand Casino Hinckley commenced operations in May 1992, Grand Casino Avoyelles commenced operations in June 1994 and Grand Casino Coushatta commenced operations in January 1995. - 12 - 13 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) Pursuant to the Avoyelles and Coushatta management contracts, Lakes receives a fee based on the net distributable profits (as defined in the contracts) generated by Grand Casino Avoyelles and Grand Casino Coushatta. On May 12, 1999, the Company announced that it has agreed to form a partnership for the purpose of developing a gaming facility on Indian-owned land near San Diego, California. Under the agreement, Lakes has formed a limited liability company with KAR, a limited liability company based in Houston, Texas. The partnership between Lakes and KAR will hold a contract to develop and manage a casino resort facility with a Tribe in California. The contract is subject to approval by the National Indian Gaming Association and placement of the land where the gaming facility is to be located into trust with the Bureau of Indian Affairs. Development of the casino resort will not begin until the Tribe has entered into a compact with the state of California. On June 22, 1999, the Company announced that it has been selected by the Pokagon Band of Potawatomi Indians (the "Band") to serve as the exclusive developer and manager of a proposed casino gaming resort facility to be owned by the Band in the state of Michigan. In connection with its selection, Lakes Gaming and the Band have executed a development and management agreement governing their relationship during the development, construction and management of the casino. This agreement is subject to ratification by the tribal council. Various regulatory approvals are needed prior to commencement of development activities. Casino construction cannot start until land is accepted into trust status by the Secretary of the Interior and the agreements are approved by the Chairman of the NIGC. Lakes' limited operating history may not be indicative of Lakes' future performance. In addition, a comparison of results from year to year may not be meaningful due to the opening of new facilities during each year. Lakes' growth strategy contemplates the expansion of existing operations and the pursuit of opportunities to develop and manage additional gaming facilities. The successful implementation of this growth strategy is contingent upon the satisfaction of various conditions, including obtaining governmental approvals, the impact of increased competition, and the occurrence of certain events, many of which are beyond the control of Lakes. The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 3, 1999. - 13 - 14 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) RESULTS OF OPERATIONS Lakes is prohibited by the IGRA from having an ownership interest in any casino it manages for Indian tribes. The management contracts for Grand Casino Avoyelles and Grand Casino Coushatta expire June 3, 2001 and January 16, 2002, respectively. There can be no assurance that any of these management contracts will be renewed upon expiration or approved by NIGC upon any such renewal. The failure to renew the Lakes management contracts would result in the loss of revenues to Lakes derived from such contracts, which would have an adverse effect on Lakes' results of operations. The Coushatta Tribe and the Tunica-Biloxi Tribe each entered into tribal-state compacts with the State of Louisiana on September 29, 1992. These compacts were approved in November 1992 by the Secretary of the Interior. Each compact expires in November 1999, and the State of Louisiana has delivered a written notice of non-renewal. The Coushatta Tribe and the Tunica-Biloxi Tribe are actively negotiating with the State of Louisiana terms for a new compact. Lakes' management agreements with the Tunica-Biloxi Tribe and the Coushatta Tribe expire after November 1999. In the event the compacts are not renewed, gaming may not be permitted at Grand Casino Avoyelles or Grand Casino Coushatta. There can be no assurance that these compacts will be renewed on terms and conditions acceptable to either of the tribes. See Part II, Item 5. Other Information. Revenues are calculated in accordance with generally accepted accounting principles and are presented in a manner consistent with industry practice. Net distributable profits from Grand Casino Avoyelles and Grand Casino Coushatta are computed using a modified cash basis of accounting in accordance with the management contracts. The effect of the use of the modified cash basis of accounting is to accelerate the write-off of capital equipment and leased assets, which thereby impacts the timing of net distributable profits. SIX MONTHS ENDED JULY 4, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 28, 1998 Revenues Grand Casino Avoyelles and Grand Casino Coushatta generated approximately $300 million in management fee income during the six months ended July 4, 1999. Grand Casino Mille Lacs, Grand Casino Hinckley, Grand Casino Avoyelles and Grand Casino Coushatta generated $42.7 million in management fee income during the six months ended June 28, 1998. Gross revenue increases at Grand Casino Avoyelles and Grand Casino Coushatta partially offset the fact that the management contracts for Grand Casino Mille Lacs and Grand Casino Hinckley ended during 1998. Contributing to the increases were a 223-room hotel at Grand Casino Coushatta, which opened in November of 1998 along with a 28,000 square foot casino expansion at Coushatta which opened in December of 1998. Also contributing to the increases were a special events center and RV resort at Grand Casino Avoyelles, which opened during the first quarter of 1998, and the addition of approximately 180 slot machines at Avoyelles from June 28, 1998 to July 4, 1999. - 14 - 15 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) Costs and Expenses Total costs and expenses were $5.6 million for the six months ended July 4, 1999, compared to $6.6 million for the same period in the prior year. Selling, general, and administrative expenses decreased in the amount of $1.4 million from $6.0 million for the six months ended June 28, 1998 to $4.6 million for the six months ended July 4, 1999 due primarily to fewer legal costs. Other Interest income increased from $2.6 million for the six months ended June 28, 1998 to $4.1 million for the six months ended July 4, 1999 due primarily to interest earned on increased cash balances and additional notes receivable during the six months ended July 4, 1999, compared to the same period in the prior year. Earnings per Common Share and Net Earnings For the six months ended July 4, 1999 basic and diluted earnings per common share were $1.62 and $1.60, respectively. This compares to basic and diluted earnings of $2.28 and $2.22 per common share for the six months ended June 28, 1998. Earnings decreased $6.8 million to $17.2 million for the six months ended July 4, 1999 compared to the same period in the prior year. This decrease is primarily due to the expiration of the management contracts for Grand Casino Mille Lacs and Grand Casino Hinckley during 1998. Total revenues during the period ended June 28, 1998 under these expired contracts was $15.2 million. The Company's current year period revenues and earnings do not include contributions from these operations. THREE MONTHS ENDED JULY 4, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 28, 1998 Revenues Grand Casino Avoyelles and Grand Casino Coushatta generated $14.9 million in management fee income during the three months ended July 4, 1999. Grand Casino Mille Lacs, Grand Casino Hinckley, Grand Casino Avoyelles and Grand Casino Coushatta generated $19.7 million in management fee income during the three months ended June 28, 1998. Gross revenue increases at Grand Casino Avoyelles and Grand Casino Coushatta partially offset the fact that the management contract for Grand Casino Mille Lacs concluded during April of 1998 and the contract for Grand Casino Hinckley concluded during the fourth quarter of 1998. Contributing to the increases were a 223-room hotel at Grand Casino Coushatta, which opened in November of 1998 along with a 28,000 square foot casino expansion at Grand Casino Coushatta which opened in December of 1998, and the addition of approximately 180 slot machines at Grand Casino Avoyelles from June 28, 1998 to July 4, 1999. - 15 - 16 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) Costs and Expenses Total costs and expenses were $3.4 million for the three months ended July 4, 1999, compared to $1.4 million for the same period in the prior year. Selling, general, and administrative expenses increased in the amount of $1.8 million from $1.1 million for the three months ended June 28, 1998 to $2.9 million for the three months ended July 4, 1999 due primarily to a payment made for the settlement of litigation relating to the Tulalip Tribe. Other Interest income was $2.4 million and $1.3 million for the three months ended July 4, 1999 and June 28, 1998, respectively. The increase is due primarily to additional interest earned on increased cash balances and additional notes receivable during the three months ended July 4, 1999, compared to the same period in the prior year. Earnings Per Common Share and Net Earnings For the three months ended July 4, 1999, basic and diluted earnings per common share were $.81 and $.80, respectively. This compares to basic and diluted earnings of $1.17 and $1.14 per common share for the three months ended June 28, 1998. Earnings decreased $3.7 million to $8.6 million for the three months ended July 4, 1999 compared to the same period in the prior year. This decrease is primarily due to the expiration of the management contracts for Grand Casino Mille Lacs and Grand Casino Hinckley during 1998. Total revenues during the three-month period ended June 28, 1998, under these expired contracts was $6.3 million. The company's current year period revenues and earnings do not include contributions from these operations. CAPITAL RESOURCES, CAPITAL SPENDING, AND LIQUIDITY At July 4, 1999 Lakes had $53.9 million in restricted and unrestricted cash and cash equivalents. The cash balances are planned to be used for loans to tribal partners to help develop operations, the pursuit of additional business opportunities, and potential settlement of pending litigation matters. For the six months ended July 4, 1999 and June 28, 1998 net cash provided by operating activities totaled $11.4 million and $35.7 million, respectively. Payments for income taxes were $12.7 million and $0 for the six months ended July 4, 1999 and June 28, 1998, respectively. For the same periods, net cash used in investing activities totaled $19 million and $11 million, respectively. Included in these investing activities for the six months ended July 4, 1999 and June 28, 1998, are proceeds, primarily from repayment of notes receivable from Indian-owned casinos, which amounted to $5.1 million and $3.1 million, respectively. Advances under notes receivable amounted to $6.8 million and $2.7 million for the six months ended July 4, 1999 and June 28, 1998. - 16 - 17 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) Also during these periods, payments for land in Las Vegas, Nevada, held for development amounted to $10 million and $6.6 million, respectively, and restricted cash decreased $0 and increased $4 million, respectively. For the six months ended July 4, 1999 and June 28, 1998, payments for investments in, and notes receivable from, unconsolidated affiliates totaled $6.6 million and $0, respectively. As security to support Lakes' indemnification obligations to Grand under each of the Distribution Agreement and the Merger Agreement, and as a condition to the consummation of the Merger, Lakes agreed to deposit, in trust for the benefit of Grand, as a wholly owned subsidiary of Park Place, an aggregate of $30 million, to cover various commitments and contingencies related to or arising out of, Grand's non-Mississippi business and assets (including by way of illustration and not limitation, tribal loan guarantees, real property lease guarantees for Lakes' subsidiaries and director and executive officer indemnity obligations), consisting of four annual installments of $7.5 million, on each annual anniversary of the Distribution and Merger. Lakes' ability to satisfy this funding obligation is materially dependent upon the continued success of its operations and the general risks inherent in its business. In the event Lakes is unable to satisfy its funding obligation, it would be in breach of its agreement with Grand, possibly subjecting itself to additional liability for contract damages, which could have a material adverse effect on Lakes' business and results of operations. YEAR 2000 Lakes is currently working to fully determine and resolve the potential impact of the Year 2000 on the processing of date-sensitive information by its computerized information systems. The Year 2000 problem is the result of computer programs being written using two digits (rather than four) to define the applicable year. Any of Lakes' programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the Year 2000, which could result in miscalculations or system failures. Lakes and its managed properties have a Year 2000 program, the objective of which is to determine and assess the risks of the Year 2000 issue, and plan and institute mitigating actions to minimize those risks. Pursuant to the Lakes Year 2000 program, the Company has established an internal review team to monitor and facilitate efficient Year 2000 compliance. Lakes is currently in the process of upgrading its financial reporting systems, to ensure that they are year 2000 compliant. Lakes' vendors and consultants have represented to management that the new systems meet year 2000 requirements. Lakes' standard for compliance requires that for a computer system or business process to be Year 2000 compliant, it must be designed to operate without error in dates and date-related data prior to, on and after January 1, 2000. Between now and the Year 2000, Lakes will proceed through its various phases of assessment, detailed planning, implementation, testing and management. Lakes expects to be fully Year 2000 compliant by fourth quarter 1999. - 17 - 18 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) Generally, Lakes is confident that the implementation of its Year 2000 program in conjunction with the replacement of all of Lakes' financial reporting systems will resolve any IT system compliance issues. Lakes has not currently identified any material non-IT system Year 2000 issues. Throughout the remainder of 1999, Lakes will continually review its progress against its Year 2000 plans and determine what contingency plans are feasible and appropriate to reduce its exposure to Year 2000 related issues. Based on Lakes' current assessment, the costs of addressing potential problems at Lakes and its currently managed properties are estimated at $1.3 million, of which $.7 million is left to be spent. However, the historical and estimated costs relating to the resolution of Lakes' Year 2000 compliance issues cannot be fully and finally determined at this time. If significant customers or vendors identify Year 2000 issues in the future and are unable to resolve such issues in a timely manner, it could result in a material financial risk. Lakes has initiated formal communications with all of its material suppliers to determine the extent to which Lakes' interface systems are vulnerable to those third parties' failures to resolve their own Year 2000 issues. Lakes plans to devote the necessary resources to resolve all significant Year 2000 issues in a timely manner. While Lakes fully anticipates achieving Year 2000 compliance well in advance of January 1, 2000 there are certain risks which exist with respect to Lakes' business and the Year 2000. Those risks range from slight delays and inefficiencies in processing data and carrying out accounting and financial functions to, in a most reasonably likely worst case scenario, extensive and costly inability to process data, provide vital accounting functions and communicate with customers and suppliers. As of the date of this filing, Lakes has not finalized a contingency plan to address the failure to be Year 2000 compliant. SEASONALITY The Company believes that the operation of all casinos managed by the Company are affected by seasonal factors, including holidays, weather and travel conditions. REGULATION AND TAXES The Company is subject to extensive regulation by state gaming authorities. The Company will also be subject to regulation, which may or may not be similar to current state regulations, by the appropriate authorities in any other jurisdiction where it may conduct gaming activities in the future. Changes in applicable laws or regulations could have an adverse effect on the Company. - 18 - 19 LAKES GAMING, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (UNAUDITED) The gaming industry represents a significant source of tax revenues. From time to time, various federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. It is not possible to determine the likelihood of possible changes in tax law or in the administration of such law. Such changes, if adopted, could have a material adverse effect on the Company's results of operations and financial results. PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this integrated Quarterly Report on Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contain statements that are forward-looking, such as plans for future expansion and other business development activities as well as other statements regarding capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect the anticipated results in the future and, accordingly, actual results may differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to development and construction activities, dependence upon existing management, pending litigation, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws and changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions). For further information regarding the risks and uncertainties, see the "Business -- Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended January 3, 1999. - 19 - 20 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The following summaries describe certain known legal proceedings to which Grand is a party which Lakes has assumed, or which Lakes has agreed to indemnify Grand, in connection with the Distribution. STRATOSPHERE SHAREHOLDERS LITIGATION - FEDERAL COURT In August 1996, a complaint was filed in the U.S. District Court for the District of Nevada -- Michael Ceasar, et al v. Stratosphere Corporation, et al - -- against Stratosphere and others, including Grand. The complaint was filed as a class action, and sought relief on behalf of Stratosphere shareholders who purchased their stock between December 19, 1995 and July 22, 1996. The complaint included allegations of misrepresentations, federal securities law violations and various state law claims. In August through October 1996, several other nearly identical complaints were filed by various plaintiffs in the U.S. District Court for the District of Nevada. The defendants in the actions submitted motions requesting that all of the actions be consolidated. Those motions were granted in January 1997, and the consolidated action is entitled In re: Stratosphere Corporation Securities Litigation -- Master File No. CV-S-96-00708 PMP (RLH). In February 1997, the plaintiffs filed a consolidated and amended complaint naming various defendants, including Grand and certain current and former officers and directors of Grand. The amended complaint includes claims under federal securities laws and Nevada laws based on acts alleged to have occurred between December 19, 1995 and July 22, 1996. In February 1997, various defendants, including Grand and Grand's officers and directors named as defendants, submitted motions to dismiss the amended complaint. Those motions were made on various grounds, including Grand's claim that the amended complaint failed to state a valid cause of action against Grand and Grand's officers and directors. In May 1997, the court dismissed the amended complaint. The dismissal order did not allow the plaintiffs to further amend their complaint in an attempt to state a valid cause of action. - 20 - 21 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) In June 1997, the plaintiffs asked the court to reconsider its dismissal order, and to allow the plaintiffs to submit a second amended complaint in an attempt to state a valid cause of action. In July 1997, the court allowed the plaintiffs to submit a second amended complaint. In August 1997, the plaintiffs filed a second amended complaint. In September 1997, certain of the defendants, including Grand and Grand's officers and directors named as defendants, submitted a motion to dismiss the second amended complaint. The motion was based on various grounds, including Grand's claim that the second amended complaint failed to state a valid cause of action against Grand and Grand's officers and directors. In April 1998, the Court granted Grand's motion to dismiss, in part, and denied the motion in part. Thus, the plaintiffs are pursuing the claims in the second amended complaint that survived the motion to dismiss. In June 1998, certain of the defendants, including Grand and Grand's officers and directors named as defendants, submitted a motion for summary judgment seeking an order that such defendants are entitled to judgment as a matter of law. In December 1998, the plaintiffs completed fact discovery related to the issues raised by the summary judgment motion. Expert discovery was completed in March of 1999. As of June 1, 1999, all papers had been filed and the parties were waiting for the Court to set a hearing and rule on the motion. STRATOSPHERE SHAREHOLDERS LITIGATION - NEVADA STATE COURT In August 1996, a complaint was filed in the District Court for Clark County, Nevada -- Victor M. Opitz, et al v. Robert E. Stupak, et al -- Case No. A363019 - -- against various defendants, including Grand. The complaint seeks relief on behalf of Stratosphere Corporation shareholders who purchased stock between December 19, 1995 and July 22, 1996. The complaint alleges misrepresentations, state securities law violations and other state claims. Grand and certain defendants submitted motions to dismiss or stay the state court action pending resolution of the federal court action described above. The court has stayed further proceedings pending the resolution of In re: Stratosphere Securities Litigation. - 21 - 22 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) GRAND CASINOS, INC. SHAREHOLDERS LITIGATION In September and October 1996, two actions were filed by Grand shareholders in the U.S. District Court for the District of Minnesota against Grand and certain of Grand's current and former directors and officers. The complaints allege misrepresentations, federal securities law violations and other claims in connection with the Stratosphere project. The actions have been consolidated as In re: Grand Casinos, Inc. Securities Litigation -- Master File No. 4-96-890 -- and the plaintiffs filed a consolidated complaint. The defendants submitted a motion to dismiss the consolidated complaint, based in part on Grand's claim that the consolidated complaint failed to properly state a cause of action. In December 1997, the court granted Grand's motion to dismiss in part, and denied the motion in part. Thus, the plaintiffs are pursuing the claims in the consolidated complaint that survived Grand's motion to dismiss. Discovery in the action has begun. The defendants have submitted a motion for summary judgment seeking an order that the defendants are entitled to judgment as a matter of law. In December 1998, the plaintiffs completed fact discovery related to the issues raised by the summary judgement motion. Expert discovery was completed in March of 1999. The parties have completed follow-up discovery pertaining to the summary judgment motion and the court has set a hearing date of 9/2/99. In early February 1999, the plaintiffs filed a motion for leave to amend the complaint in this action to include, as defendants in the case, both the Company and Park Place. The motion for leave to amend the complaint has been granted and Lakes has filed its answer. Lakes will defend this action vigorously. - 22 - 23 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) DERIVATIVE LITIGATION In February 1997, certain shareholders of Grand brought an action in the Hennepin County, Minnesota District Court -- Lloyd Drilling, et al v. Lyle Berman, et al -- Court File No. MC97-002807 -- against certain current and former officers and director of Grand. The plaintiffs allege that those officers and directors breached certain fiduciary duties to the shareholders of Grand as a result of certain transactions involving the Stratosphere project. Pursuant to Minnesota law, Grand's Board of Directors appointed an independent special litigation committee to evaluate whether Grand should pursue the claims made in the action against the officers and directors. The special litigation committee completed its evaluation in December 1997, and filed a report with the court recommending that such claims not be pursued. Grand provided the defense for Grand's current and former officers and directors who are defendants in the action pursuant to Grand's indemnification obligations to such defendants. In January 1998, Grand submitted a motion for summary judgment based on the special litigation committee's report. In May 1998, the court granted the motion, thereby dismissing the plaintiffs' claims. In August 1998, the plaintiffs appealed the Court's ruling. On March 9, 1999, the Minnesota Court of Appeals affirmed the dismissal of the plaintiffs' claims. The plaintiffs sought further review of the ruling by the Minnesota Supreme Court. The Court declined to grant further review. SLOT MACHINE LITIGATION In April 1994, William H. Poulos brought an action in the U.S. District Court for the Middle District of Florida, Orlando Division -- William H. Poulos, et al v. Caesars World, Inc. et al -- Case No. 39-478-CIV-ORL-22 -- in which various parties (including Grand) alleged to operate casinos or be slot machine manufacturers were named as defendants. The plaintiff sought to have the action certified as a class action. A subsequently filed Action -- William Ahearn, et al v. Caesars World, Inc. et al -- Case No. 94-532-CIV-ORL-22 -- made similar allegations and was consolidated with the Poulos action. - 23 - 24 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) Both actions included claims under the federal Racketeering-Influenced and Corrupt Organizations Act and under state law, and sought compensatory and punitive damages. The plaintiffs claimed that the defendants are involved in a scheme to induce people to play electronic video poker and slot machines based on false beliefs regarding how such machines operate and the extent to which a player is likely to win on any given play. In December 1994, the consolidated actions were transferred to the U.S. District Court for the District of Nevada. In September 1995, Larry Schreier brought an action in the U.S. District Court for the District of Nevada -- Larry Schreier, et al v. Caesars World, Inc. et al -- Case No. CV-95-00923-DWH(RJJ). The plaintiffs' allegations in the Schreier action were similar to those made by the plaintiffs in the Poulos and Ahearn actions, except that Schreier claimed to represent a more precisely defined class of plaintiffs than Poulos or Ahearn. In December 1996, the court ordered the Poulos, Ahearn and Schreier actions consolidated under the title William H. Poulos, et al v. Caesars World, Inc., et al -- Case No. CV-S-94-11236-DAE(RJJ) -- (Base File), and required the plaintiffs to file a consolidated and amended complaint. In February 1997, the plaintiffs filed a consolidated and amended complaint. In March 1997, various defendants (including Grand) filed motions to dismiss or stay the consolidated action until the plaintiffs submitted their claims to gaming authorities and those authorities considered the claims submitted by the plaintiffs. In December 1997, the court denied all of the motions submitted by the defendants, and ordered the plaintiffs to file a new consolidated and amended complaint. That complaint has been filed. Grand has filed its answer to the new complaint. The plaintiffs have filed a motion seeking an order certifying the action as a class action. Grand and certain of the defendants have opposed the motion. The Court has not ruled on the motion. - 24 - 25 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) STRATOSPHERE NOTEHOLDER COMMITTEE BANKRUPTCY COURT ACTION In June 1997, the Official Committee of Noteholders (the "Committee") in the Chapter 11 bankruptcy proceeding for Stratosphere filed a motion with the U.S. Bankruptcy Court for the District of Nevada (the "Bankruptcy Court") by which the Committee sought Bankruptcy Court approval for assumption (on behalf of Stratosphere's estate) of the March 1995 Standby Equity Commitment (the "Standby Equity Commitment") between Stratosphere and Grand. In the motion, the Committee sought Bankruptcy Court authorization to compel Grand to fund up to $60 million in "capital contributions" to Stratosphere over three years, based on the Committee's claim that such "contributions" are required by the Standby Equity Commitment. Grand opposed the Committee's motion. Grand asserted, in its opposition to the Committee's motion, that the Standby Equity Commitment is not enforceable in the Stratosphere bankruptcy proceeding as a matter of law. The Bankruptcy Court held a preliminary hearing on the Committee's motion in June 1997, and an evidentiary hearing in February 1998 on the issues raised by the Committee's motion and Grand's opposition to that motion. In February 1998, the Bankruptcy Court denied the Committee's motion, and determined that the Standby Equity Commitment cannot be assumed (or enforced) by Stratosphere under applicable bankruptcy law. No appeal was taken. STANDBY EQUITY COMMITMENT LITIGATION In September 1997, the Stratosphere Trustee under the indenture pursuant to which Stratosphere issued its first mortgage notes filed a complaint in the U.S. District Court for the District of Nevada -- IBJ Schroeder Bank & Trust Company, Inc. v. Grand Casinos, Inc. -- File No. CV-S-97-01252-DWH (RJJ) -- naming Grand as defendant. The complaint alleges that Grand failed to perform under the Standby Equity Commitment entered into between Stratosphere and Grand in connection with Stratosphere's issuance of such first mortgage notes in March 1995. The complaint seeks an order compelling specific performance of what the Trustee claims are Grand's obligations under the Standby Equity Commitment. - 25 - 26 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) The Stratosphere Trustee filed the complaint in its alleged capacity as a third party beneficiary under the Standby Equity Commitment. Pursuant to the Second Amended Plan, a new limited liability company (the "Stratosphere LLC") was formed to pursue certain alleged claims and causes of action that Stratosphere and other parties may have against numerous third parties, including Grand and/or officers and/or directors of Grand. The Stratosphere LLC has been substituted for IBJ Schroeder Bank & Trust Company, Inc. in this proceeding. Discovery and motion practice is pending and Lakes will continue to defend this lawsuit diligently. STRATOSPHERE PREFERENCE ACTION In April 1998, Stratosphere served on Grand and Grand Media & Electronics Distributing, Inc., a wholly owned subsidiary of Grand ("Grand Media"), a complaint in the Stratosphere bankruptcy case seeking recovery of certain amounts paid by Stratosphere to (i) Grand as management fees and for costs and expenses under a management agreement between Stratosphere and Grand, and (ii) Grand Media for electronic equipment purchased by Stratosphere from Grand Media. Stratosphere claims in its complaint that such amounts are recoverable by Stratosphere as preferential payments under bankruptcy law. In May 1998, Grand responded to Stratosphere's complaint. That response denies that Stratosphere is entitled to recover the amounts described in the complaint. Discovery is pending. TULALIP TRIBES LITIGATION In 1995, Grand entered into discussions with Seven Arrows, LLC ("Seven Arrows"), a Delaware limited liability company, regarding the possible participation of Grand in a proposed casino resort development on land in the State of Washington held in trust by the United State for the Tulalip Tribes. Grand and Seven Arrows entered into a letter of intent providing for the negotiation of a revision to the Seven Arrows limited liability company agreement by which Grand (or a subsidiary of Grand) would become a member of Seven Arrows. Those negotiations were not completed and no revision to the limited liability company agreement was signed. During the negotiations, Grand entered into an agreement (the "Advance Agreement") with Seven Arrows and the Tulalip Tribes. The Advance Agreement provided for the loan by Grand and Seven Arrows of certain amounts to the Tulalip Tribes upon the satisfaction of certain conditions. - 26 - 27 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) These negotiations between Seven Arrows and Grand along with the execution of the Advance Agreement gave rise to two lawsuits involving Grand, Seven Arrows and the Tulalip Tribes. In April 1996, the Tulalip Tribes brought a legal action in Tulalip Tribal Court - Tulalip Tribes of Washington v. Seven Arrows LLC, et al. - Case No. TUL-Ci4/96-499 - against Seven Arrows and Grand. In May 1996, Seven Arrows and Grand brought a legal action in the U.S. District Court for the Western District of Washington - Seven Arrows LLC, et al. v. Tulalip Tribes of Washington - Case No. C96-0709Z - against the Tulalip Tribes. On May 17, 1999, the Tulalip Tribes of Washington, Seven Arrows, Morgan, Lewis, Githens & Ahn LP ("MLGA"); (through Red Rocks LLC the majority member of seven arrows LLC), Grand and Lakes entered into a settlement agreement resolving all claims between them. Pursuant to the settlement agreement, the Tulalip Tribes and Grand made a one time settlement payment to Seven Arrows. In turn, the Tulalip Tribes, Seven Arrows, and MLGA, each on their own behalf and on behalf of all affiliated persons, released Grand and Lakes from any claim each may have. For their part, Grand and Lakes, each on their own behalf and on behalf of all affiliated persons, released the Tulalip Tribes, Seven Arrows, and MLGA from any claim each may have. The federal lawsuit was dismissed with prejudice and without costs by order dated June 2, 1999. The Tulalip Tribal Court lawsuit was dismissed with prejudice and without costs by order dated June 2, 1999. OTHER LITIGATION The Company has recorded a reserve assessment related to various of the above items. The reserve is reflected as a litigation and claims accrual on the accompanying consolidated balance sheet as of July 4, 1999. Grand and Lakes are involved in various other inquiries, administrative proceedings, and litigation relating to contracts and other matters arising in the normal course of business. While any proceeding or litigation has an element of uncertainty, management currently believes that the final outcome of these matters is not likely to have a material adverse effect upon Grand's or the Company's consolidated financial position or results of operations. - 27 - 28 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) ITEM 5. OTHER INFORMATION The Coushatta Tribe and the Tunica-Biloxi Tribe each entered into Tribal-State compacts with the State of Louisiana on September 29, 1992. These compacts were approved in November, 1992 by the Secretary of the Interior. Each compact expires in November, 1999, but would automatically renew for an additional seven year term unless either the tribe or the State of Louisiana delivered to the other written notice of non-renewal at least 180 days prior to the applicable expiration date. On April 7, 1999, the State of Louisiana provided written notice to each of the Coushatta Tribe of Louisiana and the Tunica-Biloxi Tribe of Louisiana of the State's intent not to renew the Tribal-State compacts which expire for each tribe on November 4, 1999 and November 18, 1999, respectively. The State further extended an invitation to each such Tribe to continue to discuss mutually advantageous terms and conditions under which the State and the Tribes can enter into new gaming compacts. IGRA requires that for Class III gaming to occur on Indian land,it must be conducted in accord with an effective state compact. IGRA further imposes an obligation on state governments, upon the request of a Tribe, to negotiate with Indian Tribes regarding the operation of gaming activities which are otherwise allowable within the state "by any person, organization or entity." Louisiana currently permits various forms of legalized, non-Indian gaming. Each Tribe is actively negotiating with the State to establish suitable alternative compacts. It is unclear what consequences, if any, might result, in the event the Tribes and the State are unable to either negotiate suitable alternative compacts or agree to an extension of the existing compacts. To the knowledge of the Company, there has been no prior instance where an existing compact has expired without either a replacement compact in place or an extension (temporary or permanent) of the present compact. Nonetheless, the Company's Management Agreements with each of the Tribes provides that, absent a determination by (i) NIGC, (ii) the Congress of the United States, (iii) the Department of the Interior or (iv) a final judgment from a court of competent jurisdiction that the operation of either Grand Casino Coushatta or Grand Casino Avoyelles would be unlawful under either federal or state law, Lakes and the Tribes are obligated in their duties to each other, as set forth in the applicable Management Agreements. It is possible that one or both of the current Tribal-State compacts may expire without the execution of a replacement compact or an extension of the existing compact. If that were to occur, each Tribe has indicated to the Company that they will assert their legal rights to continue gaming operations at both Grand Casino Coushatta and Grand Casino Avoyelles. - 28 - 29 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) As outlined above, in the absence of a determination by (i) NIGC, (ii) the Congress of the United States, (iii) the Department of the Interior or (iv) a final judgment from a court of competent jurisdiction that the operation of either Grand Casino Coushatta or Grand Casino Avoyelles would be unlawful under either federal or state law, so long as the Tribes continue to conduct gaming activities at Grand Casino Coushatta and Grand Casino Avoyelles, Lakes intends to continue to operate and manage these casinos and to abide by the terms and obligations of the applicable Management Agreements. If the terms of the current Tribal-State compacts expire, without the execution of new compacts or the extension of the current compacts, there is a risk that (i) NIGC, (ii) the Congress of the United States, (iii) the Department of the Interior, (iv) the United States Department of Justice or (v) a court of competent jurisdiction could take action against either or both of the Tribes and/or Grand Casino Coushatta and Grand Casino Avoyelles resulting in the cessation of gaming operations at these casinos and/or the inability of Lakes to manage either or both of these casinos. The cessation of gaming operations at either or both of Grand Casino Coushatta and Grand Casino Avoyelles or the inability of Lakes to manage the gaming operations at these casinos would result in the loss of revenues to Lakes derived from such contracts, which would have a material adverse effect on Lakes' results of operations. Currently, the management contracts for Grand Casino Coushatta and Grand Casino Avoyelles generate all of Lakes' operating revenues. Without the realization of new business opportunities or new management contracts, the cessation of gaming operations at these casinos or the inability of Lakes to manage those operations, would have a material adverse impact on Lakes' results of operations and financial condition. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)Exhibits Description -------- ----------- 10.1 Equipment Loan Promissory Note in the principal amount of $6,000,000 by and among the Tunica-Biloxi Tribe of Louisiana, as Borrower and Hibernia National Bank, as Lender executed as of May 28, 1999. 10.2 Dominion Account Agreement, dated effective as of May 28, 1999, between the Tunica-Biloxi Tribe of Louisiana, a federally recognized Indian tribe, Grand Casinos of Louisiana, LLC - Tunica-Biloxi, a Minnesota limited liability company, Lakes Gaming, Inc., a Minnesota corporation, the Cottonport Bank, a bank chartered under the laws of the State of Louisiana, and Hibernia National Bank, a national banking association. - 29 - 30 LAKES GAMING, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) 10.3 Subordination Agreement Granted by Lakes Gaming, Inc., in Favor of Hibernia National Bank entered into as of May 28, 1999. 10.4 Intercreditor Agreement dated as of May 28, 1999, between The Cottonport Bank, Hibernia National Bank and Grand Casinos of Louisiana, LLC - Tunica-Biloxi and Lakes Gaming, Inc. 10.5 Commercial Security Agreement entered into between the Tunica-Biloxi Tribe of Louisiana (as Grantor) and Hibernia National Bank (as Lender). 10.6 Subordination Agreement Granted by Grand Casinos of Louisiana, LLC - Tunica-Biloxi in Favor of Hibernia National Bank entered into as of May 28, 1999. 10.7 Equipment Loan Agreement dated effective as of May 28, 1999 made by and between the Tunica-Biloxi Tribe of Louisiana and Hibernia National Bank, a national banking association. 27 Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K (i) A Form 8-K, Item 5. Other Events; and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits, was filed on April 23, 1999. -30- 31 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 17 , 1999 LAKES GAMING, INC. ------------------------------- Registrant / S / THOMAS J. BROSIG ------------------------------- Thomas J. Brosig President / S / TIMOTHY J. COPE ------------------------------- Timothy J. Cope Executive Vice President and Chief Financial Officer (LAKES10Q899C) - 31 - EX-10.1 2 EQUIPMENT LOAN PROMISSORY NOTE 1 EXHIBIT 10.1 EQUIPMENT LOAN PROMISSORY NOTE BORROWER: TUNICA-BILOXI TRIBE OF LOUISIANA LENDER: HIBERNIA NATIONAL BANK 711 GRAND BLVD. TIN: 72-0210640 MARKSVILLE, LA 71352 LOAN ADMINISTRATION DEPARTMENT 333 TRAVIS STREET SHREVEPORT, LA 71101 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT: $6,000,000.00 DATE OF NOTE: MAY 28, 1999 PROMISE TO PAY. Tunica-Biloxi Tribe of Louisiana (the "Borrower") promises to pay to the order of Hibernia National Bank ("Bank"), in lawful money of the United States of America the sum of Six Million and No/100 Dollars (U.S. $6,000,000.00), or such other or lesser amounts as may be reflected from time to time on the books and records of the Bank as evidencing the aggregate unpaid principal balance of loan advances made to the Borrower on a multiple advance basis as provided in the Loan Agreement (as defined below), together with simple interest assessed thereon at the interest rates specified in the Loan Agreement, commencing on the date funds are first advanced under the terms hereof and continuing until this Note is paid in full, or until default under this Note with interest thereafter being subject to the default interest rate provisions set forth herein. This Note is executed and delivered pursuant to the terms of that certain Equipment Loan Agreement dated of even date herewith between Borrower and the Bank (the "Loan Agreement"). Unless the context otherwise requires, capitalized terms not defined herein shall have the meaning ascribed to them in the Loan Agreement. MULTIPLE ADVANCE LOAN. This Note contemplates multiple loan advances. All such advances shall be requested by Borrower and made by the Bank pursuant to the terms of the Loan Agreement. PAYMENT. Borrower will pay this Note as follows: (1) Commencing thirty (30) days from the date hereof and ending upon the Funding Termination Date (which date shall be no later than August 28, 1999), the Borrower shall pay accrued interest only assessed on the outstanding principal balance which shall be payable monthly in arrears; and (2) Commencing thirty (30) days following the Funding Termination Date, the Tribe shall repay the unpaid principal balance of this Note in twenty-six (26) consecutive monthly payments of principal and interest with the first twenty-five (25) payments each in the principal amount of Two Hundred Thirty Thousand Seven Hundred Sixty Nine and No/100 Dollars ($230,769.00), plus accrued interest, and one final payment equal to all unpaid principal due under this Note and accrued interest. All payments of principal and interest are due on the same day of each month as set forth above until 2 this Note is paid in full. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Bank at Bank's address shown above or at such other place as Bank may designate in writing. Unless otherwise agreed or required by applicable law, payments shall be applied: first, to reimburse Bank for its costs of collecting the same (including but not limited to, reimbursement of Bank's reasonable attorneys' fees); second, to the repayment of interest to all additional advances that Bank may have made on Borrower's behalf pursuant to this Agreement; third, to the payment of principal of all such additional advances; and finally, to the payment of principal and interest on the Note then outstanding, which may be applied in such order and priority as Bank may determine within its sole discretion. INTEREST RATE. Commencing on the date hereof and ending upon the Funding Termination Date, the outstanding principal balance of the Loan shall bear interest at the LIBOR Rate. Commencing on the Funding Termination Date and continuing until this Note is paid in full, the outstanding principal balance of the Loan shall bear interest at the Applicable Interest Rate specified by the Borrower in the Interest Rate Selection Notice. SECURITY. This Note is secured by the Collateral referred to in the Loan Agreement and the other Loan Documents. PREPAYMENT. Borrower may prepay this Note without premium or penalty. LATE CHARGE. If Borrower fails to pay any payment under this Note in full within 10 days of when due, Borrower agrees to pay Bank a late payment fee in an amount equal to 10% of the delinquent interest due. Late charges will not be assessed following declaration of default and acceleration of maturity of this Note. DEFAULT. Borrower's default in the payment of principal and/or interest under this Note when due shall constitute a default event under this Note. Further, an Event of Default under the terms of the Loan Agreement shall constitute a default event under this Note. BANK'S RIGHTS UPON DEFAULT. Should any one or more Events of Default occur or exist under the Loan Agreement as provided above, Bank shall have the right, at its sole option, to declare formally this Note to be in default and to accelerate the maturity and insist upon immediate payment in full of the unpaid principal balance then outstanding under this Note, plus accrued interest, together with reasonable attorneys' fees, costs, expenses and other fees and charges as provided herein. Bank shall have the further right, again at its sole option, to declare formal default and to accelerate the maturity and to insist upon immediate payment in full of each and every other loan, extension of credit, debt, liability and/or 3 obligation of every nature and kind that Borrower may then owe to Bank, whether direct or indirect or by way of assignment, and whether absolute or contingent, liquidated or unliquidated, voluntary or involuntary, determined or undetermined, secured or unsecured, whether Borrower is obligated alone or with others on a "solidary" or "joint and several" basis, as a principal obligor or otherwise, all without further notice or demand, unless Bank shall otherwise elect. INTEREST AFTER DEFAULT. If Bank declares this Note to be in default, Bank has the right prospectively to adjust and fix the simple interest rate under this Note until this Note is paid in full at a fixed default interest rate shall be equal to three (3%) per cent per annum in excess of the interest rate under this Note at the time of default (the "Post-Default Rate"). ATTORNEYS' FEES. If Bank refers this Note to an attorney for collection, or files suit against Borrower to collect this Note, or if Borrower files for bankruptcy or other relief from creditors, Borrower agrees to pay Bank's reasonable attorneys' fees. NSF CHECK CHARGES. In the event that Borrower makes any payment under this Note by check and Borrower's check is returned to Bank unpaid due to nonsufficient funds in Borrower's deposit account, Borrower agrees to pay Bank an additional NSF check charge equal to $20.00. FINANCIAL STATEMENTS. Borrower agrees to provide Bank with such financial statements and other related information as required in the Loan Agreement. GOVERNING LAW. Borrower agrees that this Note and the loan evidenced hereby shall be governed under the laws of the State of Louisiana. Specifically, this business or commercial Note is subject to La. R.S. 9:3509 et seq. WAIVERS. Borrower hereby waives demand, presentment for payment, protest, notice of protest and notice of nonpayment, and all pleas of division and discussion, and severally agrees that its obligations and liabilities to Bank hereunder shall be on a "solidary" or "joint and several" basis. Borrower further agrees that discharge or release of any party who is or may be liable to Bank for the indebtedness represented hereby, or the release of any collateral directly or indirectly securing repayment hereof, shall not have the effect of releasing any other party or parties, who shall remain liable to Bank, or of releasing any other collateral that is not expressly released by Bank. Borrower additionally agrees that Bank's acceptance of payment other than in accordance with the terms of this Note, or Bank's subsequent agreement to extend or modify such repayment terms, or Bank's failure or delay in exercising any rights or remedies granted to Bank, shall likewise not have the effect of releasing Borrower or any other party or parties from their respective obligations to Bank, or of releasing any collateral that directly or indirectly secures repayment hereof. In addition, any failure or delay on the part of Bank to exercise any of the rights and remedies granted to Bank shall not have the effect of waiving any of Bank's rights and remedies. Any partial exercise of any rights and/or remedies granted to Bank shall furthermore not be construed as a waiver of any other rights and remedies; it being Borrower's intent and agreement that Bank's rights and remedies shall be cumulative in nature. Borrower further agrees that, should any default event occur or exist under this Note, any waiver or forbearance on the part of Bank to pursue the rights and remedies available to Bank, shall be binding upon Bank only to the extent that Bank specifically agrees to any such waiver or forbearance in writing. A waiver or forbearance on the part of 4 Bank as to one default event shall not be construed as a waiver or forbearance as to any other default. Borrower further agrees that any late charges provided for under this Note will not be charges for deferral of time for payment and will not and are not intended to compensate Bank for a grace or cure period, and no such deferral, grace or cure period has or will be granted to Borrower in return for the imposition of any late charge. Borrower recognizes that Borrower's failure to make timely payment of amounts due under this Note will result in damages to Bank, including but not limited to Bank's loss of the use of amounts due, and Borrower agrees that any late charges imposed by Bank hereunder will represent reasonable compensation to Bank for such damages. Failure to pay in full any installment or payment timely when due under this Note, whether or not a late charge is assessed, will remain and shall constitute a default event hereunder until such a payment is made by the Borrower and accepted by the Bank. SUCCESSORS AND ASSIGNS BOUND. Borrower's obligations and agreements under this Agreement shall be binding upon Borrower's successors and assigns. CAPTION HEADINGS. Caption headings of the sections of this Note are for convenience purposes only and are not to be used to interpret or to define their provisions. In this Note, whenever the context so requires, the singular includes the plural and the plural also includes the singular. SEVERABILITY. If any provision of this Note is held to be invalid, illegal or unenforceable by any court, that provision shall be deleted from this Note and the balance of this Note shall be interpreted as if the deleted provision never existed. LIMITED WAIVER OF SOVEREIGN IMMUNITY; ARBITRATION; SUBMISSION TO JURISDICTION; JURY TRIAL WAIVERS. This Note constitutes a Loan Document as defined in the Loan Agreement. As such and without limiting the scope of the Loan Agreement, the provisions of Section 15.10 of the Loan Agreement apply to this Note and are incorporated herein by reference. COMPLIANCE WITH 25 U.S.C.SS.81. In compliance with 25 U.S.C.ss.81 the residence and occupation of the parties is stated as follows: Party in interest: TUNICA-BILOXI TRIBE OF LOUISIANA Residence: 711 Grand Boulevard Marksville, LA 71352 Occupation: A federally recognized Indian Tribe Party in interest: HIBERNIA NATIONAL BANK Residence: 333 Travis Street Shreveport, LA 71101 Occupation: Commercial bank Scope of Authority: The Borrower is authorized to execute this Note by a resolution adopted by the Tribal Council of the Borrower at a meeting at Marksville, Louisiana, on April 19, 1999. The Tribal 5 Council exercises its authority in this instance because it believes the financing facility with the Bank represented, in part, by this Note, and the use of the funds advanced in connection therewith to purchase equipment related to the Borrower's Class III gaming facility in Marksville, Louisiana, to be in accordance with the long-range economic objectives of the Borrower. This document was executed on behalf of the Borrower on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana. This instrument shall terminate upon payment in full of the indebtedness evidenced hereby, provided that in any event this instrument shall expire not later than 50 years from the date hereof. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. BANK AND BORROWER HEREBY WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER BANK OR BORROWER AGAINST THE OTHER. BORROWER: TUNICA-BILOXI TRIBE OF LOUISIANA By: s/ Earl J. Barbry, Sr. ------------------------------------------------ Earl J. Barbry, Sr., Chairman BIA APPROVAL THE FOREGOING DOCUMENT IS APPROVED PURSUANT TO 25 U.S.C. 81: UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF INDIAN AFFAIRS: BY ---------------------------------------------------- AREA DIRECTOR OF THE EASTERN AREA OFFICE OF THE BUREAU OF INDIAN AFFAIRS OF THE SECRETARY OF THE INTERIOR AND THE COMMISSIONER OF INDIAN AFFAIRS, ACTING UNDER DELEGATED AUTHORITY. EX-10.2 3 DOMINION ACCOUNT AGREEMENT 1 EXHIBIT 10.2 DOMINION ACCOUNT AGREEMENT THIS DOMINION ACCOUNT AGREEMENT (the "Agreement"), dated effective as of May 28, 1999, (the "Effective Date"), between the TUNICA-BILOXI TRIBE OF LOUISIANA (the "Tribe"), a federally recognized Indian tribe, GRAND CASINOS OF LOUISIANA, LLC - TUNICA-BILOXI, a Minnesota limited liability company (the "Manager"), LAKES GAMING, INC., a Minnesota corporation ("Lakes Gaming"), THE COTTONPORT BANK ("Cottonport Bank"), a bank chartered under the laws of the State of Louisiana, and HIBERNIA NATIONAL BANK, a national banking association ("Hibernia"); WITNESSETH: WHEREAS, the Tribe has the inherent power to conduct and regulate gaming on its lands, subject only to the restrictions imposed by the Indian Gaming Regulatory Act, Public Law 100-497 (the "IGRA"); and WHEREAS, in accordance with the IGRA, the Tribe has adopted its Gaming Ordinance No. 11-94 (the "Ordinance"), and has entered into a Tribal-State Compact for the Conduct of Class III Gaming with the State of Louisiana; and WHEREAS, under the Ordinance, the Tribe operates a gaming facility (the "Casino") on its lands; and WHEREAS, pursuant to that certain Amended and Restated Management & Construction Agreement, dated as of November 1, 1991, (the "Management Contract"), the Tribe engaged Grand Casinos of Louisiana, Inc.-Tunica-Biloxi ("GCI") to manage the Casino and to collect the receipts, pay the operating expenses and to distribute the income thereof; and WHEREAS, pursuant to that certain Assignment dated December 31, 1998, GCI assigned to the Manager all of GCI's rights, title and interest in and to the Management Contract; and WHEREAS, the Tribe has consented to such an Assignment; and WHEREAS, the Tribe has purchased, and intends to purchase gaming equipment and other general equipment to utilize in the gaming operations at the Casino; and WHEREAS, the Tribe, as borrower, and Hibernia, as lender, have entered into that certain Equipment Loan Agreement dated as of the Effective Date (the " Equipment Loan Agreement"), under the terms of which Hibernia agreed to loan to the Tribe sums not to exceed $6,000,000 to purchase gaming equipment and other equipment to use in conjunction with gaming operations at the Casino; and WHEREAS, the Tribe and the Manager desire to enter into this Agreement in order to grant to Hibernia a security interest in the Gross Receipts (as defined herein) and to provide for the receipt and deposit of the Gross Receipts into the Casino Bank Accounts and the payment therefrom of certain sums to Hibernia; and WHEREAS, the parties hereto are willing to enter into this Agreement and to undertake the EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT - PAGE 1 2 duties set forth herein upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Unless the context otherwise requires, capitalized terms which are not defined herein shall have the meaning ascribed to them in the Loan Agreement. Section 1.2 Defined Terms. The following terms when used herein shall have the following meanings: "Business Day" means a day other than (i) a Saturday or Sunday (ii) any day on which banks located in the State of Louisiana are required or authorized by law to remain closed. "Casino Bank Accounts" means all of the bank accounts specified or contemplated in Section 5.10 of the Management Contract, including without limitation, the General Account and the Expense Account. "Collateral" means the Gross Receipts and the Casino Bank Accounts and the funds deposited or credited thereto from time to time. "Entities" collectively means the Tribe and the Manager and "Entity" means any one of the Entities. "Enterprise" means the operation of the Casino by the Tribe and the Manager pursuant to the Management Contract. "Expense Account" means that certain Account No.111350-000-000 owned and maintained by the Tribe with the Cottonport Bank as the Expense Account pursuant to Section 5.10.2 of the Management Contract. "Equipment Loan Note" means that certain promissory note dated as of May 28, 1999, executed by the Tribe in favor of the Hibernia in an amount not to exceed $6,000,000.00 which note was executed in connection with the Equipment Loan Agreement. "General Account" means that certain Account No. 111101-000-000 owned and maintained by the Tribe with the Cottonport Bank as the General Account pursuant to Section 5.10 of the Management Contract. "Gross Receipts" has the meaning ascribed to it in Section 2.9 of the Management Agreement; provided however, the term shall include all revenues received by the Enterprise from the operations of the Hotel. EQUIPMENT LOAN DOMINION AGREEMENT - PART 2 3 "Hotel Loan Agreement" means that certain Commercial Loan Agreement dated as of March 14, 1997, under the terms of which Cottonport Bank agreed to loan to the Tribe sums not to exceed $16,500,000 to purchase and renovate a hotel facility, and to refinance certain gaming equipment and to purchase other new gaming equipment to use in conjunction with gaming operations at the Casino. Cottonport Bank has participated to Hibernia one hundred percent (100%) of the interests in the Hotel Loan Agreement and the Other Loan Documents (as defined in the Hotel Loan Agreement) to Hibernia. "Hotel Loan Note" means that certain promissory note dated as of March 14, 1997, executed by the Tribe in favor of the Cottonport Bank in an amount not to exceed $16,500,000.00 which note was executed in connection with the Hotel Loan Agreement. Cottonport Bank has participated to Hibernia one hundred percent (100%) of the interests in the Hotel Loan Note. "Loan Agreements" means the Equipment Loan Agreement and the Hotel Loan Agreement and "Loan Agreement" means any one of the Loan Agreements. "Management Committee" has the meaning ascribed to it in Section 2.11 of the Management Contract. "Net Profits" shall have the meaning ascribed to it in Section 2.14 of the Management Contract. "Notes" means collectively the Hotel Loan Note and the Equipment Loan Note and "Note" means any one of the Notes, together with all substitute or replacement notes therefor, as well as all renewals, extensions, modifications, refinancings, consolidations and substitutions of and for such a Note. "Obligations" the indebtedness evidenced by the Notes, including principal, interest, costs, expenses and attorneys' fees and all other fees and charges, together with all other indebtedness and costs and expenses for which the Tribe is responsible under this Agreement or for which the Tribe is responsible under any of the Related Documents. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other form of entity. "Related Documents" means and include individually, collectively, interchangeably and without limitation the Notes, the Loan Agreements, guaranties, security agreements, financing statements and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Obligations. ARTICLE 2 COVENANTS Unless Hibernia's prior written consent to the contrary is obtained, each of the Entities will at all EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT - PART 3 4 times comply with the covenants contained in this Article 2, from the date hereof and continuing thereafter for so long as the Obligations, or any portion thereof, are outstanding. Section 2.1 MAINTENANCE OF CASINO BANK ACCOUNTS. The Entities, acting through the Management Committee, shall maintain the Casino Bank Accounts with the Cottonport Bank in accordance with the terms of the Management Contract. Section 2.2 DEPOSIT OF GROSS RECEIPTS. The Entities, acting through the Management Committee, shall deposit all Gross Receipts into the General Account maintained with the Cottonport Bank in accordance with the terms of the Management Contract. Section 2.3 CHARACTERIZATION OF PAYMENTS. All payments and transfers to the Cottonport Bank and to Hibernia which are referred to in Article 3 of this Agreement shall be deemed to be, and treated and paid as, Operating Expenses under the terms of the Management Agreement. Section 2.4 DISTRIBUTION OF NET PROFITS. Notwithstanding anything to the contrary contained in the Management Contract, the Tribe and Grand Casinos/Tunic-Biloxi shall not distribute during any calendar month any Net Profits unless and until: (a) the requirements of Article 3 of the Dominion Account Agreement have been satisfied; and (b) any other sums currently due to the Bank under the Notes and the Loan Agreements have been paid in full. Further, the Tribe and Grand Casinos/Tunica-Biloxi shall not distribute any Net Profits under the Management Contract so long as an Event of Default exists under any of the Loan Agreements. In addition to the foregoing, the Tribe shall not pay management fees or other compensation to Lakes Gaming or the Manager unless payments to the Bank under the Notes and the Loan Agreements are current. Section 2.5 LIMITATIONS UPON DISTRIBUTIONS UPON DEFAULT. Upon the occurrence of an Event of Default under the provisions of the Loan Agreement and so long as the same remains unremedied in the opinion of Hibernia, no distributions, transfers or payments shall be made directly or indirectly from the Casino Bank Accounts to the Entities or to Lakes Gaming, including without limitation, any distribution of Net Profits, repayments of principal or interest for loans made by the Manager or Lakes Gaming to the Tribe, the payment of any management fees, or the transfer of funds from the Casino Bank Accounts to any other accounts maintained by any of the Entities with the Cottonport Bank. Section 2.6 NO CHANGE IN THE MANAGEMENT CONTRACT. The Entities will maintain the Management Contract pursuant to the provisions of Section 9.16 of the Equipment Loan Agreement. The Entities shall not amend, modify, alter or change the terms of the Management Contract without Hibernia's prior written consent which consent will not be unreasonably withheld or delayed. Section 2.7 FINANCIAL INFORMATION. The Entities shall comply with the financial reporting requirements set forth in Section 9.01 of the Equipment Loan Agreement. ARTICLE 3 AUTHORIZED TRANSFERS FROM THE CASINO BANK ACCOUNTS Section 3.1 PAYMENTS DUE UNDER THE LOAN AGREEMENTS AND THE NOTES. The Tribe has EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT-PAGE 4 5 agreed to make certain monthly payments to the Cottonport Bank and Hibernia as set forth in the Loan Agreements and the Notes. In order to make any such payment, the Tribe shall pay the Notes in accordance with their respective terms via wire transfer to: Hibernia National Bank ABA Routing No. 065000090 333 Travis Street Shreveport, LA 71101 Attention: Christopher K. Haskew, Vice President Section 3.2 TERMINATION. (a) The obligations set forth in this Article 3 to the Cottonport Bank are absolute and irrevocable and shall terminate only upon the Cottonport Bank's receipt of a Termination Certificate in a form similar to Exhibit No. 1 attached hereto which has been duly signed by Hibernia and delivered to the Cottonport Bank and the Entities. Until such time as the Cottonport Bank has received such a Termination Certificate, the Cottonport Bank shall continue to transfer funds from the Casino Bank Accounts in accordance with the terms hereof and to otherwise comply with the provisions of this Agreement. (b) Upon payment and satisfaction of all of the Obligations, Hibernia shall execute and deliver a Termination Certificate to the Cottonport Bank and the Entities. If all of the Obligations have been paid in full and Hibernia has not executed and delivered the Termination Certificate, the Tribe will notify Hibernia in writing and within ten (10) days of its receipt of such notice, Hibernia shall execute and deliver the Termination Certificate to the Cottonport Bank and the Entities. ARTICLE 4 PLEDGE AND GRANT OF SECURITY INTERESTS Section 4.1. GRANT OF SECURITY INTEREST. As security for the payment and performance of all of the Obligations, each Entity hereby pledges to Hibernia, and grants to Hibernia a continuing security interest in, all of the right, title and interest of each Entity in and to the Collateral, whether now or hereafter owned, existing, arising or acquired, including without limitation, the Casino Bank Accounts and all funds currently or hereafter deposited therein or credited thereto. Section 4.2 DURATION. The security interests granted herein in the Collateral in favor of Hibernia will continue until such time as all of the Obligations have been fully paid and satisfied and this Agreement has been canceled or terminated by Hibernia; provided, however, the security interests granted herein shall terminate as to specified funds previously on deposit in the Casino Bank Accounts if and when such funds are distributed to the Entities in accordance with the terms of the Management Agreement and this Agreement. ARTICLE 5 COTTONPORT BANK'S REPRESENTATIONS AND AGREEMENTS EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 5 6 Section 5.1 COTTONPORT BANK'S REPRESENTATIONS. Cottonport Bank hereby warrants and represents to Hibernia that: (a) the Casino Bank Accounts exist and the accounts numbers specified herein with respect to the Casino Bank Accounts are correct; (b) the Tribe is the sole owner of the Casino Bank Accounts as reflected in the records of the Cottonport Bank; and (c) Cottonport Bank has not received notice from any third party, other than the Cottonport Bank and Hibernia, that any such third party has taken or claims a security interest in the Casino Bank Accounts. Section 5.2 RECEIPT OF NOTICE. The Cottonport Bank hereby acknowledges that this Agreement constitutes sufficient notice under La. R. S. 10:9-305(4) that the Tribe has pledged and granted to Hibernia a security interest to Hibernia in and to Casino Bank Accounts. Section 5.3 SUBORDINATION. The Cottonport Bank hereby subordinates to the security interest granted herein to Hibernia any right of offset or any other security interest that the Cottonport Bank has, or may hereafter obtain, in and to the Casino Bank Accounts. Section 5.4 NOTICES TO HIBERNIA. The Cottonport Bank will notify Hibernia immediately in the event the account numbers for the Casino Bank Accounts change. Further, the Cottonport Bank will notify Hibernia immediately upon the Cottonport Bank's receipt of a notice of a claim of a security interest asserted, or lien filed, by any Person in and to the Casino Bank Accounts. Section 5.5 ACCEPTANCE. By execution of this Agreement, the Cottonport Bank accepts its obligations hereunder, but only upon the express terms and conditions set forth in this Agreement. Cottonport Bank undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, including the instructions set forth in Article 3. ARTICLE 6 AGREEMENTS REGARDING THE COTTONPORT BANK The Entities and Hibernia agree that the following provisions shall control with respect to the rights, duties, liabilities and privileges of the Cottonport Bank: Section 6.1 PERFORMANCE BY OTHERS. The Cottonport Bank shall have no duty to see that any duties or obligations herein or elsewhere imposed on any other parties are performed or honored. Section 6.2 RECITALS. The Cottonport Bank shall not be responsible for any recital herein or in any other instrument or certificate described in this Agreement, or for the validity of execution by any party to any such instruments, or for the validity of any representations set forth in any such agreements. Section 6.3 RELIANCE BY COTTONPORT BANK. As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument or certificate, or as to its authorization to perform any act described herein, the Cottonport Bank shall be entitled to rely upon any written notice signed by a representative of the parties to this Agreement. Further, Cottonport Bank acts as depository and transfer agent only, and is not responsible, or liable in any manner whatsoever, for the sufficiency, correctness, genuineness or validity of the subject matter of any such written notice. Section 6.4 FAILURE OF PERFORMANCE BY COTTONPORT BANK. In the event that the Cottonport EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 6 7 Bank fails to comply with its obligations hereunder, the Entities, at the request of Hibernia, shall move custody of the Casino Bank Accounts to another financial institution mutually acceptable to the Entities and Hibernia. ARTICLE 7 EVENTS OF DEFAULT Section 7.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: (a) Any of the Entities shall breach any of their respective covenants or agreements set forth herein; or (b) Any of the Entities shall revoke, alter or modify, or attempt to revoke, alter or modify, any direction or instruction given or required to be given to Cottonport Bank pursuant to Article 3 hereof; or (c) An Event of Default, as defined in either Loan Agreement, shall occur. Section 7.2 REMEDIES ON DEFAULT. Whenever an Event of Default shall have occurred and be continuing, Hibernia shall be entitled to exercise all of the rights and remedies available to a secured party under the Commercial Laws - -- Secured Transactions as set forth in La. R.S. 10-9:901 et seq., all rights and remedies under any Obligation, all rights and remedies available to it under the Related Agreement and all rights and remedies available to it under this Agreement, including, without limitation, the right, from time to time, without demand or notice of any kind, to: (a) notify the Cottonport Bank of the Event of Default and direct the Cottonport Bank to freeze the balances of the Casino Bank Accounts and not permit any further withdrawals or transfers therefrom unless and until the Event of Default is corrected; (b) take any reasonable action that Hibernia may deem necessary or desirable in order to realize on the Collateral, including, the authority to endorse in the name of the Tribe without recourse to the Tribe any checks, drafts, notes or other instruments or documents received in payment of or on account of the Gross Receipts; and (c) exercise any and all other rights, remedies and privileges it may have under this Agreement and under any Obligation. Any proceeds received by Hibernia from the exercise of any remedy shall be applied by Hibernia (i) first to the payment by Hibernia of all expenses of the exercise of such remedies, including the reasonable attorneys' fees and legal expenses incurred in connection therewith by Hibernia, (ii) second, to the payment of the Obligations in such order and in such manner as Hibernia may, in its discretion, determine, and (iii) third, any surplus after such application shall be delivered to the Enterprise, except as otherwise required by law or as a court of competent jurisdiction may direct. The Entities agree to pay all reasonable expenses incurred by Hibernia in connection with the exercise of any remedy hereunder, including the reasonable attorneys' fees incurred in connection therewith by Hibernia. EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 7 8 Section 7.3. WAIVERS; REMEDIES. Any waiver given by Hibernia hereunder shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any rights and remedies available to Hibernia. All rights and remedies of Hibernia shall be cumulative and may be exercised singly in any order or concurrently, at Hibernia's option, and the exercise or enforcement of any such right or remedy shall neither be a condition to nor a bar to the exercise or enforcement of any other. ARTICLE 8 MISCELLANEOUS Section 8.1. NOTICES. Except as otherwise provided herein, any notice or demand which, by provision of this Agreement, is required or permitted to be given or served by Hibernia to or on any of the Entities or the Cottonport Bank shall be deemed to have been sufficiently given and served for all purposes: (a) (if mailed) seven (7) calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail; or (b) (if delivered by express courier) one Business Day after being delivered to such courier; or (c) (if delivered in person) the same day as delivery or until another address or addresses are given in writing by a party to Hibernia as follows: To the Tribe Tunica-Biloxi Tribe of Louisiana 711 Grand Boulevard Marksville, Louisiana 71351 Attention: Earl J. Barbry, Sr., Chairman Fax: (318) 253-2028 Gold, Weems, Bruser, Sue & Rundell Attorneys at Law 2001 MacArthur Drive Alexandria, Louisiana 71307 Attn: Amanda Wood Barnett/Kendall Rathburn Fax: 318-445-6476 To Manager Grand Casinos of Louisiana, LLC- Tunica-Biloxi 130 Chesire Lane Minnetonka, Minnesota 55305 Attention: Chief Financial Officer Fax: (612) 449-9353 To Lakes Lakes Gaming, Inc. Gaming 130 Chesire Lane Minnetonka, Minnesota 55305 Attention: Chief Financial Officer Fax: (612) 449-9353 To Hibernia: Hibernia National Bank 333 Travis Street EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 8 9 Shreveport, Louisiana 71101 Attention: Loan Administration Department Fax: (318) 674-3758 To Cottonport The Cottonport Bank Bank: 144 South Main Street Marksville, Louisiana 71351 Attention: Dwayne Harper Fax No. (318) 253-4472 Section 8.2. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Louisiana. Section 8.3. SEVERABILITY. If any provision of this Agreement is prohibited by, or is unlawful or unenforceable under, any applicable law of any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining provisions hereof; provided, however that where the provisions of any such applicable law may be waived, they hereby are waived by the Entities to the fullest extent permitted by law to the end that this Agreement shall be deemed to be a valid and binding agreement in accordance with its terms. Section 8.4. SURVIVAL. The warranties, representations, covenants and agreements set forth herein shall survive the execution and delivery of this Agreement and shall continue in full force and effect until all Obligations shall have been paid and performed in full. Section 8.5. COSTS AND EXPENSES; INDEMNITY. The Tribe will pay or reimburse Hibernia on demand for all reasonable out-of-pocket expenses (including in each case all filing and recording fees and taxes and all reasonable fees and expenses of counsel) incurred by Hibernia in connection with the creation, perfection, protection, satisfaction, foreclosure or enforcement of the liens created hereby and the preparation, administration, continuance, amendment or enforcement of this Agreement, and all such costs and expenses shall be part of the Obligations secured by this Agreement. The Tribe shall indemnify and hold Hibernia harmless from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or Hibernia's actions pursuant hereto other than those claims, losses and liabilities resulting from Hibernia's negligence, gross negligence or intentional misconduct. Any liability of the Tribe to indemnify and hold Hibernia harmless pursuant to the preceding sentence shall be part of the Obligations secured by this Agreement. The obligations of the Tribe under this Section 8.5 shall survive any termination of this Agreement. Section 8.6. CAPTIONS. Captions herein are for convenience only and shall not be deemed part of this Agreement. Section 8.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and assigns. Section 8.8 AMENDMENTS. This Agreement may not be amended, modified, waived, canceled or terminated, except in writing executed by all of the parties hereto. EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 9 10 Section 8.9. LIMITED WAIVER OF SOVEREIGN IMMUNITY; ARBITRATION; SUBMISSION TO JURISDICTION, JURY TRIAL WAIVER. This Agreement constitutes a Loan Document as defined in the Loan Agreements. As such and without limiting the scope of the Loan Agreements, the provisions of Section 15.10 of the Equipment Loan Agreement apply to this Agreement and are incorporated herein by reference. Section 8.10 COMPLIANCE WITH 25 U.S.C. SS.81. In compliance with 25 U.S.C.ss.81, the residence and occupation of the parties is stated as follows: Party in interest: TUNICA-BILOXI TRIBE OF LOUISIANA Residence: 711 Grand Boulevard Marksville, Louisiana 71351 Occupation: A federally recognized Indian Tribe Party in interest: THE COTTONPORT BANK Residence: 144 South Main Street Marksville, LA 71351 Occupation: Commercial bank Party in interest: HIBERNIA NATIONAL BANK Residence: 333 Travis Street Shreveport, LA 71101 Occupation: Commercial bank Party in interest: GRAND CASINOS OF LOUISIANA, LLC- TUNICA -BILOXI Residence: 130 Chesire Lane Minnetonka, Minnesota 55305 Occupation: A Minnesota limited liability company Party in interest: LAKES GAMING, INC. Residence: 130 Chesire Lane Minnetonka, Minnesota 55305 Occupation: A Minnesota corporation Scope of Authority: The Tribe is authorized to execute the within document by a resolution adopted by the Tribal Council of the Tribe at a meeting held at Marksville, Louisiana, on April 19, 1999. The Tribal Council exercises its authority in this instance because it believes the purchase of the equipment related to Tribe's Class III gaming facility in Marksville, Louisiana, in connection with the Casino, and the financing thereof, to be in accordance with the long-range economic objectives of the Tribe. EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 10 11 This document was executed on behalf of the Tribe on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana, at N/A, N/A, on behalf of Manager on or about a.m./p.m. on , 1999, at , , on behalf of Lakes Gaming on or about a.m./p.m. on , 1999, at , on behalf of The Cottonport Bank on or about 10:30 a.m. on May 28, 1999, at Alexandria, Louisiana, and on behalf of Hibernia on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana. This instrument shall terminate upon payment in full of the indebtedness secured hereby, provided that in any event this instrument shall expire not later than 50 years from the date hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in counterparts, as of the Effective Date. TUNICA-BILOXI TRIBE OF LOUISIANA By: s/ Earl J. Barbry, Sr. ------------------------------------------ Earl J. Barbry, Sr., Chairman HIBERNIA NATIONAL BANK By: s/ Christopher K. Haskew ------------------------------------------ Christopher K. Haskew, Vice President THE COTTONPORT BANK By: s/ DeWayne Harper ------------------------------------------ Its V.P. --------------------------------------- GRAND CASINOS OF LOUISIANA, LLC - TUNICA BILOXI By: s/ Timothy Cope ------------------------------------------ Timothy Cope, its Chief Financial Officer LAKES GAMING, INC. By: s/ Timothy Cope ------------------------------------------ Timothy Cope, its Chief Financial Officer Attachments: EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 11 12 Exhibit No. 1 - Termination Certificate BIA APPROVAL THE FOREGOING DOCUMENT IS APPROVED PURSUANT TO 25 U.S.C. 81: UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF INDIAN AFFAIRS: BY --------------------------------------- AREA DIRECTOR OF THE EASTERN AREA OFFICE OF THE BUREAU OF INDIAN AFFAIRS OF THE SECRETARY OF THE INTERIOR AND THE COMMISSIONER OF INDIAN AFFAIRS, ACTING UNDER DELEGATED AUTHORITY. EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT -- PAGE 12 13 EXHIBIT NO. 1 TERMINATION CERTIFICATE The Cottonport Bank 144 South Main Street Marksville, Louisiana 71351 Attention: -------------- Re: Termination Certificate pursuant to that certain Dominion Account Agreement dated May 28, 1999 Gentlemen: The undersigned, a duly authorized officer of Hibernia National Bank ("Hibernia"), hereby certifies to The Cottonport Bank (the "Bank") pursuant to Section 3.2 of the captioned Dominion Account Agreement that all of the Obligations (as defined in the Dominion Account Agreement) have been paid in full and that the Dominion Agreement is hereby terminated. IN WITNESS WHEREOF, Hibernia has executed and delivered this Termination Certificate as of the day of , . HIBERNIA NATIONAL BANK By -------------------------------------- Name ------------------------------------ Title ----------------------------------- cc: Tunica Biloxi Tribe of Louisiana Lakes Gaming, Inc. EQUIPMENT LOAN DOMINION ACCOUNT AGREEMENT - PAGE 13 EX-10.3 4 SUBORDINATION AGREEMENT 1 EXHIBIT 10.3 - -------------------------------------------------------------------------------- SUBORDINATION AGREEMENT GRANTED BY LAKES GAMING , INC., IN FAVOR OF HIBERNIA NATIONAL BANK - -------------------------------------------------------------------------------- This Subordination Agreement (the "Agreement") is entered into as of May 28, 1999, by: LAKES GAMING, INC. (hereinafter referred to as "Lakes Gaming"), a Minnesota corporation, whose permanent mailing address is 130 Chesire Lane, Minnetonka, Minnesota, 55305, represented herein by Timothy Cope, its duly authorized Chief Financial Officer. Lakes Gaming hereby represents, covenants and agrees as follows: 1. As used herein, the term "Subordinated Claims" shall mean all debts, liabilities and obligations of the Tunica-Biloxi Tribe of Louisiana (hereinafter referred to as the "Tribe"), a federally recognized Indian tribe, to Lakes Gaming, whether such debts, liabilities and obligations now exist or are hereafter incurred or arise, or whether the obligation of the Tribe thereon be direct, contingent, primary, secondary, joint and several, or otherwise, and irrespective of whether such debts, liabilities or obligations are evidenced by note, contract, open account or otherwise, and irrespective of the person or entity in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Lakes Gaming. 2. For and in consideration of the Hibernia Indebtedness (herein defined) under the Hibernia Documents (herein defined), and in order to induce the Hibernia National Bank ("Hibernia Bank"), acting in its discretion in each instance, to make loans or otherwise to give, grant or extend credit at any time or times to the Tribe under the Hibernia Documents, Lakes Gaming hereby agrees, subject to the terms of that certain Intercreditor Agreement dated May 28, 1999, between Hibernia Bank, Lakes Gaming and Grand Coushatta of Louisiana, LLC-Tunica-Biloxi, as follows: (a) To subordinate, and does hereby subordinate, the payment by the Tribe of the Subordinated Claims, together with any and all interest accrued or to accrue thereon, to the payment to Hibernia Bank of any and all debts, liabilities and obligations for which the Tribe may now or hereafter be under obligation to Hibernia Bank (the "Hibernia Indebtedness"), under: (i) that certain Equipment Loan Agreement dated May 28, 1999, between Hibernia Bank, as lender, and the Tribe, as borrower (herein referred to as the "Loan Agreement"); (ii) that certain Promissory Note dated May 28, 1999, executed by the Tribe in favor 2 of Hibernia Bank in the original principal sum of $6,000,000.00 (herein referred to as the "Note"); (iii) that certain Commercial Security Agreement dated May 28, 1999, executed by the Tribe, as debtor, in favor of Hibernia Bank, as secured party, which agreement covers certain equipment and machinery more fully described therein (the "Hibernia Security Agreement"); (iv) that certain Dominion Account Agreement dated May 28, 1999, executed by the Tribe, The Cottonport Bank, Hibernia, Lakes Gaming and Grand Casinos of Louisiana L.L.C. --Tunica-Biloxi (the "Hibernia Dominion Account Agreement"); and (v) all Non Standard Financing Statements executed by the Tribe, as the debtor, in favor of the Hibernia Bank, as the secured party, regarding the Collateral (as defined in the Hibernia Security Agreement and/or the Dominion Account Agreement) which instruments are recorded in the public records of Avoyelles Parish, Louisiana, (the Loan Agreement, Note, Hibernia Security Agreement, Hibernia Dominion Account Agreement and Hibernia Financing Statement are sometimes collectively referred to as the "Hibernia Documents"). (whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligation of the Tribe thereon be direct, contingent, primary, secondary, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account or otherwise). (b) Not to ask, demand, sue for, take or receive all or any part of the Subordinated Claims, or any interest thereon, unless or until that portion of the Hibernia Indebtedness then due shall have been fully paid and discharged; provided however, unless and until Hibernia Bank notifies Lakes Gaming at the address noted above that an Event of Default has occurred under the terms of the Loan Agreement, Lakes Gaming may continue to receive scheduled payments from the Tribe under the Subordinated Claims; (c) That, if any payment(s) is (are) made on account of the Subordinated Claims contrary to the terms of this Agreement, each and every amount so paid shall be held in trust by Lakes Gaming on behalf of Hibernia Bank and Lakes Gaming will promptly pay such amounts to Hibernia Bank to be credited and applied to any Hibernia Indebtedness (principal and/or interest) then owing to Hibernia Bank by the Tribe, whether matured or unmatured; (d) That any liens, security interests, judgments liens, charges or other encumbrances upon the Tribe's assets securing payment of the Subordinated Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon the Tribe's assets securing payment of the Hibernia Indebtedness; 3 (e) If Lakes Gaming forecloses upon any of the Subordinated Claims or obtains possession of the Tribe's property in lieu of foreclosure, all assets of the Tribe or proceeds thereof obtained thereby shall be held in trust by Lakes Gaming on behalf of Hibernia Bank and Lakes Gaming will promptly pay such amounts to Hibernia Bank to be credited and applied to any Hibernia Indebtedness (principal and/or interest) then owing to Hibernia Bank by the Tribe, whether matured or unmatured; (f) That, upon any distribution of the assets or readjustment of indebtedness of the Tribe, whether by reason of reorganization, liquidation, dissolution, bankruptcy, receivership, assignment for the benefit of creditors, or any other action or proceeding involving the readjustment of all or any of the Subordinated Claims, or the application of assets of the Tribe to the payment or liquidation thereof, either in whole or in part, Hibernia Bank shall be entitled to receive payment in full of any and all of the Hibernia Indebtedness then owing to Hibernia Bank by the Tribe prior to the payment of all or any portion of the Subordinated Claims; and (g) Not to transfer, assign, encumber or subordinate at any time while this Agreement remains in effect, any right, claim or interest of any kind in or to any of the Subordinated Claims, either principal or interest, unless such is done expressly subject to the terms and provisions of this Agreement. 4. This Agreement is complete and effective upon execution by Lakes Gaming and delivery of this Agreement to Hibernia Bank. 5. This is a continuing Agreement and shall remain in full force and effect and be binding upon Lakes Gaming and its legal representatives, successors or assigns, until all of the Hibernia Indebtedness has been paid in full and the aforesaid Loan Agreement has been terminated. 6. This Agreement shall be deemed to be made under and shall be governed by the laws of the State of Louisiana in all respects, including matters of construction, validity and performance. 7. None of the terms or provisions of this Agreement may be waived, altered, modified or amended except in writing duly signed for and on behalf of Hibernia Bank and Lakes Gaming. 8. Hibernia Bank will not alter, modify or amend any of the Hibernia Documents with the prior written consent of Lakes Gaming, which consent will not be unreasonably withheld. LAKES GAMING, INC. By: s/ Timothy Cope ----------------------------------------- Timothy Cope, Its Chief Financial Officer ACCEPTED: 4 HIBERNIA NATIONAL BANK By s/ Christopher Haskew -------------------------------------------- Christopher Haskew, its Vice President Date: May 28, 1999 EX-10.4 5 INTERCREDITOR AGREEMENT 1 EXHIBIT 10.4 INTERCREDITOR AGREEMENT This INTERCREDITOR AGREEMENT (the "Agreement") dated as of May 28, 1999, between The Cottonport Bank ("Cottonport Bank"), Hibernia National Bank ("Hibernia") and Grand Casinos of Louisiana, LLC -- Tunica-Biloxi ("Grand Casinos/Tunica Biloxi") and Lakes Gaming, Inc. ("Lakes Gaming"): WITNESSETH: WHEREAS, the Cottonport Bank, and the Tunica-Biloxi Tribe of Louisiana (the "Tribe") entered into that certain Commercial Loan Agreement dated March 14, 1997 (the "Hotel Loan Agreement") under the terms of which the Cottonport Bank agreed to loan to the Tribe up to $16,500,000.00 (the "Hotel Loan") to be used to purchase and renovate a hotel facility, to purchase new gaming equipment, and to refinance certain gaming equipment, all as more fully set forth therein; WHEREAS, in connection with the Hotel Loan Agreement, the Tribe executed in favor of the Cottonport Bank the Hotel Loan Collateral Documents (herein defined), including without limitation, the Hotel Loan Security Agreement (herein defined) which, among other things, granted to the Cottonport Bank as collateral for the Hotel Loan a first priority security interest in accounts (the "Casino Bank Accounts") maintained by the Tribe at the Cottonport Bank; WHEREAS, certain of the Hotel Loan Collateral Documents create a Lien (herein defined) on certain equipment which equipment is also encumbered by the Grand Equipment Liens (herein defined); WHEREAS, in connection with the Hotel Loan, Grand Casinos, Inc. ("Grand"), a Minnesota corporation and Grand Casinos of Louisiana, Inc. -- Tunica Biloxi ("GCI"), a Minnesota corporation, executed in favor of the Cottonport Bank that certain Commercial Guaranty Agreement dated April 7, 1997 (the "Grand Hotel Loan Guaranty") under the terms of which Grand and GCI guaranteed up to the maximum sum of $16,500,000.00 of the Hotel Loan Obligations (herein defined); WHEREAS, in connection with the Hotel Loan, Lakes Gaming and Grand Casino/ Tunica Biloxi executed in favor of the Cottonport Bank that certain Commercial Guaranty Agreement dated February 15, 1999 (the "Lakes Hotel Loan Guaranty") under the terms of which Lakes Gaming and Grand Casino/ Tunica Biloxi guaranteed up to the maximum sum of $16,500,000.00 of the Hotel Loan Obligations; WHEREAS, in connection with the Management Agreement (herein defined), the Tribe executed in favor of Grand and GCI the Grand Collateral Documents (herein defined); WHEREAS, in connection with the Hotel Loan Agreement, Lakes Gaming and Grand Casinos/Tunica Biloxi executed the Lakes Hotel Loan Subordination Agreements (herein defined); WHEREAS, Grand Casinos/Tunica Biloxi has succeeded to the interests of GCI in the Operative Agreements (herein defined); WHEREAS, Lakes Gaming has succeeded to the interests of Grand in the Operative INTERCREDITOR AGREEMENT -- PAGE 1 2 Agreements, except for Grand's obligation under the Hotel Loan Guaranty; WHEREAS, if the Cottonport Bank makes demand for payment upon Lakes Gaming and Grand Casinos/Tunica Biloxi pursuant to the Lakes Hotel Loan Guaranty and if payment in full is made of all amounts owing thereunder, Lakes Gaming and Grand Casinos/Tunica Biloxi will have certain subrogation rights under the Lakes Hotel Loan Guaranty, including, the right to succeed to the Cottonport Bank's rights as a secured party under the Hotel Loan Collateral Documents (such subrogation rights herein referred to as the "Lakes Hotel Loan Subrogation Rights"); WHEREAS, the Cottonport Bank has participated to Hibernia one hundred percent (100%) of the Hotel Loan; WHEREAS, Hibernia and the Tribe entered into that certain Commercial Loan Agreement dated May 28, 1999 (the "Equipment Loan Agreement"), under the terms of which Hibernia agreed to loan to the Tribe up to $6,000,000.00 (the "Equipment Loan") to purchase new gaming equipment and other general equipment; WHEREAS, in connection with the Equipment Loan Agreement, the Tribe executed in favor of Hibernia the Equipment Loan Collateral Documents (herein defined), including without limitation, the Equipment Loan Dominion Account Agreement (herein defined) which, among other things, granted to Hibernia as collateral for the Equipment Loan a security interest in the Casino Bank Accounts; WHEREAS, in connection with the Equipment Loan Agreement, Grand Casinos/Tunica Biloxi and Lakes Gaming executed the Equipment Loan Subordination Agreements (herein defined); WHEREAS, certain of the Equipment Loan Collateral Documents creates a Lien (herein defined) on certain equipment which equipment is also encumbered by a Lien created under certain of the Grand Collateral Documents; WHEREAS, the undersigned parties wish to set forth their understanding with respect to the priority of those Liens; WHEREAS, the Equipment Loan Dominion Account Agreement and the Hotel Loan Security Agreement encumber the Casino Bank Accounts; WHEREAS, the parties wish to set forth herein their understanding as to the application of the net proceeds from such collateral in the event of foreclosure pursuant to such Equipment Loan Dominion Account Agreement, Hotel Loan Security Agreement, the other Hotel Loan Collateral Documents and/or the other Equipment Loan Collateral Documents; NOW, THEREFORE, in consideration of the foregoing, the Cottonport Bank, Hibernia, Lakes Gaming and Grand Casinos/Tunica Biloxi agree as follows: SECTION 1. DEFINITIONS. The following terms shall have the following meanings: "Acceleration" means the earlier of (a) the acceleration of the Hotel Loan Obligations under INTERCREDITOR AGREEMENT -- PAGE 2 3 Section 11.02 of the Hotel Loan Agreement, (b) the acceleration of the Equipment Loan Obligations under Section 11.02 of the Equipment Loan Agreement, or (c) the date on which the Cottonport Bank makes demand for payment upon Lakes Gaming and/or Grand Casinos/Tunica Biloxi under the Lakes Hotel Loan Guaranty and all obligations of Lakes Gaming and/or Grand Casinos/Tunica Biloxi under the Lakes Hotel Loan Guaranty have been fully satisfied. "Cottonport Bank Equipment Lien" means the Lien granted by the Tribe in favor of the Cottonport Bank pursuant to that certain Commercial Security Agreement dated March 14, 1997. "Equipment Loan Collateral" means all property which is, or will become, subject to the liens, pledges and security interests of every kind granted by the Equipment Loan Collateral Documents. "Equipment Loan Collateral Documents" means those documents designated as such which are described in Schedule 1 attached hereto and made a part hereof. "Equipment Loan Dominion Account Agreement" means that certain Dominion Account Agreement dated as of May 28, 1999, between the Tribe, Lakes Gaming, Grand Casinos/Tunica Biloxi, the Cottonport Bank and Hibernia. "Equipment Loan Obligations" shall have the meaning attributable to the term "Obligations" as defined in the Equipment Loan Agreement. "Equipment Loan Subordination Agreements" mean those certain Subordinations Agreements dated as of May 28, 1999, by Lakes Gaming and Grand Casinos/Tunica Biloxi in favor of the Bank regarding the Equipment Loan. "Foreclosure" means (a) the seizure and sale of property of a debtor by executory or ordinary proceedings or by any other judicial proceeding, (b) the seizure and sale of the property of a debtor in a nonjudicial proceeding in lieu of the institution of a judicial proceeding, and (c) the exercise by the creditor of the right of setoff with respect to funds owed by the creditor to the debtor. "Grand Collateral Documents" means those documents designated as such which are described in Schedule 3 attached hereto and made a part hereof. "Grand Equipment Liens" mean any and all Liens granted by the Tribe in favor of Grand, GCI, Lakes Gaming and/or Grand Casinos/Tunica Biloxi with respect to the Equipment Loan Collateral and the Hotel Loan Collateral, including, but not limited to, those Liens granted pursuant to that certain Security Agreement dated as of November 1, 1991, by the Tribe in favor of GCI and assigned by GCI to Grand Casinos/Tunica Biloxi, together with the Financing Statements executed by the Tribe in favor of GCI which Financing Statement was recorded under File No. 05-920792 on April 7, 1992, and under File No. 05-941890, on September 26, 1994, in the Records of Avoyelles Parish, Louisiana. The term "Grand Equipment Liens" does not include any Liens under the Hotel Loan Collateral Documents to which Lakes Gaming or Grand Casinos/Tunica Biloxi succeed under their respective Hotel Loan Subrogation Rights. "Grand Obligations" means the indemnification obligations owed by the Tribe to Lakes Gaming and Grand Casinos/Tunica Biloxi pursuant to the Management Agreement, any of the Grand Collateral INTERCREDITOR AGREEMENT -- PAGE 3 4 Documents or applicable law with respect to the Lakes Hotel Loan Guaranty. "Hibernia Equipment Lien" means the Lien granted by the Tribe in favor of the Bank pursuant to that certain Commercial Security Agreement dated May 28, 1999. "Hotel Loan Collateral" means all property which is, or will become, subject to the liens, pledges and security interests of every kind granted by the Hotel Loan Collateral Documents. "Hotel Loan Collateral Documents" means those documents designated as such which are described in Schedule 2 attached hereto and made a part hereof. "Hotel Loan Obligations" shall have the meaning attributable to the term "Obligations" as defined in the Hotel Loan Agreement. "Hotel Loan Security Agreement" means that certain Commercial Security Agreement dated March 14, 1997, by the Tribe in favor of the Cottonport Bank with respect to the Hotel Loan. "Lakes Hotel Loan Subordination Agreements" means those certain Subordination Agreements dated as of February 15, 1999, executed by Lakes Gaming and Grand Casinos/Tunica Biloxi in favor of the Bank regarding the Hotel Loan. "Lien" means any interest in property securing an obligation owed to, or a claim by, a person other than the owner of the property, whether such interest is based on jurisprudence, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, leasehold mortgage, assignment of rents and leases, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. "Management Agreement" means that certain Amended and Restated Management & Construction Agreement between the Tribe and GCI dated November 1, 1991. "Net Foreclosure Proceeds" means the amount by which (a) the gross proceeds obtained by a creditor in a Foreclosure exceeds (b) all expenses incurred by the creditor in connection with such Foreclosure, including without limitation, all attorneys fees. "Operative Agreements" means the Equipment Loan Agreement, the Equipment Loan Collateral Documents, the Hotel Loan Agreement, the Hotel Loan Collateral Documents, the Lakes Hotel Loan Guaranty, the Management Agreement and the Grand Collateral Documents. "Post-Acceleration Payments" means any payments made by the Tribe after Acceleration for credit to the Hotel Loan Obligations or the Equipment Loan Obligations other than payments from Net Foreclosure Proceeds realized from Foreclosure upon the Casino Bank Accounts, upon the Hotel Loan Collateral, or upon the Equipment Loan Collateral. "Pro Rata Basis" means a fraction the numerator of which is the outstanding principal balance and accrued unpaid interest due under either the Hotel Loan or the Equipment Loan, as the case may be, and the denominator of which is the sum of the outstanding principal balances and accrued unpaid interest due under both the Hotel Loan and the Equipment Loan. INTERCREDITOR AGREEMENT -- PAGE 4 5 SECTION 2. RANK OF EQUIPMENT LIENS. The Hibernia Equipment Lien and the Cottonport Bank Equipment Lien shall be senior and prior to the Grand Equipment Liens irrespective of the time, order or method of attachment or perfection of any such Liens. SECTION 3. PRO RATA SHARING. Upon the earlier of Acceleration or Foreclosure, the parties shall apply the following, whether received by Hibernia, the Cottonport Bank, Lakes Gaming or Grand Casinos/Tunica Biloxi on a Pro Rata Basis to the Hotel Loan Obligations and to the Equipment Loan Obligations: (a) Net Foreclosure Proceeds received from the Foreclosure upon the Casino Bank Accounts, or any one of them; and (b) Post-Acceleration Payments. SECTION 4. FORECLOSURE UPON THE OTHER HOTEL LOAN COLLATERAL. In the event of Foreclosure upon the Hotel Loan Collateral (other than the Casino Bank Accounts), the Net Foreclosure Proceeds realized therefrom shall be applied to the following obligations in the following sequence and amounts: (a) To the Hotel Loan Obligations until paid in full; (b) To the Grand Obligations until paid in full; and (c) To the Equipment Loan Obligations until paid in full. SECTION 5. SUBROGATION RIGHTS. At such time, if any, that (a) the Cottonport Bank has made demand for payment upon Lakes Gaming and/or Grand Casinos/Tunica Biloxi under the Lakes Hotel Loan Guaranty and (b) after such demand, all obligations of Lakes Gaming and/or Grand Casinos/Tunica Biloxi under the Lakes Hotel Loan Guaranty have been fully satisfied, Lakes Gaming and/or Grand Casinos/Tunica Biloxi will thereafter be subrogated to the rights of the Cottonport Bank under the Lakes Hotel Loan Obligations and the Hotel Loan Collateral Documents in accordance with the terms of the Lakes Hotel Loan Guaranty and shall succeed to, and be entitled to exercise and receive, the rights and benefits under Sections 3 and 4 of this Agreement that the Cottonport Bank would otherwise be entitled to; provided however, neither Lakes Gaming and/or Grand Casinos/Tunica Biloxi shall have any rights under the Equipment Loan Collateral Documents except in accordance with the provisions of Section 6 of this Agreement. SECTION 6. FORECLOSURE UPON THE OTHER EQUIPMENT LOAN COLLATERAL. In the event of Foreclosure upon the Equipment Loan Collateral (other than the Casino Bank Accounts), the Net Foreclosure Proceeds realized therefrom shall not be applied toward the Hotel Loan Obligations or the Grand Obligations unless and until: (a) the Equipment Loan Obligations have been paid in full; (b) Acceleration by Hibernia of the Hotel Loan Obligations; and (c) Hibernia, in its sole discretion which may be withheld for any reason or for no reason, agrees to such an application. SECTION 7. EFFECT OF THIS AGREEMENT. 7.1 The foregoing provisions shall supersede any provisions to the contrary contained in the Operative Agreements. Except as expressly set forth hereinabove, this Intercreditor Agreement shall not alter, change or modify the terms of or the effects of the Operative Agreements. INTERCREDITOR AGREEMENT -- PAGE 5 6 7.2 This Agreement shall not be binding upon the parties hereto until such time as (a) the Bank, Lakes Gaming and/or Grand Casinos/Tunica Biloxi have signed this Agreement, (b) the Tribe has consented in writing to this Agreement, and (c) the Bureau of Indian Affairs has approved of such consent of the Tribe pursuant to 25 U.S.C. 81. SECTION 8. MISCELLANEOUS. 8.1 Notices. Except as otherwise provided herein, any notice or demand which, by provision of this Agreement, is required or permitted to be given or served by a party shall be deemed to have been sufficiently given and served for all purposes: (a) (if mailed) seven (7) calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail; or (b) (if delivered by express courier) one business day after being delivered to such courier; or (c) (if delivered in person) the same day as delivery or until another address or addresses are given in writing by a party to the other parties as follows: To Grand Casinos/Tunica Biloxi: Grand Casinos of Louisiana, LLC-Tunica-Biloxi 130 Chesire Lane Minnetonka, Minnesota 55305 Attention: Chief Financial Officer Fax: (612) 449-9353 To Lakes Gaming: Lakes Gaming, Inc. 130 Chesire Lane Minnetonka, Minnesota 55305 Attention: Chief Financial Officer Fax: (612) 449-9353 To Hibernia: Hibernia National Bank 333 Travis Street Shreveport, Louisiana 7110 Attention: Legal Administration Department Fax: (318) 674-3758 To Cottonport Bank: The Cottonport Bank 144 South Main Street Marksville, Louisiana 71351 Attention: President Fax: (318) 253-0276 8.2 Governing Law. This Agreement shall be construed in accordance with and governed the laws of the State of Louisiana. 8.3. Severability. If any provision of this Agreement is prohibited by, or is unlawful or unenforceable under, any applicable law of any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining provisions hereof. INTERCREDITOR AGREEMENT -- PAGE 6 7 8.4 Captions. Captions herein are for convenience only and shall not be deemed part of this Agreement. 8.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and assigns. 8.6 Amendments. This Agreement may not be amended, modified, waived, canceled or terminated, except in writing executed by all of the parties hereto. [The remainder of this page has been intentionally left blank] INTERCREDITOR AGREEMENT -- PAGE 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. HIBERNIA NATIONAL BANK By: s/ Christopher K. Haskew -------------------------------- Christopher K. Haskew, Vice President INTERCREDITOR AGREEMENT -- PAGE 8 9 GRAND CASINOS OF LOUISIANA, LLC - TUNICA-BILOXI By: s/ Timothy Cope ----------------------------------------- Timothy Cope, its Chief Financial Officer LAKES GAMING, INC. By: s/ Timothy Cope ----------------------------------------- Timothy Cope, its Chief Financial Officer THE COTTONPORT BANK By: s/ DeWayne Harper ----------------------------------------- Schedules Schedule 1 - Equipment Loan Collateral Documents Schedule 2 - Hotel Loan Collateral Documents Schedule 3 - Grand Collateral Documents INTERCREDITOR AGREEMENT -- PAGE 9 10 CONSENT The undersigned hereby acknowledges and agrees: (a) to the foregoing terms and provisions of the Intercreditor Agreement between the Cottonport Bank, Hibernia, Lakes Gaming and Grand Casinos/Tunica Biloxi; (b) to be bound by the provisions hereof as they relate to the relative rights of the Cottonport Bank, Hibernia, Lakes Gaming and Grand Casinos/Tunica Biloxi; and (c) that the terms of this Agreement shall not give either of the undersigned any substantive rights vis-a-vis the Cottonport Bank, Hibernia, Lakes Gaming and Grand Casinos/Tunica Biloxi, nor is either intended to be a third party beneficiary hereunder. If any of the Cottonport Bank, Hibernia, Lakes Gaming or Grand Casinos/Tunica Biloxi shall enforce its rights or remedies in violation of the terms of this Agreement, each of the undersigned further agrees that it shall not use such violation as a defense to enforcement by the Cottonport Bank, Hibernia, Lakes Gaming or Grand Casinos/Tunica Biloxi, as applicable, of that party's respective rights and/or remedies under any financing, development or other related agreements with either of the undersigned nor assert such violation as a defense, counterclaim or basis for set-off or recoupment against the Cottonport Bank, Hibernia, Lakes Gaming or Grand Casinos/Tunica Biloxi. Dated: May 28, 1999 TUNICA-BILOXI TRIBE OF LOUISIANA ------- By s/ Earl J. Barbry, Sr. ------------------------------------ Name: Earl J. Barbry, Sr. ----------------------- Title: Chairman ----------------------- BIA APPROVAL THE FOREGOING DOCUMENT IS APPROVED PURSUANT TO 25 U.S.C. 81: UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF INDIAN AFFAIRS: BY_______________________________________ AREA DIRECTOR OF THE EASTERN AREA OFFICE OF THE BUREAU OF INDIAN AFFAIRS OF THE SECRETARY OF THE INTERIOR AND THE COMMISSIONER OF INDIAN AFFAIRS, ACTING UNDER DELEGATED AUTHORITY. SCHEDULES ATTACHED TO INTERCREDITOR AGREEMENT SCHEDULE 1 -- EQUIPMENT LOAN COLLATERAL DOCUMENTS 1.1 That certain Dominion Account Agreement dated effective May 28, 1999, executed by the Tribe, Lakes Gaming, Grand Casinos/Tunica Biloxi, Cottonport Bank and the Bank. 11 1.2 That certain Commercial Security Agreement dated May 28, 1999, executed by the Tribe in favor of the Bank. 1.2 Financing Statement(s) executed by the Tribe in favor of the Bank regarding the grant of security interests in the Collateral referred to in the aforesaid Dominion Account Agreement and Commercial Security Agreement, including, without limitation, security interest in Cash, the Casino Bank Accounts and Equipment purchased with Advances made pursuant to the Equipment Loan. SCHEDULE 2 -- HOTEL LOAN COLLATERAL DOCUMENTS 2.1 That certain Commercial Security Agreement dated March 14, 1997, executed by the Tribe and the Cottonport Bank granting in favor of the Cottonport Bank a security interest in the Casino Bank Accounts, all funds deposited by the Tribe with the Cottonport Bank and in certain equipment consisting of approximately 360 slot machines. 2.2 That certain Non-Standard Financing Statement dated March 19, 1997, executed by the Tribe in favor of the Cottonport Bank with respect to the grant of a security interest in the Casino Bank Accounts, all funds deposited by the Tribe with the Cottonport Bank and in certain equipment consisting of approximately 360 slot machines which financing statement was filed on April 22, 1997, under Original File No. 97-0978 of the Records of Avoyelles Parish. 2.3 That certain instrument entitled "An Agreement Pertaining to the Transfer or Encumbrance of Property" executed by the Tribe in favor of the Cottonport Bank which instrument was filed on April 22, 1999, in Conveyance Book 437 and Mortgage Book 431 of the Records of Avoyelles Parish. SCHEDULE 3 - GRAND COLLATERAL DOCUMENTS 3.1 That certain Amended and Restated Management & Construction Agreement between the Tribe and GCI dated November 1, 1991. 3.2 That certain Security Agreement dated as of November 1, 1991, by the Tribe in favor of GCI and later assigned by GCI to Grand Casinos/Tunica Biloxi, together with the Financing Statements executed by the Tribe in favor of GCI which Financing Statement was recorded under File No. 05-920792 on April 7, 1992, and under File No. 05-941890, on September 26, 1994, in the Records of Avoyelles Parish, Louisiana. INTERCREDITOR AGREEMENT -- PAGE 11 EX-10.5 6 COMMERCIAL SECURITY AGREEMENT 1 Exhibit 10.5 COMMERCIAL SECURITY AGREEMENT Borrower: Tunica-Biloxi Tribe of Louisiana Lender: Hibernia National Bank 711 Grand Blvd. 333 Travis Street Marksville, LA 71352 Shreveport, LA. 71101 THIS COMMERCIAL SECURITY AGREEMENT is entered into between the Tunica- Biloxi Tribe of Louisiana (referred to below as "Grantor") and Hibernia National Bank (referred to below as "Lender"). For valuable consideration, Grantor hereby pledges to Lender and grants to Lender a continuing security interest in the Collateral to secure Grantor's present and future Indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law or otherwise. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Louisiana Commercial Laws (La. R.S. 10: 9-101, et seq.) and in the Loan Agreement. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modified from time to time, together with all exhibits and schedules attached or to be attached to this Commercial Security Agreement from time to time. CASINO BANK ACCOUNTS. The words "Casino Bank Accounts" means all of the bank accounts specified or contemplated in Section 5.10 of the Management Contract, all of which shall be maintained with the Cottonport Bank. COLLATERAL. The word "Collateral" means individually, collectively and interchangeably any and all of Grantor's present and future rights, title and interest in and to the following described property, together with any and all present and future additions thereto, substitutions therefor, and replacements thereof: ALL CASINO BANK ACCOUNTS MAINTAINED BY OR ON BEHALF OF GRANTOR WITH THE COTTONPORT BANK AND RELATED FUNDS DEPOSITED BY, OR ON BEHALF OF, THE GRANTOR WITH THE COTTONPORT BANK; AND ALL OTHER EQUIPMENT AND MACHINERY PURCHASED BY GRANTOR WITH FUNDS ADVANCED BY LENDER TO GRANTOR OR ON BEHALF OF GRANTOR (THE "EQUIPMENT"). The Collateral also includes any related equipment wherever located, and any and all additions thereto and substitutions or replacements therefor, and all accessories, attachments, and accessions thereto, whether added now or later, and all products and proceeds derived or to be derived therefrom, including 2 without limitation all insurance proceeds and refunds of insurance premiums, if any, and all sums that may be due from third parties who may cause damage to any of the foregoing, or from any insurer, whether due to judgment, settlement, or other process, and any and all present and future accounts, contract rights, chattel paper, instruments, documents, and notes that may be derived from the sale, lease or other disposition of any of the forgoing, and any rights of Grantor to collect or enforce payment thereof, as well as to enforce any guarantees of the forgoing and security therefor, and all of Grantor's present and future general intangibles related or pertaining to the ownership, operation, use or collection of any of the foregoing, including without limitation Grantor's books, records, files, computer disks and software, and all rights that Grantor may have with regard thereto. The word "Collateral" also includes any and all present or future parts, accessories, attachments, additions, accessions, substitutions and replacements to and for the collateral. The word "Collateral" further includes any and all of Grantor's present and future rights to any proceeds derived or to be derived from the sale, lease, damage, destruction, insurance loss, expropriation and other disposition of the Collateral, including without limitation, any and all of Grantor's rights to enforce collection and payment of such proceeds. "COTTONPORT BANK" means the Cottonport Bank of Marksville, Louisiana. ENCUMBRANCES. The word "Encumbrances" means individually, collectively and interchangeably any and all presently existing and/or future mortgages, liens, privileges and other contractual and/or statutory security interests and rights of every nature and kind that, now and/or in the future, may affect the Collateral or any part or parts thereof. EVENT OF DEFAULT. The words "Event of Default" mean individually, collectively, and interchangeably any Event of Default as defined in the Loan Agreement. GRANTOR. The word "Grantor" means Tunica-Biloxi Tribe of Louisiana, its successors and assigns. INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the Note, in principal, interest, costs, expenses and attorneys' fees and all other fees and charges, together with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" also includes any and all other loans, extensions of credit, obligations, debts, plus interest thereon, of Grantor, or any one or more of them, that may now and in the future be owed to or incurred in favor of Lender, as well as all claims by Lender against Grantor, or any one or more of them, whether existing now or later; whether they are voluntary or involuntary, whether related or unrelated, whether committed or purely discretionary, due or to become due, direct or indirect or by way of assignment, determined or undetermined, absolute or contingent, liquidated or unliquidated; whether Grantor may be liable individually or jointly with others, of every nature and kind whatsoever, in principal, interest, costs, expenses and attorneys' fees and all other fees and charges; and whether Grantor may be obligated as guarantor, surety, accommodation party or otherwise. LENDER. The word "Lender" means Hibernia National Bank, its successors and assigns, and any subsequent holder or holders of the Note, or any interest therein. LOAN AGREEMENT. The word "Loan Agreement" means that certain Equipment Loan Agreement 3 dated May 28, 1999, between Grantor and Lender. MANAGEMENT CONTRACT. The words "Management Contract" means that certain Amended and Restated Management & Construction Agreement dated November 1, 1991, between the Grantor and Grand Casinos/ Louisiana. NOTE. The word "Note" means that certain promissory note dated May 28, 1999, in the principal amount of Six Million and No/100 Dollars ($6,000,000.00) executed by Grantor in favor of Lender, together with all substitute or replacement notes therefor, as well as all renewals, extensions, modifications, refinancings, consolidations and substitutions of and for such a note. RELATED DOCUMENTS. The words "Related Documents" mean and include individually, collectively, interchangeably and without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, collateral mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. CONTINUING SECURITY INTEREST TO SECURE PRESENT AND FUTURE INDEBTEDNESS. Grantor affirms that Grantor has granted a continuing security interest in the Collateral in favor of Lender to secure any and all Indebtedness of Grantor in favor of Lender, as may be outstanding from time to time set forth above, in principal, interest, costs, expenses, attorneys' fees and other fees and charges, with the continuing preferences and priorities provided under applicable Louisiana law. DURATION OF THIS AGREEMENT. This Agreement shall remain in full force and effect until such time as this Agreement and the security interests created hereby are terminated and canceled by Lender under a written cancellation instrument in favor of Grantor. OBLIGATIONS OF GRANTOR. In addition to all of Grantor's agreements and representations contained in the Loan Agreement, Grantor represents, warrants and covenants to Lender as follows: PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Lender may at any time, and without further authorization from Grantor, file a carbon, photographic, facsimile, or other reproduction of any financing statement. Grantor will reimburse Lender for all reasonable expenses for the perfection, termination, and the continuation of the perfection of Lender's security interest in the Collateral. Grantor promptly will notify Lender before any change in Grantor's name including any change to the assumed business names of Grantor. Grantor also promptly will notify Lender of any change in Grantor's Employer Identification Number. Grantor further agrees to notify Lender in writing prior to any change in address or location of Grantor's principal governance office. Grantor represents and warrants to Lender that Grantor has provided Lender with Grantor's correct Employer Identification Number and that Grantor has no other Employer Identification Numbers. Grantor promptly shall notify Lender should Grantor apply for or obtain a new Employer Identification Number or should Grantor merge or consolidate with any other 4 entity. NO VIOLATION. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its tribal governance documents do not prohibit any term or condition of this Agreement. ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts, chattel paper, or general intangibles, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with applicable state and federal laws and regulations concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral, free of any offset, compensation, deduction or counterclaim. LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor's Business including, without limitation, all properties where the Collateral is or may be located. Except in the ordinary course of its business, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts, the records concerning the Collateral) at Grantor's address shown above, or at such other locations as are acceptable to Lender. Except in the ordinary course of its business, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. TRANSACTIONS INVOLVING COLLATERAL. Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any Encumbrance or charge, other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. TITLE, AUTHORITY, BINDING EFFECT. Grantor represents and warrants to Lender that it holds good and marketable title to the Collateral, free and clear of all Encumbrances except for Lender's security interest and except for security interests granted to Grand Casinos of Louisiana, LLC--Tunica-Biloxi which have been subordinated to the security interests granted under this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor further represents and warrants that it has requisite authority to enter into this Agreement in favor of Lender and to grant to Lender the security interest in the Collateral as provided herein. Grantor additionally represents and warrants that this Agreement is binding upon Grantor as well as Grantor's heirs, successors, transferees and assigns, and is legally enforceable in accordance with its terms. The foregoing representations and warranties and all other representations and warranties of Grantor under 5 this Agreement shall be continuing and shall survive the termination of this Agreement. COLLATERAL SCHEDULES AND LOCATIONS. Grantor shall deliver to Lender, as often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require to identify the nature, extent, and location of such Collateral. Such information shall be submitted for Grantor and each of its subsidiaries or related companies. REPAIRS AND MAINTENANCE. Grantor shall keep and maintain and shall cause others to keep and maintain the Collateral in good order, repair and merchantable condition. Grantor shall further make and/or cause all necessary repairs to be made to the Collateral, including the repair and restoration of any portion of the Collateral that may be damaged, lost or destroyed. In addition, Grantor shall not, without the prior written consent of Lender, make or permit to be made any alterations to any of the Collateral that may reduce or impair the Collateral's use, value or marketability. Furthermore, Grantor shall not, nor shall Grantor permit others to abandon, commit waste, or destroy the Collateral or any part or parts thereof. TAXES. Grantor shall promptly pay or cause to be paid when due, all taxes, local and special assessments, and governmental and other charges of every type and description, that may from time to time be imposed, assessed and levied against the Collateral or against Grantor. Grantor further agrees to furnish Lender upon request with evidence that such taxes, assessments, and governmental and other charges have been paid in full and in a timely manner. Grantor may withhold any such payment or elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with, and shall cause others to comply with, all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, is not jeopardized. Grantor shall not use the Collateral, and shall not permit others to use the Collateral, for any purpose other than those previously agreed to by Lender in writing; but in no event shall any of the Collateral be used in any manner that would damage, depreciate or diminish its value or that may result in cancellation or termination of insurance coverage. Grantor additionally agrees not to do or suffer to be done anything that may increase the risk of fire or other hazards to the Collateral. PRIOR ENCUMBRANCES. To the extent applicable, Grantor shall fully and timely perform any and all of its obligations under any prior Encumbrances affecting the Collateral. Without limiting the foregoing, Grantor shall not commit or permit to exist any breach of or default under any such prior Encumbrances. Grantor shall further promptly notify Lender in writing upon the occurrence of any event or circumstances that would, result in a breach of or default under any such prior Encumbrance. Grantor shall further not modify or extend any of the terms of any prior Encumbrance or any indebtedness secured thereby, or request or obtain any additional loans or other extensions of credit from any third party creditor or creditors whenever such additional loan advances or other extensions of credit may be directly or indirectly secured, whether by cross-collateralization or otherwise, by the Collateral, or any part or parts thereof, with possible preference and priority over Lender's security interest. Grantor additionally agrees to obtain, upon request by Lender, and in form and substance as may then be 6 satisfactory to Lender, appropriate waivers and/or subordinations of any lessor's liens or privileges, vendor's liens or privileges, purchase money security interests, and any other Encumbrances that may affect the Collateral at any time. FUTURE ENCUMBRANCES. Grantor shall not, without the prior written consent of Lender, grant any Encumbrance that may affect the Collateral, or any part or parts thereof, nor shall Grantor permit or consent to any Encumbrance attaching to or being filed against any of the Collateral in favor of anyone other than Lender. Grantor shall further promptly pay when due all statements and charges of mechanics, materialmen, laborers and others incurred in connection with the alteration, improvement, repair and maintenance of the Collateral, or otherwise furnish appropriate security or bond, so that no future Encumbrance may attach to or be filed against any Collateral. Grantor additionally agrees to obtain, upon request by Lender, and in form and substance as may then be satisfactory to Lender, appropriate waivers and/or subordinations of any lessor's liens or privileges, vendor's liens or privileges, purchase money security interests, and any other Encumbrances that may affect the Collateral at any time. NOTICE OF ENCUMBRANCES. Grantor shall immediately notify Lender in writing upon the filing of any attachment, lien, judicial process, claim, or other Encumbrance. Grantor additionally agrees to notify Lender immediately in writing upon the occurrence of any default, or event that with the passage of time, failure to cure, or giving of notice, might result in a default under any of Grantor's obligations that may be secured by any presently existing or future Encumbrance, or that might result in an Encumbrance affecting the Collateral, or should any of the Collateral be seized or attached or levied upon, or threatened by seizure or attachment or levy, by any person other than Lender. GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's discretion, shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness. EXPENDITURES BY LENDER. Grantor recognizes and agrees that Lender may incur certain expenses in connection with Lender's exercise of rights under this Agreement. If not discharged or paid when due, Lender may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Grantor under this Agreement, including without limitation all taxes, Encumbrances and other claims, at any time levied or placed on the Collateral. Lender also may (but shall not be obligated to) pay all reasonable costs for insuring, maintaining and preserving the Collateral, including without limitation, the purchase of insurance protecting only Lender's interest in the Collateral. Lender may further take such other action or actions and incur such additional expenditures as Lender may deem to be reasonably necessary and proper to cure or rectify any actions or inactions on Grantor's part as may be required under this Agreement. Nothing under this Agreement or otherwise shall obligate 7 Lender to take any such actions or to incur any such additional expenditures on Grantor's behalf, or as making Lender in any way responsible or liable for any loss, damage, or injury to the Collateral, to Grantor, or to any other person or persons, resulting from Lender's election not to take such actions or to incur such additional expenses. In addition, Lender's election to take any such actions or to incur such additional expenditures shall not constitute a waiver or forbearance by Lender of any Event of Default under this Agreement. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment. All such expenses shall become a part of the Indebtedness and, at Lender's option, will (a) be payable on demand, (b) be added to the balance of the Note and be apportioned among and be payable with any payments to become due during either (i) the term of any applicable insurance policy or (ii) the remaining term of the Note, or (c) be treated as a balloon payment which will be due and payable at the Note's maturity. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the occurrence of an Event of Default. EVENTS OF DEFAULT. The occurrence of an Event of Default, as defined in the Loan Agreement, shall constitute an Event of Default under this Agreement. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under applicable law, and including, at Lender's sole election, Louisiana Commercial Laws (La. R.S. 10: 9-101 et seq.) or those under the laws and resolutions adopted by the Grantor. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies: ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, immediately due and payable, without notice or further demand for payment. SEIZURE AND SALE OF COLLATERAL IN LOUISIANA. In the event that Lender elects to commence appropriate foreclosure proceedings under this Agreement in a Louisiana state court, Lender may cause the Collateral, or any part or parts thereof, to be immediately seized wherever found, and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying Grantor or placing Grantor in default, all of which are expressly waived. CONFESSION OF JUDGMENT. For purposes of foreclosure under Louisiana executory process procedures, Grantor confesses judgment and acknowledges to be indebted unto and in favor of Lender, up to the full amount of the Indebtedness, in principal, interest, costs, expenses, attorneys' fees and other fees and charges. Grantor further confesses judgment and acknowledges to be indebted unto and in favor of Lender in the amount of all additional advances that Lender may make on Grantor's behalf pursuant to this Agreement, together with interest thereon, up to a maximum of two (2) times the face amount of the aforesaid Note. To the extent permitted under applicable Louisiana law, Grantor additionally waives: (a) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (b) the demand and three (3) days' delay as provided under Articles 2639 and 2721 of the Louisiana Code of Civil Procedure; (c) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; 8 (d) the three (3) days' delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. KEEPER. Should any or all of the Collateral be seized as an incident to an action for the recognition or enforcement of this Agreement, by executory process, sequestration, attachment, writ of fieri facias or otherwise, Grantor hereby agrees that the court issuing any such order shall, if requested by Lender, appoint Lender, or any agent designated by Lender, or any person or entity named by Lender at the time such seizure is requested, or any time thereafter, as Keeper of the Collateral as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. Grantor agrees to pay the reasonable fees of such Keeper, which are hereby fixed at $500.00 per day, which compensation to the Keeper shall also be secured by this Agreement in the form of an additional advance as provided herein. DECLARATION OF FACT. Should it become necessary for Lender to foreclose under this Agreement, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, as applicable. DELIVER COLLATERAL. This provision applies, to the extent applicable, if and when the Collateral for any reason is located outside the State of Louisiana following the occurrence of any Event of Default, or should there be a subsequent change in Louisiana law permitting such remedies. Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession. PUBLIC OR PRIVATE SALE OF COLLATERAL. To the extent that any of the Collateral is then in Lender's possession, Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in its own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made. The requirements of reasonable notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All reasonable expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. Grantor agrees that any such sale shall be conclusively deemed to be conducted in a commercially reasonable manner if it is made consistent with the standard of similar sales of collateral by commercial banks in Marksville, Louisiana. APPOINT RECEIVER. This provision applies if and when the Collateral for any reason is located 9 outside the State of Louisiana following the occurrence of any Event of Default, or should Louisiana law change or be interpreted to permit such a remedy or should the laws or resolutions of the Grantor permit such a remedy. Lender shall have the following rights and remedies regarding the appointment of a receiver: (a) Lender may have a receiver appointed as a matter of right, (b) the receiver may be an employee of Lender and may serve without bond, and (c) all fees of the receiver and his or her attorney shall become part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. COLLECT REVENUES, APPLY ACCOUNTS. Lender shall have the right, at its sole option and election, at any time, if one or more Events of Default then exist under this Agreement, to directly collect and receive all proceeds and/or payments arising under or in any way accruing from the Collateral, as such amounts become due and payable. In order to permit the foregoing, Grantor unconditionally agrees to deliver to Lender, immediately following demand, any and all of Grantor's records, ledger sheets, and other documentation, in the form requested by Lender, with regard to the Collateral and any and all proceeds and/or payments applicable thereto. Lender shall have the further right, if an Event of Default then exists under this Agreement, where appropriate and within Lender's sole discretion, to file suit, either in Lender's own name or in the name of Grantor, to collect any and all proceeds and payments that may then and/or in the future be due and owing under this Agreement, and if as a result of such it is necessary for Lender to attempt to collect any such proceeds and/or payments from the obligors therefor, Lender may compromise, settle, extend, or renew for any period (whether or not longer than the original period) any obligation or indebtedness thereunder or evidenced thereby, or surrender, release, or exchange all or any part of said obligation or indebtedness, without affecting the liability of Grantor under this Agreement or under the Indebtedness. To that end, Grantor hereby irrevocably constitutes and appoints Lender as its attorney-in-fact, coupled with an interest and with full power of substitution, to take any and all such actions and any and all other actions permitted hereby, either in the name of Grantor or Lender. ADDITIONAL EXPENSES. In the event that it should become necessary for Lender to conduct a search for any of the Collateral in connection with any foreclosure action, or should it be necessary to remove the Collateral, or any part or parts thereof, from the premises in which or on which the Collateral is then located, and/or to store and/or refurbish such Collateral, Grantor agrees to reimburse Lender for the cost of conducting such a search and/or removing and/or storing and/or refurbishing such Collateral, which additional expense shall also be secured by the lien of this Agreement. SPECIFIC PERFORMANCE. Lender may, in addition to the foregoing remedies, or in lieu thereof, in Lender's sole discretion, commence an appropriate action against Grantor seeking specific performance of any covenant contained herein, or in aid of the execution or enforcement of any power herein granted. OBTAIN DEFICIENCY. Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement and any Related Document. OTHER RIGHTS AND REMEDIES. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise. CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by this 10 Agreement or the Related Documents or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and to exercise its remedies. ASSIGNMENT OF INDEBTEDNESS. Grantor hereby recognizes and agrees that Lender may, subject to the terms of the Loan Agreement, assign all or any portion of the Indebtedness to one or more third party creditors. Such transfers may include, but are not limited to, sales of participation interests in the Indebtedness. Grantor specifically agrees and consents to all such transfers and assignments. Grantor additionally agrees that any and all of the Indebtedness in favor of such a third party assignee, for the limited purposes set forth above, will be secured by the Collateral. PROTECTION OF LENDER'S SECURITY RIGHTS. Grantor will be fully responsible for any losses that Lender may suffer as a result of anyone other than Lender, its successors or assigns, asserting any rights or interest in or to the Collateral. Subject thereto, Grantor agrees to appear in and to defend all actions or proceedings purporting to affect Lender's security interests in any of the Collateral subject to this Agreement and any of the rights and powers granted Lender hereunder. In the event that Grantor fails to do what is required of it under this Agreement, or if any action or proceeding is commenced naming Lender as a party or affecting Lender's security interests or the rights and powers granted under this Agreement, then Lender may, without releasing Grantor from any of its obligations under this Agreement, take all reasonable steps to protect the security of this Agreement, including without limitation making additional advances on Grantor's behalf as provided herein. INDEMNIFICATION OF LENDER. Grantor agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations, damages, losses, costs, expenses (including without limitation Lender's attorneys' fees), demands, liabilities, penalties, fines and forfeitures of any nature whatsoever that may be asserted against or incurred by Lender arising out of or in any manner occasioned by this Agreement and the exercise of the rights and remedies granted Lender hereunder, except for those which result from lender's negligence, gross negligence or intentional acts or omissions. The foregoing indemnity provisions shall survive the termination of this Agreement as to all matters arising or accruing prior to such termination, and the foregoing indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following default hereunder. EXECUTION OF ADDITIONAL DOCUMENTS. Grantor agrees to execute all additional documents, instruments and agreements that are necessary and proper, in form and substance satisfactory to Lender, to keep this Agreement in effect, to better reflect the true intent of this Agreement, and to consummate fully all of the transactions contemplated hereby and by any other agreement, instrument or document heretofore, executed by Grantor and delivered to Lender. INSPECTION; AUDITS. Lender and its agents may periodically enter upon Grantor's premises at reasonable hours and inspect the Collateral. Lender and its agents may also periodically conduct audits of the Collateral and may further inspect and audit Grantor's books and records that in any way pertain to the Collateral and any part or parts thereof. 11 APPLICATION OF PAYMENTS. Grantor agrees that all payments and other sums and amounts received by Lender under the Indebtedness or under this Agreement, shall be applied: first, to reimburse Lender for its costs of collecting the same (including but not limited to, reimbursement of Lender's reasonable attorneys' fees); second, to the repayment of interest on all additional advances that Lender may have made on Grantor's behalf pursuant to this Agreement; third, to the payment of principal of all such additional advances; and finally, to the payment of principal and interest on the Indebtedness then outstanding, which may be applied in such order and priority as Lender may determine within its sole discretion. TAXATION. In the event that there should be any change in law with regard to taxation of security agreements or the debts they secure, Grantor agrees to pay any taxes, assessments or charges that may be imposed upon Lender as a result of this Agreement. EFFECT OF WAIVERS. Grantor has waived, and/or does by these presents waive, presentment for payment, protest, notice of protest and notice of nonpayment under all of the Indebtedness secured by this Agreement. Grantor has further waived, and/or does by these presents waive, all pleas of division and discussion, and all similar rights with regard to the Indebtedness, and agrees that Grantor shall remain liable, together with any and all Guarantors, on a "solidary" or "joint and several" basis. Grantor further agrees that discharge or release of any party who is, may, or will be liable to Lender under any of the Indebtedness, or the release of the Collateral or any other collateral directly or indirectly securing repayment of the same, shall not have the effect of releasing or otherwise diminishing or reducing the actual or potential liability of Grantor and/or any other party or parties guaranteeing payment of the Indebtedness, who shall remain liable to Lender, and/or of releasing any Collateral or other collateral that is not expressly released by Lender. Grantor additionally agrees that Lender's acceptance of payments other than in accordance with the terms of any agreement or agreements governing repayment of the Indebtedness, or Lender's subsequent agreement to extend or modify such repayment terms, shall likewise not have the effect of releasing any party or parties from their respective obligations to Lender, and/or of releasing any of the Collateral or other collateral directly or indirectly securing repayment of the Indebtedness. In addition, no course of dealing between Grantor and Lender, nor any failure or delay on the part of Lender to exercise any of the rights and remedies granted to Lender under this Agreement, or under any other agreement or agreements by and between Grantor and Lender, shall have the effect of waiving any of Lender's rights and remedies. Any partial exercise of any rights and remedies granted to Lender shall furthermore not constitute a waiver of any of Lender's other rights and remedies, it being Grantor's intent and agreement that Lender's rights and remedies shall be cumulative in nature. Grantor further agrees that, upon the occurrence of any Event of Default under this Agreement, any waiver or forbearance on the part of Lender to pursue the rights and remedies available to Lender, shall be binding upon Lender only to the extent that Lender specifically agrees to any such waiver or forbearance in writing. A waiver or forbearance as to one Event of Default shall not constitute a waiver or forbearance as to any other Event of Default. None of the warranties, conditions, provisions and terms contained in this Agreement or any other agreement, document, or instrument now or hereafter executed by Grantor and delivered to Lender, shall be deemed to have been waived by any act or knowledge of Lender, its agents, officers or employees; but only by an instrument in writing specifying such waiver, signed by a duly authorized officer of Lender and delivered to Grantor. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: 12 AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF LOUISIANA. LENDER AND GRANTOR HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR GRANTOR AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA. ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's reasonable costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. NOTICES. To give Grantor any notice required under this Agreement, Lender may hand deliver or mail such notice to Grantor. Lender will deliver or mail any notice to Grantor at any address which Grantor may have given Lender by written notice as provided in this paragraph. To give Lender any notice under this Agreement, Grantor shall mail the notice to Lender by registered or certified mail at the address specified in this Agreement, or at any other address that Lender may have given to Grantor by written notice as provided in this paragraph. All notices required or permitted under this Agreement must be in writing and will be considered as given on the day it is delivered by hand or deposited in the U.S. Mail, by registered or certified mail to the address specified in this Agreement. POWER OF ATTORNEY. Grantor hereby appoints Lender, effective upon an Event of Default, as its true and lawful attorney-in-fact, irrevocably, with full power of substitution to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing or payable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or in the name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable. This power is given as security for the Indebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until the Event of Default is cured. SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be 13 invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SOLE DISCRETION OF LENDER. Whenever Lender's consent or approval is required under this Agreement, the decision as to whether or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender's decision shall be final and conclusive. SUCCESSORS AND ASSIGNS BOUND; SOLIDARY LIABILITY. Grantor's obligations and agreements under this Agreement shall be binding upon Grantor's successors and assigns. LIMITED WAIVER OF SOVEREIGN IMMUNITY; CONSENT TO JURISDICTION. This Agreement constitutes a Loan Document as defined in the Loan Agreement. As such and without limiting the scope of the Loan Agreement, the provisions of Section 15.10 of the Loan Agreement apply to this Agreement and are incorporated herein by reference. COMPLIANCE WITH 25 U.S.C. ss.81. In compliance with 25 U.S.C. ss.81 the residence and occupation of the parties is stated as follows: Party in interest: TUNICA-BILOXI TRIBE OF LOUISIANA Residence: 711 Grand Boulevard Marksville, LA 71352 Occupation: A federally recognized Indian Tribe Party in interest: HIBERNIA NATIONAL BANK Residence: 333 Travis Street Shreveport, LA 71101 Occupation: Commercial bank Scope of Authority: The Grantor is authorized to execute the within document by a resolution adopted by the Tribal Council of the Grantor at a meeting at Marksville, Louisiana, on April 19, 1999. The Tribal Council exercises its authority in this instance because it believes the purchase of the Equipment related to its Class III gaming facility in Marksville, Louisiana, and the financing thereof to be in accordance with the long-range economic objectives of the Tribe. This document was executed on behalf of the Grantor on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana, and on behalf of the Lendor on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana. This instrument shall terminate upon payment in full of the indebtedness, provided that in any event this instrument shall expire not later than 50 years from the date hereof. 14 GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 28, 1999. GRANTOR: TUNICA-BILOXI TRIBE OF LOUISIANA BY: s/ Earl J. Barbry, Sr. ---------------------------------------------------------- EARL J. BARBRY, SR., CHAIRMAN LENDER: HIBERNIA NATIONAL BANK BY: s/ Christopher Haskew ---------------------------------------------------------- CHRISTOPHER HASKEW, ITS VICE PRESIDENT BIA APPROVAL ------------ THE FOREGOING DOCUMENT IS APPROVED PURSUANT TO 25 U.S.C. 81: UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF INDIAN AFFAIRS: By ----------------------------------------------------------- Area Director of the Eastern Area Office of the Bureau of Indian Affairs of the Secretary of the Interior and the Commissioner of Indian Affairs, acting under delegated authority. EX-10.6 7 SUBORDINATION AGREEMENT 1 EXHIBIT 10.6 ================================================================================ SUBORDINATION AGREEMENT GRANTED BY GRAND CASINOS OF LOUISIANA, LLC - TUNICA-BILOXI IN FAVOR OF HIBERNIA NATIONAL BANK ================================================================================ This Subordination Agreement (the "Agreement") is entered into as of May 28, 1999, by: GRAND CASINOS OF LOUISIANA, LLC-TUNICA-BILOXI (hereinafter referred to as "Grand Casinos-TB"), a Minnesota limited liability company, whose permanent mailing address is 130 Chesire Lane, Minnetonka, Minnesota, 55305, represented herein by Timothy Cope, its duly authorized Chief Financial Officer. Grand Casinos-TB hereby represents, covenants and agrees as follows: 1. As used herein, the term "Subordinated Claims" shall mean all debts, liabilities and obligations of the Tunica-Biloxi Tribe of Louisiana (hereinafter referred to as the "Tribe"), a federally recognized Indian tribe, to Grand Casinos-TB, whether such debts, liabilities and obligations now exist or are hereafter incurred or arise, or whether the obligation of the Tribe thereon be direct, contingent, primary, secondary, joint and several, or otherwise, and irrespective of whether such debts, liabilities or obligations are evidenced by note, contract, open account or otherwise, and irrespective of the person or entity in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Grand Casinos-TB. Without limiting the foregoing, the term Subordinated Claims includes the following existing debts, liabilities and obligations owed by the Tribe to Grand Casinos-TB under: (a) That certain Amended and Restated Management and Construction Agreement (herein referred to as the "Management Agreement") dated November 1, 1991, between the Tribe and Grand Casinos-TB, as successor to Grand Casinos of Louisiana, Inc.- Tunica-Biloxi (hereinafter referred to as "GCL, Inc."), a Minnesota corporation, pursuant to that certain assignment dated December 31, 1998, executed by GCL, Inc. in favor of Grand Casinos-Tunica Biloxi; and (b) That certain Amended and Restated Tunica-Biloxi Tribe of Louisiana Security Agreement (herein referred to as the "Grand Casinos-Tunica Biloxi Security Agreement") dated November 1, 1991, between the Tribe, as the debtor, and Grand-Casinos-TB, as the secured party, as successor to GCL, Inc., pursuant to that certain assignment dated December 31, 1998, executed by GCL, Inc., in favor of Grand Casinos-Tunica Biloxi; and (c) That certain UCC-1 Financing Statement executed by the Tribe, as the debtor, in favor of Grand Casinos-TB, as the secured party, as successor to GCL, Inc., filed on April 7, 1992, in the public records of Avoyelles Parish, Louisiana, under Original File No. 05-920792, and as continued by Continuation Statement filed in SUBORDINATION AGREEMENT--1 2 the public records of Avoyelles Parish, Louisiana, under File No. 05-970190 (herein referred to as the "Grand Casino-TB Financing Statement") [Grand Casinos-Tunica Biloxi succeeded to the interests of GCL, Inc., pursuant to that certain assignment dated December 31, 1998, executed by GCL, Inc., in favor of Grand Casinos-Tunica Biloxi which is reflected by that certain assignment filed under Original File No. 05- 990635 of the Records of Avoyelles Parish, Louisiana]; (herein collectively referred to as the "Existing Subordinated Claims"). 2. For and in consideration of the Hibernia Indebtedness (herein defined) under the Hibernia Documents (herein defined), and in order to induce the Hibernia National Bank ("Hibernia Bank"), acting in its discretion in each instance, to make loans or otherwise to give, grant or extend credit at any time or times to the Tribe under the Hibernia Documents, Grand Casinos-TB hereby agrees, subject to the terms of that certain Intercreditor Agreement dated May 28, 1999, between Hibernia Bank, Lakes Gaming, inc., and Grand Casinos-TB, as follows: (a) To subordinate, and does hereby subordinate, the payment by the Tribe of the Subordinated Claims, together with any and all interest accrued or to accrue thereon, to the payment to Hibernia Bank of any and all debts, liabilities and obligations for which the Tribe may now or hereafter be under obligation to Hibernia Bank (the "Hibernia Indebtedness"), under: (i) that certain Equipment Loan Agreement dated May 28, 1999, between Hibernia Bank, as lender, and the Tribe, as borrower (herein referred to as the "Loan Agreement"); (ii) that certain Promissory Note dated May 28, 1999, executed by the Tribe in favor of Hibernia Bank in the original principal sum of $6,000,000.00 (herein referred to as the "Note"); (iii) that certain Commercial Security Agreement dated May 28, 1999, executed by the Tribe, as debtor, in favor of Hibernia Bank, as secured party, which agreement covers certain equipment and machinery more fully described therein (the "Hibernia Security Agreement"); (iv) that certain Dominion Account Agreement dated May 28, 1999, executed by the Tribe, The Cottonport Bank, Hibernia Bank, Lakes Gaming and Grand Casinos of Louisiana L.L.C. --Tunica-Biloxi (the "Hibernia Dominion Account Agreement"); and (v) that certain Non Standard Financing Statement(s) executed by the Tribe, as the debtor, in favor of the Hibernia Bank, as the secured party, regarding the Collateral (as defined in the Hibernia Security Agreement) which instrument has or soon will be recorded in the public records of Avoyelles Parish, Louisiana, (the Loan Agreement, Note, Hibernia Security Agreement, Hibernia Dominion Account Agreement and Hibernia SUBORDINATION AGREEMENT--2 3 Financing Statement are sometimes collectively referred to as the "Hibernia Documents"). (whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligation of the Tribe thereon be direct, contingent, primary, secondary, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account or otherwise). (b) Not to ask, demand, sue for, take or receive all or any part of the Subordinated Claims, or any interest thereon, unless or until that portion of the Hibernia Indebtedness then due shall have been fully paid and discharged; provided however, unless and until Hibernia Bank notifies Grand Casinos-TB at the address noted above that an Event of Default has occurred under the terms of the Loan Agreement, Grand Casinos-TB may continue to receive scheduled payments from the Tribe under the Existing Subordinated Claims; (c) That, if any payment(s) is (are) made on account of the Subordinated Claims contrary to the terms of this Agreement, each and every amount so paid shall be held in trust by Grand Casinos-TB on behalf of Hibernia Bank and Grand Casinos- TB will promptly pay such amounts to Hibernia Bank to be credited and applied to any Hibernia Indebtedness (principal and/or interest) then owing to Hibernia Bank by the Tribe, whether matured or unmatured; (d) That any liens, security interests, judgments liens, charges or other encumbrances upon the Tribe's assets securing payment of the Subordinated Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon the Tribe's assets securing payment of the Hibernia Indebtedness; (e) If Grand Casinos-TB forecloses upon any of the Subordinated Claims or obtains possession of the Tribe's property in lieu of foreclosure, all assets of the Tribe or proceeds thereof obtained thereby shall be held in trust by Grand Casinos-TB on behalf of Hibernia Bank and Grand Casinos-TB will promptly pay such amounts to Hibernia Bank to be credited and applied to any Hibernia Indebtedness (principal and/or interest) then owing to Hibernia Bank by the Tribe, whether matured or unmatured; (f) That, upon any distribution of the assets or readjustment of indebtedness of the Tribe, whether by reason of reorganization, liquidation, dissolution, bankruptcy, receivership, assignment for the benefit of creditors, or any other action or proceeding involving the readjustment of all or any of the Subordinated Claims, or the application of assets of the Tribe to the payment or liquidation thereof, either in whole or in part, Hibernia Bank shall be entitled to receive payment in full of any and all of the Hibernia Indebtedness then owing to Hibernia Bank by the Tribe prior to the payment of all or any portion of the Subordinated Claims; and SUBORDINATION AGREEMENT--3 4 (g) Not to transfer, assign, encumber or subordinate at any time while this Agreement remains in effect, any right, claim or interest of any kind in or to any of the Subordinated Claims, either principal or interest, unless such is done expressly subject to the terms and provisions of this Agreement. 4. This Agreement is complete and effective upon execution by Grand Casinos-TB and delivery of this Agreement to Hibernia Bank. 5. This is a continuing Agreement and shall remain in full force and effect and be binding upon Grand Casinos-TB and its legal representatives, successors or assigns, until all of the Hibernia Indebtedness has been paid in full and the aforesaid Loan Agreement has been terminated. 6. This Agreement shall be deemed to be made under and shall be governed by the laws of the State of Louisiana in all respects, including matters of construction, validity and performance. 7. None of the terms or provisions of this Agreement may be waived, altered, modified or amended except in writing duly signed for and on behalf of Hibernia Bank and Grand Casinos-TB. 8. Hibernia Bank will not alter, modify or amend any of the Hibernia Documents with the prior written consent of Grand Casinos-TB, which consent will not be unreasonably withheld. [The remainder of this page has been intentionally left blank] SUBORDINATION AGREEMENT--4 5 GRAND CASINOS OF LOUISIANA, LLC- TUNICA BILOXI By s/ Timothy Cope ----------------------------------- Timothy Cope, Its Chief Financial Officer ACCEPTED: HIBERNIA NATIONAL BANK By s/ Christopher Haskew -------------------------------------- Christopher Haskew, its Vice President Date: May 13, 1999 SUBORDINATION AGREEMENT--5 EX-10.7 8 EQUIPMENT LOAN AGREEMENT 1 EXHIBIT 10.7 EQUIPMENT LOAN AGREEMENT AMONG TUNICA BILOXI TRIBE OF LOUISIANA, AS BORROWER AND HIBERNIA NATIONAL BANK, AS BANK $6,000,000 EQUIPMENT TERM LOAN DATED: MAY 28, 1999 2 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION............1 Section 1.01. Defined Terms.............................................1 Section 1.02. Accounting Terms and Calculations.........................6 Section 1.03. Rules of Construction.....................................6 ARTICLE 2. LOAN...............................................................7 Section 2.01. Commitment................................................7 Section 2.02. Loan Advances.............................................7 Section 2.03. Term, Interest Rate(s) and Repayment of the Loan..........7 Section 2.04. Note......................................................8 Section 2.05. Use of Proceeds...........................................8 ARTICLE 3. OTHER TERMS APPLICABLE TO THE LOAN AND THE NOTE....................8 Section 3.01. Computation of Interest...................................8 Section 3.02. Late Charge and Post-Default Interest.....................8 Section 3.03. Maximum Rate of Interest..................................8 Section 3.04. Acceleration..............................................8 ARTICLE 4. SECURITY FOR THE OBLIGATIONS.......................................8 Section 4.01. Security..................................................8 Section 4.02. Form of Collateral Documents..............................9 Section 4.03. Cross Collateralization...................................9 ARTICLE 5. CONDITIONS PRECEDENT TO INITIAL ADVANCE............................9 Section 5.01. Documents to be Received..................................9 Section 5.02. Other Conditions Precedent...............................10 ARTICLE 6. ADVANCES..........................................................11 Section 6.01. Requirements.............................................11 Section 6.02. Accounting for Advances..................................12 ARTICLE 7. [INTENTIONALLY LEFT BLANK]........................................12 ARTICLE 8. REPRESENTATIONS AND WARRANTIES....................................12 Section 8.01. Existence................................................12 Section 8.02. Power and Authorization..................................12 Section 8.03. Binding Obligations......................................12 Section 8.04. No Legal Bar or Resultant Lien...........................12 Section 8.06. Financial Condition......................................13 Section 8.07. Litigation...............................................13
3 Section 8.08. Solvency.................................................13 Section 8.09. Taxes and Governmental Charges...........................13 Section 8.10. Defaults.................................................13 Section 8.11. Casualties and Condemnation..............................14 Section 8.12. Use of Proceeds; Margin Stock............................14 Section 8.13. Compliance with the Law..................................14 Section 8.14. ERISA....................................................14 Section 8.15. No Material Misstatements................................14 Section 8.16. Title to Collateral......................................14 Section 8.17. Environmental Matters....................................14 Section 8.18. Governmental Requirements................................15 Section 8.19. Existing Loan............................................15 Section 8.20. Management Contract......................................15 Section 8.21. Continuing Accuracy......................................15 ARTICLE 9. AFFIRMATIVE COVENANTS.............................................15 Section 9.01. Financial Statements and Reports.........................16 Section 9.02. Taxes and Other Liens....................................16 Section 9.03. Maintenance of Existence.................................17 Section 9.04. Further Assurances.......................................17 Section 9.05. Performance of Obligations...............................17 Section 9.06. Reimbursement of Expenses................................17 Section 9.07. Insurance................................................17 Section 9.08. Accounts and Records.....................................18 Section 9.09. Right of Inspection......................................18 Section 9.10. Notice of Certain Events.................................19 Section 9.11. ERISA Information and Compliance.........................19 Section 9.12. Indemnification..........................................19 Section 9.13. Compliance with Laws and Covenants.......................19 Section 9.14. Environmental Indemnity..................................19 Section 9.15. Financial Covenants......................................20 Section 9.16. Management of the Enterprise.............................20 Section 9.17. Repayment of Existing Debts..............................21 Section 9.18. Maintenance of Gaming Licenses and Gaming Operations.....21 Section 9.19. Schedule of Enterprise Assets............................21 ARTICLE 10. NEGATIVE COVENANTS...............................................21 Section 10.01. Liens on the Collateral..................................22 Section 10.02. Change of Office.........................................22 Section 10.03. Accounting Methods.......................................22 Section 10.04. No Change in the Management Contract.....................22 Section 10.05. Distribution of Net Profits..............................22 Section 10.06. Impairment of Contracts; Imposition of Governmental Charges..................................................22
4 Section 10.07. No Alienation............................................23 ARTICLE 11. DEFAULT..........................................................23 Section 11.01. Events of Default........................................23 Section 11.02. Remedies.................................................24 Section 11.03. Set-Off..................................................24 ARTICLE 12. EXPENSES AND FEES INCURRED IN CLOSING............................24 ARTICLE 13. CLOSING AND FUNDING..............................................25 Section 13.01. Closing..................................................25 Section 13.02. Funding..................................................25 ARTICLE 14. [INTENTIONALLY LEFT BLANK].......................................25 ARTICLE 15. MISCELLANEOUS....................................................25 Section 15.01. Notices..................................................25 Section 15.02. Invalidity...............................................26 Section 15.03. Survival of Agreements...................................26 Section 15.04. Successors and Assigns...................................26 Section 15.05. Waivers..................................................27 Section 15.06. Cumulative Rights........................................27 Section 15.07. Governing Law............................................27 Section 15.08. Amendment................................................27 Section 15.09. Entire Agreement.........................................27 Section 15.10. Limited Sovereign Immunity Waiver; Arbitration; Submission to Jurisdiction, Jury Trial Waiver............27 Section 15.11. Preparation..............................................29 Section 15.12. Form of Documents........................................29 Section 15.13. Counterparts.............................................29 Section 15.14. Suspension of Loan.......................................29 Section 15.15. Illegality...............................................30 Section 15.16. Year 2000................................................30 Section 15.17. Compliance with 25 U.S.C. Paragraph 81...................30 Section 15.18. Signatures...............................................30
TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 4 5 EQUIPMENT LOAN AGREEMENT THIS EQUIPMENT LOAN AGREEMENT (the "Agreement"), dated effective as of May 28, 1999 (the "Effective Date"), is made by and between the TUNICA-BILOXI TRIBE OF LOUISIANA (the "Tribe") and HIBERNIA NATIONAL BANK, a national banking association (the "Bank"). WITNESSETH WHEREAS, the Tribe has the inherent power to conduct and regulate gaming on its lands, subject only to the restrictions imposed by the Indian Gaming Regulatory Act, Public Law 100-497 (the "IGRA"); and WHEREAS, in accordance with the IGRA, the Tribe has adopted its Gaming Ordinance No. 11-94 (the "Ordinance"), and has entered into a Tribal-State Compact for the conduct of Class III Gaming with the State of Louisiana; and WHEREAS, under the Ordinance, the Tribe operates a gaming facility (the "Casino") on its lands held in trust located in Avoyelles Parish, Louisiana; and WHEREAS, the Tribe desires to borrow from the Bank the aggregate sum of $6,000,000 to purchase gaming equipment and to purchase other general equipment, including non-gaming equipment rel ated to the operation of the Casino and the Hotel; NOW, THEREFORE, in consideration of the premises and in order to induce the Bank to make the aforesaid loan, and intending to be legally bound hereby, the Tribe and the Bank hereby agree as follows: ARTICLE 1. DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION. Section 1.01. Defined Terms. As used in this Agreement, the following terms shall have the following respective meanings: "Advance" means a disbursement of the loan proceeds under the Loan. "Agreement" means this Equipment Loan Agreement, as amended and supplemented from time to time. "Amortization Period" means the twenty-six (26) month period which shall commence on the first day following the Funding Termination Date. "Applicable Environmental Laws" shall have the meaning ascribed to it in Section 8.17. "Applicable Interest Rate" means the interest rate to be applied to the unpaid balance due on the Note during the Amortization Period which interest rate is to be selected pursuant to the provisions of Section 2.03(c). "Authorized Person" any one (1) of Earl J. Barby, Sr., Tribal Chairman, or any other person expressly designated by the Tribal Council of the Tribe as an Authorized Person for the purposes of this Agreement, as set forth from time to time in a certificate in a form prescribed by the Bank. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 1 6 "Base Rate" means for the Loan the rate (expressed as a percentage and rounded upward if necessary to the nearest 1/100 of 1%) determined by the Bank in good faith from the rates quoted in the Wall Street Journal to be the average of the rates per annum for deposits in Dollars offered to major money center banks in the London interbank market at approximately 11:00 A.M. London time two (2) LIBOR Business Days prior to the commencement of the applicable Interest Period in an amount approximately equal to the then outstanding principal amount of, and for a period comparable to the Interest Period for, the Loan. "Bank Inspector" means the inspector designated by Bank (including an officer or employee of Bank) to inspect and monitor the delivery and installation of the Equipment at the Casino and/or Hotel. "Business of the Tribe" means the operation of the Casino, the Hotel and related parking lots and other related improvements located on the Property. "Capital Lease" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time. "Casino Bank Accounts" mean all of the bank accounts specified or contemplated in Section 5.10 of the Management Contract. "Collateral" means all property which is, or will become, subject to the liens, pledges and security interests of every kind granted by the Collateral Documents, including, without limitation, the Casino Bank Accounts, the Gaming Equipment and the General Equipment. "Collateral Documents" mean collectively all security agreements, pledges, assignments and other documents executed by the Tribe and delivered to Bank pursuant to this Agreement, including without limitation those agreements specified in Article 4 hereof. "Debt" means with respect to any Person: (i) all Indebtedness for Money Borrowed of such Person; (ii) all indebtedness for the acquisition of property other than purchases of products and merchandise in the ordinary course of business; (iii) indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed; (iv) all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business); (v) all contingent obligations; (vi) all Capital Leases; and (vii) and other items which under GAAP are classified as liabilities on a balance sheet; provided that in no event shall the term "Debt" include capital stock, surplus and retained earnings, minority interest in the common stock of subsidiaries, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits and reserves, and deferred compensation obligations, or payroll indebtedness and trade indebtedness incurred in the ordinary course of business, provided that such trade indebtedness has a maturity of less than one year. "Dominion Account Agreement" means that certain agreement contemplated under Section 4.01 under the terms of which the Tribe grants to the Bank a security interest in the Gross Receipts (as defined in the Management Contract) and in the Casino Bank Accounts. "Enterprise" means the operation of the Casino and the Hotel by the Tribe. "Enterprise Assets" means all of (movable) the assets owned or hereafter acquired by the Tribe and [initialled] used in connection with, or earned from, the operation of the Enterprise, including, without limitation, the Collateral, all gaming equipment, all other equipment, inventory, accounts receivable, TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 2 7 instruments certificated securities, documents, contracts, general intangibles, deposit accounts, uncertificated securities, financial assets, security entitlements, security accounts, cash and any other property. "Entities" means the Tribe and the Enterprise and "Entity" means any one of the Entities. "Equipment" means collectively the Gaming Equipment and the General Equipment. "Existing Loan" means the entire extension of credit by Cottonport Bank to the Tribe as described in Article 2 of the Existing Loan Agreement. "Existing Loan Agreement" means that certain Commercial Loan Agreement dated March 14, 1997 between Cottonport Bank and the Tribe under the terms of which the Cottonport Bank agreed to loan to the Tribe up to $16,500,000.00 to be used to purchase and renovate a hotel facility, to purchase new gaming equipment, and to refinance certain gaming equipment, all as more fully set forth therein "Existing Loan Documents" means the Existing Loan Agreement, the promissory note executed by the Tribe in connection with the Existing Loan Agreement and all other documents executed by the Tribe in connection with the Exiting Loan. "Existing Security Agreement" means that certain Commercial Security Agreement dated as of March 14, 1997, executed by the Tribe and granting to the Cottonport Bank a security interest in the Casino Bank Accounts and in certain gaming equipment, consisting of approximately 360 slot machines. "Fixed Interest Rate" means a fixed per annum interest rate equal to 250 basis points in excess of the corresponding 5-year Treasury Rate (ask price) quoted by the Wall Street Journal seven (7) Business Days prior to the first day of the Amortization Period. "Funding Date" means the date on which Bank first advances funds to or on behalf of the Tribe pursuant to the Loan. "Funding Period" means the period commencing on the Funding Date and ending upon the Funding Termination Date. "Funding Termination Date" means the earlier of: (a) the date on which the Bank advances the aggregate sum of $6,000,000 under this Agreement; (b) the 90th day following the Funding Date; or (c) August 28, 1999. "GAAP" means generally accepted accounting principles in the United States. "Gaming Equipment" means slot machines and other gaming equipment purchased by or paid for with Advances made to or on behalf of the Tribe pursuant to the terms of this Agreement. "General Equipment" means that equipment, other than Gaming Equipment, purchased by or paid for with Advances made to or on behalf of the Tribe pursuant to the terms of this Agreement. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 3 8 "Grand Casinos/Tunica-Biloxi Inc." means Grand Casinos of Louisiana, Inc.-Tunica-Biloxi, a Minnesota corporation. "Grand Casinos/Tunica-Biloxi" means Grand Casinos of Louisiana, LLC-Tunica-Biloxi, a Minnesota limited liability company. "Grand Entities" collectively means Lakes Gaming and Grand Casinos/Tunica-Biloxi and "Grand Entity" means any one of the Grand Entities. "Hotel" means that 218-room hotel facility known as the "Grand Hotel Avoyelles" which is located adjacent to or near the Casino. "Index" means the rate of interest established from time to time by The Chase Manhattan Bank, N.A., New York, New York, as its index or prime lending rate. The Index is not necessarily the lowest rate charged by The Chase Manhattan Bank, N.A. or by Bank on their loans. If the Index becomes unavailable during the term of this Loan, Bank may designate as a substitute a reasonably comparable index after notice to Tribe. Bank will inform the Tribe of the current Index rate upon the Tribe's request. The Tribe understands that Bank may make loans based on other rates as well. "Indebtedness for Money Borrowed" means, for any Person, (i) all indebtedness, obligations and liabilities of such Person for money borrowed which are evidenced by bonds, debentures, notes or other similar instruments and (ii) all Capital Leases which have been capitalized in accordance with GAAP; provided, however, the term "Indebtedness for Money Borrowed" shall specifically exclude payroll indebtedness and trade indebtedness incurred in the ordinary course of business provided such trade indebtedness has a maturity of less than one year. "Interest Period" means a period commencing on the Funding Date and ending one month thereafter and each subsequent one month period commencing at midnight on the last day of the immediately preceding Interest Period for the Loan, and ending one month thereafter, provided that if an Interest Period would end on a day which is not a LIBOR Business Day such Interest Period shall be extended to the next LIBOR Business Day. "Interest Rate Selection Notice" means the written notice in a form acceptable to the Bank and signed by an Authorized Officer of the Tribe notifying the Bank of the Applicable Interest Rate (whether a Fixed Interest Rate or the LIBOR Rate) selected by the Tribe pursuant to Section 2.03 of this Agreement. Such notice shall be binding on and irrevocable by the Tribe. "Lakes Gaming" means Lakes Gaming, Inc., a Minnesota corporation. "LIBOR Business Day" means a Business Day on which the relevant international financial markets are open for the transaction of the business contemplated by this Agreement in London, England, and New York, New York. "LIBOR Rate" means, for an Interest Period for the Loan, the rate of interest per annum determined pursuant to the following formula: LIBOR Rate = Base Rate + 2.25% TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 4 9 "Lien" means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on jurisprudence, statute or contract, and, including but not limited to, the lien or security interest arising from a mortgage, leasehold mortgage, assignment of rents and leases, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, servitudes, usufructs, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property. "Loan" means the entire extension of credit by Bank to the Tribe hereunder as described in Article 2 of this Agreement. "Loan Documents" mean this Agreement, the Note, the Collateral Documents and any other documents executed by any of the parties hereto in connection with this Agreement, as such Loan Documents may be amended and supplemented from time to time. "Louisiana Compact" means that certain Tribal-State Compact between the Tribe and the State of Louisiana, as may be amended and supplemented, authorizing the Tribe to conduct Class III Gaming, approved on November 10, 1992, by the United States of America. "Management Contract" means that certain Amended and Restated Management & Construction Agreement dated as of November 1, 1991, between the Tribe and Grand Casinos/Tunica-Biloxi Inc., regarding, among other things, the management of the Casino and assigned by Grand Casinos/Tunica-Biloxi, Inc., to Grand Casinos/Tunica Biloxi pursuant to that certain Assignment Agreement dated December 31, 1998. "Net Worth" means the total value of all assets appearing on a balance sheet prepared in accordance with GAAP, after deducting therefrom (without duplication of deductions): (a) any increase or write-up in the book carrying value of any asset resulting from a revaluation thereof subsequent to the effective date of the most recent financial statements that the Tribe furnishes to Bank prior to the Effective Date hereof; (b) all reserves, including but not limited to reserves for liabilities, fixed or contingent, deferred income taxes, obsolescence, depletion, insurance, and inventory valuation, which are not deducted from assets; (c) the amount, if any, at which shares of stock of a corporation appear on the asset side of such balance sheet; and (d) all Debt. "Net Profits" shall have the same meaning ascribed to it in the Management Contract. "Note" means the promissory note described in Article 2. "Obligations" means any and all amounts and/or liabilities owing from time to time by the Tribe to the Bank pursuant to this Agreement, the Note or any other Loan Document, whether such amounts or liabilities are liquidated or unliquidated, now existing or hereafter arising. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other form of entity. "Post-Default Rate" means, in respect of the principal amount of the Note or any other amount payable under any other Loan Document which is not paid when due (whether at the stated maturity, by acceleration TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 5 10 or otherwise), an interest rate on such principal amount per annum during the period commencing on the due date until such amount is paid in full equal to: (i) three percentage points over the Fixed Interest Rate if the Fixed Interest Rate is the Applicable Interest Rate; or (ii) the three percentage points over the LIBOR Rate, as the same may change from time to time, if the LIBOR Rate is the Applicable Interest Rate. "Property" means the immovable property on which the Casino, the Hotel and related parking lots and other related improvements are located in Avoyelles Parish, Louisiana. "Purchase Price" means, with respect to each item of Equipment, an amount, as determined by the Bank, equal to the reasonable fair market value of each such item of Equipment which in no event shall exceed one hundred percent (100%) of the invoice price thereof. "Request for Advance" means the Tribe's written request for an Advance in a form acceptable to Bank and signed on behalf of the Tribe by an Authorized Person. "Security Agreement" means that certain agreement contemplated under Section 4.01 under the terms of which the Tribe grants to the Bank a security interest in the Equipment. "Transferee" means any Person to whom the Bank sold, assigned or otherwise transferred all or a portion of the Loan. "UCC" means the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.), now in force and as hereafter amended. Section 1.02. Accounting Terms and Calculations. Except as may be expressly provided to the contrary herein or in the Management Contract, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. To the extent any change in GAAP affects any computation or determination required to be made pursuant to this Agreement, such computation or determination shall be made as if such change in GAAP had not occurred unless the Tribe and the Bank agree in writing on an adjustment to such computation or determination to account for such change in GAAP. Section 1.03. Rules of Construction. (a) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) Words used herein in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular herein shall apply to such words when used in the plural where the context so permits and vice versa. (c) All titles or headings to articles, sections, subsections or other divisions of this Agreement or the exhibits hereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 6 11 (d) All references herein to particular articles or sections are references to articles or sections of this Agreement unless some other reference is indicated. ARTICLE 2. LOAN. Section 2.01. Commitment. Subject to and upon the terms and conditions contained in this Agreement, and relying on the representations and warranties contained in this Agreement, Bank agrees to advance funds to the Tribe during the Funding Period up to a principal amount not to exceed the lesser of: (a) Six Million and No/100 Dollars ($6,000,000.00); or (b) one hundred percent (100%) of the Purchase Price of the Equipment. Section 2.02. Loan Advances. Subject to the terms and conditions set forth in this Agreement, Bank agrees during the Funding Period to make Advances to the Tribe on any Business Day in such amount as the Tribe may request for the purchase of, or payment for, the Equipment. In no event shall the aggregate Advances for Equipment exceed the amounts set forth in Section 2.01. Bank will make Advances for the purchase of Equipment pursuant to the terms of Article 6. Section 2.03. Term, Interest Rate(s) and Repayment of the Loan. Bank and the Tribe agree that the funds advanced under the Loan pursuant to this Agreement or otherwise representing the Loan indebtedness outstanding from time to time shall be due and payable as follows: (a) Payments. During the Funding Period, the Tribe shall pay accrued interest based upon the outstanding balance of the Loan which shall be payable monthly in arrears commencing thirty (30) days after the Funding Date and ending upon the Funding Termination Date. Commencing thirty (30) days following the Funding Termination Date, the Tribe shall repay the Loan in twenty six (26) consecutive monthly payments of principal with the first twenty-five (25) monthly payments each in the amount of Two Hundred Thirty Thousand Seven Hundred Sixty Nine and No/100 Dollars ($230,769.00), plus accrued interest, and the twenty-sixth monthly payment in an amount equal to all unpaid principal and accrued interest due under the Loan. (b) Variable Interest Rate During the Funding Period. The outstanding principal balance of the Loan during the Funding Period shall bear interest at the LIBOR Rate. (c) Option to Select the Interest Rate for the Amortization Period. The Tribe shall have the option, pursuant to the following terms, to have the principal balance of the Note bear interest during the Amortization Period at either: (i) the LIBOR Rate, as it may change from time to time; or (ii) the Fixed Interest Rate. The Bank shall notify the Tribe of the applicable LIBOR Rate and the Fixed Interest Rate at least two LIBOR Business Days prior to the first day of the Amortization Period. At least one (1) LIBOR Business Day prior to the first day of the Amortization Period, the Tribe shall deliver to the Bank the Tribe's Interest Rate Selection Notice specifying therein the Tribe's selection as to the Applicable Interest Rate; provided if the Tribe fails to deliver the Interest Rate Selection Notice within such a period, the Bank may, in its sole discretion, elect whether the Note shall during the Amortization Period bear interest at the LIBOR Rate or the Fixed Interest Rate. In such an event, the Bank shall notify the Tribe in writing as to the Applicable Interest Rate so selected by the Bank. Subject to the terms of this Agreement, the Applicable Interest Rate specified in accordance with the following procedure shall be the interest rate due on the unpaid balance of the Note for the period commencing upon the first day of the Amortization Period and ending on the date on which the Note is paid in full. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 7 12 Section 2.04. Note. At Closing, the Tribe shall execute and deliver to Bank a promissory note (the "Note") which reflects the foregoing terms and such other terms as are acceptable to Bank and its legal counsel. Section 2.05. Use of Proceeds. The proceeds from the Loan will be used solely to purchase, or pay for, the Equipment. ARTICLE 3. OTHER TERMS APPLICABLE TO THE LOAN AND THE NOTE. Section 3.01. Computation of Interest. Interest on the Loan shall be computed on the basis of a year of 360 days, as the case may be, and actual days elapsed (including the first day and the last day) in the period for which payable. Section 3.02. Late Charge and Post-Default Interest. (a) If the Tribe fails to pay any payment under the Note within ten (10) days of when due, the Tribe shall pay to Bank a late payment fee in an amount equal to ten percent (10%) of the delinquent interest due. (b) Notwithstanding the foregoing, the Tribe shall pay to Bank interest on the Loan at the Post-Default Rate on any principal amount, and (to the fullest extent permitted by law) on any other amount payable by the Tribe under any Loan Document to or for account of Bank, which was not paid in full when due (whether at the stated maturity, by acceleration or otherwise), for the period commencing on the date Bank declares that the Loan is accelerated until the same is paid in full. Accrued interest payable at the Post-Default Rate shall be payable from time to time on demand. The Post-Default Rate shall not be applicable unless and until the Bank declares that the Loan is accelerated as a result of an Event of Default. Section 3.03. Maximum Rate of Interest. No provision of this Agreement or the Note shall be interpreted as charging or requiring or permitting the collection of interest in excess of the maximum permitted by applicable law. If any such excessive interest is provided in connection with the Loan, the provisions of this Section 3.03 shall govern and neither the Tribe nor any sureties, guarantors, successors or assigns of the Tribe shall be obligated to pay the excess of such interest, or any other excess sum paid for the use, forbearance, or detention of sums loaned pursuant to this Agreement. The Tribe confirms to Bank that the Tribe is borrowing the funds for the Loan for commercial purposes as contemplated by La. R.S. 9:3509. Section 3.04. Acceleration. Bank, at Bank's option, may accelerate the payments due under the Loan upon an Event of Default under this Agreement or under any of the Loan Documents. ARTICLE 4. SECURITY FOR THE OBLIGATIONS. Section 4.01. Security. The Obligations shall be secured by: (a) a Security Agreement executed by the Tribe granting to the Bank a first priority security interest in and to the Equipment; and (b) Pledge and Assignment of Income as set forth in a Dominion Account Agreement by which the Tribe and Grand Casinos/Tunica-Biloxi grant in favor of the Bank a security interest in the Gross Receipts (as such term is defined in the Management Contract) and in the Casino Bank Accounts, together with any applicable financing statement, which security interest shall have a priority second only to the security interests granted in the Existing Security Agreement in favor of the Bank. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 8 13 Section 4.02. Form of Collateral Documents. All Collateral Documents shall be in a form customarily used by the Bank in similar transactions and shall contain terms and conditions acceptable to the Bank and the Bank's counsel. Section 4.03. Cross Collateralization. The Security Agreement and the Dominion Account Agreement referred to in Section 4.01 shall provide that the security interests granted therein shall also secure all obligations owed by the Tribe to the Bank under the Existing Loan Agreement and the other agreements executed in connection therewith. ARTICLE 5. CONDITIONS PRECEDENT TO INITIAL ADVANCE. Section 5.01. Documents to be Received. The Bank's obligation to make the initial Advance under the Loan is subject to the condition precedent that, on or prior to such initial Advance, the Bank shall receive the following documents, all in form and substance satisfactory to the Bank: (a) Loan Documents. Duly executed originals of the Loan Documents and receipt thereof by the Bank; (b) Secretary's Certificate. Certificate of the Secretary of each Entity setting forth (i) resolutions of its board of directors (or other governing body) in form and substance satisfactory to the Bank with respect to the authorization of the Loan Documents, as the case may be, by such Entity; (ii) the officers authorized to sign such instruments; and (iii) copies of the articles of incorporation or other governing document of such Entity; (c) Organizational Documents of the Tribe. All instruments regarding the formation, organization and governance of the Tribe which shall be in a form and substance acceptable to the Bank and its legal counsel; (d) Opinions. Legal opinions of Maslon, Edelman, Borman & Brand, counsel for the Grand Entities, and legal opinions of Gold, Weems, Bruser, Sue & Rundell, counsel for the Tribe, all in a form and substance satisfactory to the Bank; (e) Insurance Policies. The insurance policies or certificates required by this Agreement or the Bank; (f) Gaming License. Evidence satisfactory to the Bank and its legal counsel that each of the Tribe and Grand Casinos/Tunica-Biloxi is in full compliance with all federal, state and local laws regarding its gaming operations and that each has obtained all applicable governmental permits, licenses and authorizations required to operate the Casino in the State of Louisiana; (g) Louisiana Compact. A copy of the Louisiana Compact certified as correct by the Secretary of the Tribe; (h) Management Contract. A copy of the Management Contract, certified as correct by the Secretary of Grand Casinos/Tunica-Biloxi; TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 9 14 (i) Officers' Certification. Certification executed on behalf of the Tribe by an officer of the Tribe to the effect that as of the Funding Date: (i) the representations and warranties set forth in Article 8 hereof are true and correct in all material respects as though made on and as of such date; (ii) no event has occurred and is continuing which constitutes an Event of Default hereunder; and (iii) there has been no material adverse change in the business operations or financial condition of the of any of the Entities, to the Collateral or as to any other facts, circumstances or conditions upon which the Bank has relied or utilized in making its commitment to enter into this Agreement; (j) Regulatory Approval. If required by applicable statute or regulation, the approval of the Loan by the Louisiana Gaming Board; (k) BIA Approval. Evidence satisfactory to the Bank and its counsel that the Secretary of the Interior, Bureau of Indian Affairs, has issued all approvals required from that office in order for the Tribe to enter into the transactions contemplated in this Agreement and the other Loan Documents; (l) Subordination Agreement. Subordination Agreements, together with appropriate UCC-3 filings, duly executed in a form and substance acceptable to Bank and Bank's counsel by which each Person other than the Bank who holds a Lien with respect to the Collateral subordinates any such Lien to the security interest in the Collateral to be granted hereunder by the Tribe to the Bank; (m) Subordination Agreements by the Grand Entities. Subordination Agreements in a form and substance acceptable to the Bank and its counsel executed by the Grand Entities under the terms of which each Grand Entity subordinates to the Loan and the Existing Loan any and all existing or future sums which are or might be owed by the Tribe and/or the Enterprise to each such Grand Entity (including, without limitation, sums due under the Management Contract), as well as any Lien which secures such obligations, together with appropriate UCC-3 filings; and (n) Additional Documents. Such other documents, certificates, opinions, approvals or filings with respect to this Agreement and the other Loan Documents as the Bank shall reasonably request. Section 5.02. Other Conditions Precedent. The Bank's obligation to make the initial Advance under the Loan is subject to the satisfaction of the following additional conditions precedent: (a) Expenses. Bank shall have received payment from the Tribe of any fees and reimbursement of all expenses payable to the Bank hereunder; (b) No Default. At the time of the initial Advance, no Event of Default shall have occurred and be continuing; (c) No Material Change. There shall not have occurred in the Bank's reasonable opinion any material adverse change in the business operations or the financial condition of any of the Entities, to the Collateral or as to any other facts, circumstances or conditions upon which the Bank has relied or utilized in making its commitment to enter into this Agreement [Nothing herein shall be construed to interpret a change in the percentage of revenues paid by the Tribe to the State of Louisiana in a renewal of the Louisiana Compact as a material change as long as the Tribe is in compliance with the provisions of Section 9.15 of this Agreement.]; TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 10 15 (d) Correctness of Representations. Each of the representations and warranties of the Tribe contained in this Agreement shall be true and correct on and as of the date of such Advance; (e) Approval by Bank's Counsel. Bank's legal counsel shall have approved the form and substance of all of the Loan Documents as well as any opinions of counsel to be delivered hereunder; and (f) Approval by Bank's Special Counsel. Bank's special legal counsel regarding Indian law must approve the Loan Documents and the approval thereof by the Secretary of the Interior, Bureau of Indian Affairs, and any additional provisions, documents or approvals reasonably required by such special counsel must have been satisfied. ARTICLE 6. ADVANCES. Section 6.01. Requirements. The obligation of the Bank to make any Advance under the Loan with respect to the purchase of Equipment is subject to the satisfaction of each of the following conditions at the time of each such request for any Advance: (a) Correctness of Representations. Each of the representations and warranties of the Tribe contained in this Agreement shall be true and correct on and as of the date of such Advance. (b) No Event of Default. At the time of such Advance, no Event of Default shall have occurred and be continuing. (c) No Material Change. There shall have occurred in the reasonable opinion of Bank no material adverse changes, either individually or in the aggregate, in the assets, liabilities, financial conditions, business operations, affairs or circumstances of any of the Entities from those reflected in the most recent financial statements furnished to the Bank prior to the Closing Date. (d) Notice. Tribe shall have delivered to Bank a Request for Advance at least two (2) Business Days prior to the date of such an Advance, and Tribe shall have obtained Bank's approval for such Advance. (e) Copies of Invoices. Tribe shall deliver to Bank with the Request for Advance copies of the invoices for such Equipment which will be purchased or paid for with the Advance. Before approving such a Request, the Bank may, at its election, require that the Bank Inspector verify the Purchase Price of the Equipment covered by the Request and that such Equipment has been delivered and/or installed in the Casino or the Hotel. (f) Additional Collateral Documents. With regard to any Advance under the Loan for any purpose, the Tribe shall comply with the following document requests. If requested by Bank, the Tribe shall deliver to Bank a security agreement and/or a financing statement (UCC-1), in a form, substance and content acceptable to Bank, under the terms of which, Tribe grants to Bank a first priority security interest in and to the Equipment to be acquired with the Advance. The Tribe shall also deliver to the Bank at the Bank's request supplements or schedules to the Security Agreement, dated as of the date of the Advance, in a form, substance and content acceptable to the Bank, particularly itemizing and describing the Collateral to be financed by such Advance and to be made subject to such Security Agreement. The Bank may, at its election, require that the Tribe deliver to the Bank an opinion, in a form and substance acceptable to the Bank, rendered TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 11 16 by an attorney acceptable to the Bank that the Bank has a first priority security interest in the Equipment to be paid for with the funds advanced pursuant to the Request for Advance. Section 6.02. Accounting for Advances. The credit advice resulting from the deposit of the proceeds of any disbursement into Tribe's account with Bank, or Bank's copy of any cashier's check representing all or any part of the proceeds of the disbursements, shall be deemed prima facie evidence of each such Advance hereunder. The Bank may, at its election, make such Advances by check payable jointly to the Tribe and the vendor of such New Equipment to the extent such sums are due to such a vendor. ARTICLE 7. [INTENTIONALLY LEFT BLANK] ARTICLE 8. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into this Agreement, the Tribe represents and warrants to the Bank that: Section 8.01. Existence. (a) The Tribe is an Indian tribe duly recognized as such by the United States of America. The Tribe and the Enterprise have obtained all permits, licenses and other governmental permits necessary to conduct the business each transacts. (b) The address of the chief executive office of the Tribe is as follows: Post Office Box 331 Marksville, Louisiana 71351 The federal taxpayer identification number for the Tribe is TIN 72-0942856 and for the Enterprise is 72-1265412. Section 8.02. Power and Authorization. The Tribe is duly authorized and empowered to execute, deliver and perform the Loan Documents executed by it. All tribal action on the part of the Tribe requisite for the due creation and execution of the Loan Documents has been duly and effectively taken. Section 8.03. Binding Obligations. The Loan Documents constitute the valid and binding obligations of the Tribe enforceable in accordance with their terms (except that enforcement may be subject to any applicable bankruptcy, insolvency or similar laws generally affecting the enforcement of creditors' rights). Section 8.04. No Legal Bar or Resultant Lien. The Loan Documents do not and will not violate any provisions of any of the Tribe's governing documents, will not violate any contract, agreement, debenture, law, regulation, order, injunction, judgment, decree or writ to which the Tribe is subject, and will not result in the creation or imposition of any Lien upon any property of the Tribe other than as contemplated by this Agreement. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 12 17 Section 8.05. No Consent. Except for the approval by the Secretary of the Interior, Bureau of Indian Affairs, the execution, delivery and performance of the Loan Documents executed by the Tribe either (i) do not require the consent or approval of any other Person, including without limitation any regulatory authority or governmental body of the United States or any state thereof or any political subdivision of the United States or any state thereof, or (ii) if any such consent is required, it has been obtained. Section 8.06. Financial Condition. The financial statements of the Tribe and the Enterprise for their fiscal year most recently ended which have been delivered to the Bank, are complete and correct, have been prepared in accordance with GAAP (except as otherwise provided in the Management Contract) and fully and accurately reflect in all material respects the financial condition and results of the operations of each such Entity as of the date or dates and for the period or periods stated. Neither the Tribe nor the Enterprise has made investments in, advances to or guaranties of the obligations of any Person, except as reflected in said financial statements or as permitted by this Agreement. Neither the Tribe nor the Enterprise has any material liabilities, direct or contingent, except as disclosed or referred to in said financial statements. No material adverse change has since occurred in the condition, financial or otherwise, of the Tribe or the Enterprise, except as disclosed to the Bank in writing. All of the materials which the Tribe or the Enterprise have submitted to the Bank constitute a complete and accurate presentation of all facts material to the Bank's agreement to execute this Agreement. Neither the Tribe nor the Enterprise has ever been the debtor in any insolvency proceedings. Section 8.07. Litigation. Except as referred to in the financial statements described in Section 8.06, there is no litigation, legal or administrative proceeding, investigation or other action of any nature pending or, to the knowledge of the Tribe, threatened against or affecting the Tribe or the Enterprise which involves the possibility of any judgment or liability in excess of $50,000.00 not fully covered by insurance, and which may materially and adversely affect the business or the property of such Entities or their ability to carry on business as now conducted. Section 8.08. Solvency. The Tribe will receive a reasonably equivalent value in exchange for its obligations under the Loan Documents. The execution and performance of the Loan Documents by the Tribe (i) are not being made with any intent to hinder, delay or defraud any entity to which Tribe is indebted; (ii) will not result in the Tribe becoming insolvent or having an unreasonably small capital for the business in which Tribe is engaged; and (iii) will not cause the Tribe to incur debts that would be beyond the ability of Tribe to pay as such debts mature. For the purposes of this Section 8.08, "insolvent" shall mean that the sum of the Tribe's debts is greater than all of its property at a fair valuation. Any property transferred, concealed or removed with intent to hinder, delay or defraud Tribe's creditors and property which may be exempted from the debtor's estate under the Federal Bankruptcy Code shall be excluded from the assets of Tribe for purposes of determining insolvency. Section 8.09. Taxes and Governmental Charges. The Tribe and the Enterprise have filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or upon its property or income which are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof. Section 8.10. Defaults. Neither the Tribe nor the Enterprise is in default (in any respect which materially and adversely affects its Business or the Property or the operations or condition thereof) under any indenture, mortgage, deed of trust, agreement or other instrument to which such Entity is a party or by which it is bound, except as disclosed to the Bank in writing. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 13 18 Section 8.11. Casualties and Condemnation. Since the date of the most recent financial statements furnished to the Bank prior to the Closing Date, neither the Business nor the Property of the Tribe or the Enterprise has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of property or cancellation of contracts, permits or concessions by any domestic or foreign government or any agency thereof, riot, activities of armed forces or acts of God or of any public enemy, except as disclosed in writing to the Bank on or prior to the Closing Date. Section 8.12. Use of Proceeds; Margin Stock. None of the funds advanced to the Tribe under the Loan will be used for the purpose of, and the Tribe is not engaged in the business of extending credit for the, purchasing or carrying any "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of said Regulation U. Tribe is not engaged principally, or as one of Tribe's important activities, in the business of extending credit for the purpose of purchasing or carrying margin stocks. No Person acting on behalf of the Tribe, has taken or will take any action which might cause this Agreement to violate Regulation U or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Section 8.13. Compliance with the Law. Each of the Tribe and the Enterprise (i) is not in violation of any law, judgment, decree, order, ordinance, or governmental rule or regulation to which such Entity or any of its property are subject; and (ii) has not failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of the Property or the conduct of the Business of the Tribe; in each case, which violation or failure could reasonably be anticipated to materially and adversely affect the Business, prospects, profits, Property or condition financial or otherwise of such Entity. Section 8.14. ERISA. The Tribe is in compliance in all material respects with the applicable provisions of ERISA, and no "reportable event", as such term is defined in Section 4043 of ERISA, has occurred with respect to any ERISA Plan of any such Entity. Section 8.15. No Material Misstatements. No information, exhibit or report furnished by the Tribe to the Bank in connection with this Agreement or in the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact necessary to make the statement contained therein not misleading. Section 8.16. Title to Collateral. The Tribe shall have good and merchantable title to the Collateral, free of all liens and encumbrances except those to which Bank, in its sole discretion, has expressly consented in writing. All Equipment will be acquired and owned solely by the Tribe. Furthermore, the Tribe has not heretofore conveyed or agreed to convey or encumber the Collateral in any way, except in favor of Bank. Section 8.17. Environmental Matters. To the best knowledge of the Tribe, no asbestos, or any substance containing asbestos deemed hazardous by federal or state regulations on the date of this Agreement, has been installed in or on the Property. The Property is not in violation of or subject to any existing, pending, or, to the best of the Tribe's knowledge, threatened investigation or inquiry by any governmental authority or to any remedial obligations under any applicable laws pertaining to health or the environment (hereinafter sometimes collectively called "Applicable Environmental Laws"), including without limitation the TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 14 19 Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980 the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"), except as disclosed in writing to the Bank on or prior to the Closing Date. The representation and warranty in the preceding sentence would continue to be true and correct following disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances, if any, pertaining to the Property and known to the owners thereof. The Tribe has not obtained and is not required to obtain any permits, licenses or similar authorizations to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of the Property by reason of any Applicable Environmental Laws. No hazardous substances or solid wastes have been disposed of or otherwise released on or to the Property. The use which the Tribe makes and intends to make of the Property will not result in the disposal or other release of any hazardous substance or solid waste on or to the Property. The terms "hazardous substance" and "release" as used in this Agreement shall have the meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") shall have the meanings specified in RCRA; provided, in the event that the laws of the State of Louisiana establish a meaning for "hazardous substance," "release," "solid waste," or "disposal" which is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. Section 8.18. Governmental Requirements. The Property is in compliance with all current governmental requirements affecting the Property, including, without limitation, all current coastal zone protection zoning and land use regulations, building codes and all restrictions and requirements imposed by applicable governmental authorities with respect to the contemplated use of any improvements located on the Property. Section 8.19 Existing Loan. Cottonport Bank has participated to the Bank one hundred percent (100%) of the interests the Existing Loan and the Tribe has consented to the same. The Existing Loan and all Existing Loan Documents are in full force and effect and are fully enforceable by the Cottonport Bank against the Tribe and the Tribe has no, and/or hereby waives all existing defenses to such enforcement. Section 8.20 Management Contract. Grand Casinos/Tunica-Biloxi, Inc. has assigned all of its interest in the Management Contract to Grand Casinos/Tunica-Biloxi. The Management Contract is in full force and effect. Section 8.21. Continuing Accuracy. All of the representations and warranties contained in this Article or elsewhere in this Agreement shall be true through and until the date on which all Obligations are fully satisfied. The Tribe shall promptly notify Bank of any event which would render any of said representations and warranties untrue or misleading. Each request for the Bank's approval of a Request for Advance which the Tribe delivers to Bank shall be deemed to be the Tribes' restatement and reaffirmation of the representations and warranties contained in this Article 8 and elsewhere in this Agreement. ARTICLE 9. AFFIRMATIVE COVENANTS. Unless the Bank's prior written consent to the contrary is obtained, the Tribe shall at all times comply, and shall cause the Enterprise to comply, with the covenants contained in this Article 9, from the date hereof and for so long as any part of the Obligations are outstanding. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 15 20 Section 9.01. Financial Statements and Reports. Each of the Tribe and the Enterprise will promptly furnish to the Bank such information regarding the business and affairs and financial condition of each such Entity as the Bank may reasonably request, and such Entities shall furnish to the Bank: (a) Annual Reports of the Enterprise. Within one hundred (100) days after the end of each fiscal year, the Bank shall be furnished with financial statements consisting of balance sheet, income statement and cash flow statements of the Enterprise for the year end, all in reasonable detail in a form acceptable to the Bank and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP accompanied by an unqualified opinion rendered by an independent certified public accountant reasonably acceptable to the Bank. (b) Annual Reports of the Tribe. Within one hundred eighty (180) days after the end of each fiscal year, the Bank shall be furnished with financial statements consisting of balance sheet, income statement and cash flow statements of the Tribe for the year end, all in reasonable detail in a form acceptable to the Bank and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP accompanied by an unqualified opinion rendered by an independent certified public accountant reasonably acceptable to the Bank. (c) Quarterly Compliance Reports. Within fifty five (55) days after the last business day of each quarter, the Bank shall be furnished with the quarterly compliance reports calculating the financial covenants set forth in Section 9.15 for the quarter ending, prepared and certified as correct by the chief financial officer of the Enterprise or other officer acceptable to the Bank, setting forth information as may be required by the Bank. (d) Monthly Reports of the Enterprise. Within thirty (30) days after the last business day of each month, the Bank shall be furnished with the balance sheet, income statement and cash flow statement of the Enterprise and certified as correct by its chief financial officer, or other officer acceptable to the Bank, setting forth information as may be required by the Bank. (e) Audit Under the Management Contract. As soon as available and in any event within fifty five (55) days of the end of the respective annual period, the Bank shall be furnished with the annual audit to be prepared by an independent certified public accountant obtained in accordance with Section 5.12.1 of the Management Contract; and (f) Compliance Certificates. Simultaneously with the furnishing of the financial statements required by this Section 9.01, certificates of the respective chief financial officers of the Tribe, the Enterprise and/or the Grand Entities, (i) certifying that to the best of his knowledge that no Event of Default has occurred, or if an Event of Default has occurred, specifying the nature and extent thereof and the steps that the Tribe, the Enterprise and/or Grand Entities proposes to take to cure such Default, and (ii) providing a calculation of the financial covenants set forth in Section 9.15. Section 9.02. Taxes and Other Liens. Each of the Tribe and the Enterprise will file all tax returns required by law before the due date thereof (as validly extended) and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its property as well as all claims of any kind (including claims for labor, materials, supplies and rent) which, if unpaid, might become a Lien upon any of the Collateral; provided, however, that no such Entity shall be required to pay any such tax, assessment, charges, levy or claim if the amount, applicability or validity thereof TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 16 21 shall currently be contested in good faith by appropriate proceedings diligently conducted and if the contesting party shall have set up reserves therefor adequate under GAAP. If requested by the Bank, the Tribe shall furnish the Bank with proof of payment of all taxes, assessments, charges, levies or claims against the Property not later than the date on which penalties might attach thereto, or in the event that the Tribe contests any such taxes, assessments, charges, levies or claims in accordance with this Section, the Tribe shall furnish Bank with a description of the contested matter and all actions taken by the Tribe in connection with such contest. Section 9.03. Maintenance of Existence. Each of the Tribe and the Enterprise will: (i) maintain its existence; (ii) observe and comply (to the extent necessary so that any failure will not materially and adversely affect the business of any of such Entities) with all valid laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, certificates, franchises, permits, licenses, authorizations, directions and requirements (including without limitation applicable statutes, regulations, orders and restrictions relating to gambling) of all federal, state, parish, municipal and other governments, departments, commissions, boards, courts, authorities, officials and officers, domestic or foreign; (iii) maintain the Casino, the Hotel, and the Collateral in generally good and workable condition at all times and make all repairs, replacements, additions, betterments and improvements to their properties to the extent necessary so that any failure will not materially and adversely affect the business of each such Entity; and (iv) continue to conduct its business in the manner currently conducted, including the Casino and the Hotel. Section 9.04. Further Assurances. The Tribe will promptly (and in no event later than thirty (30) days after written notice from the Bank is received) cure any defects in the creation, execution and delivery of the Loan Documents. The Tribe will promptly execute and deliver to the Bank upon request all such other and further documents, agreements and instruments in compliance with or in accomplishment of the covenants and agreements of the Tribe in the Loan Documents or to further evidence and more fully describe the Collateral, or to correct any omissions in the Collateral Documents, or to more fully state the security obligations set out herein or in any of the Collateral Documents, or to perfect, protect or preserve any Liens created pursuant to any of the Collateral Documents, or to make any recordings, to file any notices, or obtain any consents as may be necessary or appropriate in connection with the transactions contemplated by this Agreement. Section 9.05. Performance of Obligations. The Tribe will repay the Note according to its reading, tenor and effect. The Tribe will do and perform every act required of it by the Loan Documents at the time or times and in the manner specified. Section 9.06. Reimbursement of Expenses. The Tribe shall pay all reasonable legal fees, inspection fees, travel and other expenses incurred by the Bank in connection with the preparation, execution, filing and compliance with the Loan Documents (including any amendments). Following five (5) days notice to the Tribe (unless the Bank reasonably deems such payment must be paid more promptly), the Tribe shall reimburse the Bank for all payments expended, advanced or incurred by the Bank to satisfy any obligation of the Tribe under this Agreement, or to collect the Obligations, or to enforce the rights of the Bank under the Loan Documents, or in the Event of Default to protect the Collateral, which amounts will include all court costs, attorneys' fees, fees of auditors and accountants, and investigation expenses reasonably incurred by the Bank in connection with any such matters, together with interest at the Post-Default Rate on each such amount from the date that the same is expended, advanced or incurred by the Bank until the date of reimbursement to the Bank. Section 9.07. Insurance. At its sole cost and expense, the Tribe shall keep and maintain (i) the Gaming Equipment and the General Equipment insured for its full insurable value against loss or damage by TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 17 22 fire, flood, theft, explosion, sprinklers and all other hazards and risks ordinarily insured against under all risk policies in use in the jurisdiction where such properties are located; (ii) insurance against claims for general comprehensive liability relating to bodily injury, death or property damage in amounts as shall be satisfactory to the Bank in its reasonable judgment; and (iii) insurance under the workers' compensation laws of the respective states in which it conducts business. The Tribe shall notify the Bank promptly of any event or occurrence causing a material loss or decline in value of the Gaming Equipment and General Equipment and the occurrence of an event which may reasonably lead to the filing or threat of a filing of a claim for bodily injury, death or property damage or any claim under any workers' compensation law or the filing of such claim and the estimated (or actual, if available) amount of such loss or decline or claim. All policies of insurance on the Gaming Equipment and General Equipment shall be in form and with insurers recognized as adequate by prudent business persons and all such policies shall be in such amounts as may be reasonably satisfactory to the Bank. Upon the request of the Bank, Tribe shall deliver to the Bank the original (or certified copy) of each policy of insurance on the Gaming Equipment and General Equipment and evidence of payment of all premiums therefor. Such policies of insurance shall contain an endorsement, in form and substance acceptable to the Bank, showing loss payable to the Bank. Such endorsement, or an independent instrument furnished to the Bank, shall provide that the insurance companies will give the Bank at least thirty (30) days' prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of the Tribe or any other person shall affect the right of the Bank to recover under such policy or policies of insurance in case of loss or damage. Tribe hereby directs all insurers under such policies of insurance where loss or damage to Gaming Equipment and General Equipment exceeds $25,000.00 under any such policy of insurance to pay all proceeds payable thereunder jointly to the Tribe and the Bank. So long as no Event of Default exists hereunder, in the case of insurance proceeds arising from the loss or damage of improvements to the Tribe's real and personal property, the proceeds may, at the option of the Tribe, be used to replace or restore same with property having equal or greater value and utility to that lost or destroyed. The Tribe irrevocably makes, constitutes and appoints the Bank (and all officers, employees or agents designated by the Bank) as the Tribe's true and lawful attorney (and agent-in-fact), effective from and after the occurrence of an Event of Default and the exercise by the Bank of any remedy granted hereunder, for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of the Tribe on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. In the event the Tribe, at any time or times hereafter, shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then the Bank, without waiving or releasing any obligation or default by the Tribe hereunder, may (but shall be under no obligation to) at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Bank deems advisable. All sums so disbursed by the Bank, including reasonable attorneys' fees, court costs and expenses relating thereto, shall be payable, on demand, by the Tribe to the Bank, shall bear interest until paid in full at the Post-Default Rate and shall be additional Obligations hereunder secured by the Gaming Equipment and General Equipment. Section 9.08. Accounts and Records. The Tribe and the Enterprise will keep books of record and accounts in which true and correct entries will be made as to all material matters of all dealings or transactions in relation to their respective business and activities, in accordance with GAAP, except for changes in accounting principles or practices with which the independent public accountants for each such Entity concur and except as otherwise provided in the Management Contract. Section 9.09. Right of Inspection. The Tribe will permit any officer, employee or agent authorized by the Bank to visit and inspect the Collateral, the Property, the Casino, the Hotel and any other property TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 18 23 owned by the Tribe and related to the operation of the Equipment, the Hotel or the Casino. Upon an Event of Default for non-payment, or any other Event of Default which has not been remedied pursuant to relevant Sections 11.01(b) or (c), the Tribe and the Enterprise will permit any officer, employee or agent authorized by the Bank to examine its books of record and accounts, to take copies and extracts therefrom, and to discuss its affairs, finances and accounts with their respective officers, accountants and auditors, all at such reasonable times and as often as the Bank may reasonably desire upon two (2) days prior notice. Section 9.10. Notice of Certain Events. The Tribe shall promptly notify the Bank if the Tribe learns of the occurrence of any event which constitutes an Event of Default, together with a detailed statement by a responsible officer of the Tribe of the steps being taken to cure the effect of such an Event of Default. Section 9.11. ERISA Information and Compliance. To the extent ERISA is applicable to the Tribe, the Tribe will promptly furnish to the Bank (i) promptly after the filing thereof with the United States Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of each annual and other report with respect to each ERISA Plan or any trust created by the Tribe or the Enterprise, and (ii) immediately upon becoming aware of the occurrence of any "reportable event," as such term is defined in Section 4043 of ERISA, or of any "prohibited transaction," as such term is defined in Section 4975 of the Internal Revenue Code of 1986, as amended, in connection with any ERISA Plan or any trust created by any such Entity, a written notice signed by the chief executive officer or the principal financial officer of such Entity specifying the nature thereof, what action such Entity is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto. The Tribe and the Enterprise will comply with all of the applicable funding and other requirements of ERISA as such requirements relate to any such ERISA Plan of each Entity. Section 9.12. Indemnification. (a) The Tribe will indemnify the Bank and hold the Bank harmless from claims of brokers or agents with whom the Tribe or the Enterprise have dealt in the execution hereof or the consummation of the transactions contemplated hereby. (b) The Tribe will indemnify the Bank and hold the Bank harmless from any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses (including, without limitation, costs of suit, reasonable attorneys' fees and fees of expert witnesses) of whatever kind or nature which may be imposed on, incurred by or asserted at any time against the Bank in any way relating to, or arising in connection with, the use or possession of any of the Collateral, except for the Bank's negligence, gross negligence or intentional acts. Without prejudice to the survival of any other agreements of the Tribe hereunder, the provisions of this Section 9.12 (b) shall survive the final payment of all Obligations and the termination of this Agreement and shall continue thereafter in full force and effect. Section 9.13. Compliance with Laws and Covenants. The Tribe and the Enterprise shall observe and comply with all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, certificates, franchises, permits, licenses, authorizations, directions and requirements of all federal, state, county, municipal and other governments, departments, commissions, boards, courts, authorities, officials and officers domestic or foreign, applicable to such Entities, the Property or the Collateral. Section 9.14. Environmental Indemnity. The Tribe shall defend, indemnify and hold Bank and its directors, officers, agents and employees harmless from and against all claims, demands, causes of action, TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 19 24 liabilities, losses, costs and expenses (including, without limitation, costs of suit, reasonable attorneys' fees and fees of expert witnesses) arising from or in connection with (i) the presence on or under the Property of any hazardous substances or solid wastes (as defined elsewhere in this Agreement), or any releases or discharges of any hazardous substances or solid wastes on, under or from the Property, (ii) any activity carried on or undertaken on or off the Property, whether prior to or during the term of this Agreement and whether by Tribe or any predecessor in title or any officers, employees, agents, contractors or subcontractors of Tribe or any predecessor in title, or any third persons (other than the Bank's agents) at any time occupying or present on the Property, in connection with the handling, use, generation, manufacture, treatment, removal, storage, decontamination, clean-up, transport or disposal of any hazardous substances or solid wastes at any time located or present on or under the Property, or (iii) any breach of any representation, warranty or covenant under Section 8.17 of this Agreement. The foregoing indemnity shall further apply to any residual contamination on or under the Property, or affecting any natural resources, and to any contamination of any Property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such hazardous substances or solid wastes, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances. Without prejudice to the survival of any other agreements of the Tribe hereunder, the provisions of this Section 9.14 shall survive the final payment of all Obligations and the termination of this Agreement and shall continue thereafter in full force and effect. Section 9.15. Financial Covenants. (a) Minimum Debt Service Coverage Ratio and Ratio of Total Liabilities to EBITDA. From the date hereof and for so long as any part of the Obligations are outstanding, the Enterprise shall maintain the following: (i) Minimum Debt Service Coverage Ratio of 2.50:1.00, which ratio will be calculated as follows: Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") divided by Current Maturities of Long-Term Debt, including any capital leases plus Interest Expense during the time period calculated (this shall include debt service requirements of the Tribe in relation to the operation of the Enterprise); and (ii) Ratio of Total Liabilities (as defined by GAAP) to EBITDA of not more than 2.00:1.00 (Total Liabilities shall include all of the liabilities of the Tribe which relate to the operation of the Enterprise). The above financial covenants shall be calculated on an annual basis and shall be certified, reported and delivered within ninety (90) days following the last day of each fiscal year by the chief financial officer of the Enterprise or other officer acceptable to the Bank. (b) Minimum Net Worth. From the date hereof and for so long as any part of the Obligations are outstanding, the Enterprise shall maintain a Net Worth, determined under GAAP, equal to or in excess of Twenty Eight Million and no/100 Dollars ($28,000,000.00). This covenant shall be computed quarterly commencing with the period ending March 31, 1999. Section 9.16. Management of the Enterprise. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 20 25 (a) From the Effective Date hereof and until all obligations under the Existing Loan Agreement are fully satisfied, including, without limitation, payment in full of the Existing Loan, the Management Contract will remain in force and effect to the same extent set forth in Section 9.18 of the Existing Loan Agreement; and (b) From the date that all obligations under the Existing Loan Agreement are fully satisfied, including, without limitation, payment in full of the Existing Loan, and until all obligations under this Equipment Loan Agreement are fully satisfied, including, without limitation, payment in full of the Loan and the Note, either; (i) the Management Contract will remain in full force and effect; or (ii) if the Management Contract is terminated before the Note is paid in full: (x) the Enterprise and the Casino will be managed by a successor manager acceptable to the Bank in its sole discretion; or (y) the Tribe shall manage the Enterprise and the Casino pursuant to an operating plan and budget acceptable to the Bank, in its sole discretion. Section 9.17. Repayment of Existing Debts. The Tribe will maintain its repayment schedule and shall not prepay, or otherwise accelerate the payment of, any indebtedness owed by the Tribe to any of the Grand Entities; provided however, that as long as the Tribe is not in default of the terms of this Agreement, the Tribe may prepay or otherwise accelerate any such payment of indebtedness. Section 9.18. Maintenance of Gaming Licenses and Gaming Operations. The Tribe and Grand Casinos/Tunica-Biloxi shall be in full compliance with all federal, state and local laws regarding its gaming operations and each shall maintain all applicable governmental permits, licenses and authorizations required to operate the Casino in the State of Louisiana. Subject to the provisions of Section 9.16, the Tribe and Grand Casinos/Tunica-Biloxi shall continue to operate the Casino under the Management Contract. The Tribe shall at all times maintain the Louisiana Compact in effect (including any renewal thereof) so that the Tribe may continue to conduct gaming operations at the Casino in the manner currently conducted and in compliance with the provisions of Section 9.15. Nothing herein shall be construed to interpret a change in the percentage of revenues paid by the Tribe to the State of Louisiana in a renewal of the Louisiana Compact as a violation of this Section 9.18 as long as the Tribe is in compliance with the provisions of Section 9.15. Section 9.19 Schedule of Enterprise Assets. The Tribe shall deliver to the Bank, as often as the Bank shall require, such lists, descriptions, and designations of the Enterprise Assets as the Bank may require to identify the nature, extent, and location of the Enterprise Assets. ARTICLE 10. NEGATIVE COVENANTS. Unless the Bank's prior written consent to the contrary is obtained (which consent will not be unreasonably withheld or delayed), the Tribe will at all times comply, and shall cause the Enterprise and the Grand Entities to comply, with the covenants contained in this Article 10 which are applicable to each, from the date hereof and for so long as any part of the Obligations are outstanding. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 21 26 Section 10.01. Liens on the Collateral. The Tribe will not create, incur, assume or permit to exist any Lien on any of the Enterprise Assets except for: (a) Liens in favor of the Bank to secure the Obligations; (b) Liens for taxes, assessments or other governmental charges; not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted if such reserve as shall be required by GAAP shall have been made therefor; (c) Liens of mechanics, laborers and materialmen and vendors arising by law in the ordinary course of business for claims either not yet due or being contested in good faith by appropriate action promptly initiated and diligently conducted if such reserve as shall be required by GAAP shall have been made therefor; (d) Inchoate liens arising under ERISA to secure the contingent liability of the Tribe; and (e) Liens in favor of Persons other than the Bank which Liens have been expressly made inferior to the Liens in favor of the Bank; provided however, the prohibitions set forth in this Section 10.01 shall not apply to Enterprise Assets acquired on credit after the Effective Date. Section 10.02. Change of Office. Neither the Tribe nor the Enterprise shall change its federal taxpayer identification number or the address of its chief executive office, without providing ten (10) days prior notice to the Bank. Section 10.03. Accounting Methods. None of the Entities shall change the accounting methods or procedures currently employed by them. Section 10.04. No Change in the Management Contract. The Tribe and Grand Casinos/Tunica-Biloxi shall not amend, supplement, alter or otherwise change the Management Contract. Further, neither the Tribe nor Grand Casinos/Tunica-Biloxi shall assign or otherwise alienate its interest in the Management Contract. Section 10.05. Distribution of Net Profits. Notwithstanding anything to the contrary contained in the Management Contract, the Tribe and Grand Casinos/Tunica-Biloxi shall not distribute during any calendar month any Net Profits unless and until: (a) the requirements of Article 3 of the Dominion Account Agreement have been satisfied; and (b) any other sums currently due to the Bank under the Loan Documents and the Existing Loan Agreement have been paid in full. Further, the Tribe and Grand Casinos/Tunica-Biloxi shall not distribute any Net Profits under the Management Contract so long as an Event of Default exists under this Agreement and/or the Existing Loan Agreement. In addition to the foregoing, the Tribe shall not pay management fees or other compensation to the Grand Entities unless payments to the Bank under the Loan Documents and the Existing Loan Agreement are current. Section 10.06. Impairment of Contracts; Imposition of Governmental Charges. (a) The Tribe shall not adopt, enact, promulgate or otherwise place into effect any law or requirement of law which impairs or interferes in any manner with any right or remedy of the Bank, or the Obligations (it being understood and agreed that any such law or requirement of law which is adopted, enacted, TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 22 27 promulgated or otherwise placed into effect without the consent of the Bank shall, with respect to the Loan Documents, the rights and remedies of the Bank, and the Obligations, be void and of no effect). (b) The Tribe shall not demand, impose or receive any tax, charge, assessment, fee or other imposition which in the aggregate exceed the sum of $1,500.00 per calendar year or impose any regulatory or licensing requirement against the Bank, or its employees, officers or directors other than those requirements in effect as of the Effective Date. Section 10.07. No Alienation. The Tribe shall not convey, transfer or otherwise alienate, in whole or in part, any of the Enterprise Assets except for the distributions of Net Profits in accordance with the provisions of Section 10.05 of this Agreement. ARTICLE 11. DEFAULT. Section 11.01. Events of Default. The occurrence of any of the following events (including the expiration of any specified time) shall constitute an "Event of Default": (a) Principal and Interest Payments. The Tribe fails to make any payment when due under the Note or under any of the other Loan Documents; or (b) Representations and Warranties. Any representation or warranty made by the Tribe proves to have been incorrect in any material respect as of the date thereof; or any representation, statement (including financial statements), certificate or data furnished or made by any of the Entities (or any officer, accountant or attorney of any Entity) under this Agreement, proves to have been untrue in any material respect, as of the date as of which the facts therein set forth were stated or certified and such default continues unremedied for a period of thirty (30) days after the earlier of (i) notice thereof being given by the Bank to the Tribe, or (ii) such default otherwise becoming known to the chief executive officer of the Tribe; or (c) Covenants. Any of the Entities defaults in the observance or performance of any of the covenants or agreements contained in the Loan Documents, to be kept or performed by any of the Entities, as the case may be (other than a default under Section 11.01 (a) hereof), and such default continues unremedied for a period of ten (10) days after the earlier of (i) notice thereof being given by the Bank to each of the Entities, or (ii) such default otherwise becoming known to the chief executive officer or chief financial officer of such Entity; or (d) Involuntary Bankruptcy or Receivership Proceedings. A receiver, conservator, liquidator or trustee of the Tribe, or of any of its property is appointed by order or decree of any court or agency or supervisory authority having jurisdiction; or an order for relief is entered against the Tribe, under the Federal Bankruptcy Code; or the Tribe is adjudicated bankrupt or insolvent; or any material portion of the properties of the Tribe is sequestered by court order and such order remains in effect for more than thirty (30) days after such party obtains knowledge thereof; or a petition is filed against the Tribe under any state, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any jurisdiction, whether now or hereafter in effect, and such petition is not dismissed within sixty (60) days; or (e) Voluntary Petitions. The Tribe files a case under the Federal Bankruptcy Code or seeks relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 23 28 debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any case or petition against it under any such law; or (f) Assignments for Benefit of Creditors. The Tribe makes an assignment for the benefit of its creditors, or admits in writing its inability to pay its debts generally as they become due, or consents to the appointment of a receiver, trustee or liquidator of the Tribe or of all or any part of its property; or (g) Undischarged Judgments. Judgment for the payment of money in excess of $250,000.00 (which is not covered by insurance) is rendered by any court of competent jurisdiction against the Tribe, and the Tribe does not discharge the same or provide for its discharge in accordance with its terms, or prevent execution thereof, and during such period in which execution of such judgment shall have been stayed, the Tribe does not appeal therefrom and cause the execution thereof to be stayed during such appeal while providing such reserves therefor as may be required under GAAP; or (h) Attachment. A writ or warrant of attachment, seizure or any similar process shall be issued by any court against the Collateral, the Hotel, or the Property or all or any material portion of the remaining property of the Tribe, and such writ or warrant of attachment or any similar process is not released or bonded within thirty (30) days after its entry; or (i) Breach of Other Agreements with the Bank. The Tribe defaults in the observance or performance of any of the covenants or agreements contained in any agreement (other than the Loan Documents) between the Bank and the Tribe, including without limitation, a breach of the Existing Loan Agreement, and such default is not remedied within the time permitted by any applicable cure period. Section 11.02. Remedies. Upon the occurrence and during the continuance of an Event of Default, the Bank may, in addition to any other remedies available to it at law or in equity, exercise any one or more of the following remedies: (a) The Bank may, by written notice to the Tribe, declare all Obligations to be immediately due and payable, whereupon such obligations shall become immediately due and payable; (b) The Bank may exercise any remedy available to it under any Loan Document; and/or (c) The Bank may take whatever action at law or in equity that may appear necessary or appropriate to collect any amount due or thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of any Entity under any Loan Document. Section 11.03. Set-Off. Upon the occurrence of any Event of Default, the Bank shall have the right to set-off any funds of the Tribe in any account maintained by the Tribe with the Bank or otherwise in possession or control of the Bank against any amounts then due by the Tribe to the Bank. ARTICLE 12. EXPENSES AND FEES INCURRED IN CLOSING. Upon demand by Bank, Tribe shall pay to Bank, reimburse Bank or pay third parties all reasonable expenses arising in connection with the Agreement, the delivery of the Loan Documents and the closing of the transactions contemplated hereby, including, but not limited to the following: TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 24 29 (a) All reasonable legal fees, recording and other expenses incurred by Bank in connection with the Loan, including fees related to any required attorney's opinion; and (b) All reasonable costs and expenses associated with the preparation and delivery of all appraisals and reports and of all financial information. ARTICLE 13. CLOSING AND FUNDING. Section 13.01. Closing. The Closing shall be held at the Casino near Marksville, Louisiana, on or before May 31, 1999, at 1:00 o'clock P.M., or on such date as may be agreed upon by the Tribe, and Bank. At the Closing, the Loan Documents will be executed. The appropriate Loan Documents will then be submitted to the Secretary of the Interior, Bureau of Indian Affairs, for its approval under 25 U.S.C.A. 81. Section 13.02. Funding. At such time as the conditions precedent to Funding as set forth in Article 5 and the other terms and conditions of the Agreement have been satisfied in the opinion of Bank, Bank will notify Tribe and Bank will commence making Advances to Tribe pursuant to the terms hereof. ARTICLE 14. [INTENTIONALLY LEFT BLANK] ARTICLE 15. MISCELLANEOUS. Section 15.01. Notices. Any notice or demand which, by provision of this Agreement, is required or permitted to be given or served hereunder shall be deemed to have been sufficiently given and served for all purposes: (a) (if mailed) seven (7) calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail; or (b) (if delivered by express courier or if delivered in person) the same day as delivery (until another address or addresses are given in writing by such Entity to Bank) as follows: To the Tribe: Tunica-Biloxi Tribe of Louisiana Post Office Box 331 711 Grand Boulevard Marksville, Louisiana 71351 Attention: Earl J. Barbry, Sr., Chairman Telephone No. (318) 253-5432 Fax No. (318) 253-9791 With simultaneous copies in each instance to: Gold, Weems, Bruser, Sue & Rundell Attorneys at Law 2001 MacArthur Drive Alexandria, Louisiana 71307 Attn: Amanda Wood Barnett J. Kendall Rathburn Telephone No. (318) 445-6471 Fax No. (318) 445-6467 TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 25 30 Grand Casinos of Louisiana, L.L.C.-Tunica-Biloxi 130 Chesire Lane Minnetonka, Minnesota 55305 Attention: Chief Financial Officer To Bank: Hibernia National Bank 333 Travis Street Shreveport, Louisiana 71101 Attention: Legal Administration Department Section 15.02. Invalidity. In the event that any one or more of the provisions contained in this Agreement or the other Loan Documents shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or the other Loan Documents. Section 15.03. Survival of Agreements. All representations and warranties of the Tribe herein, and all covenants and agreements herein not fully performed before the effective date of this Agreement shall survive such date until all of the Obligations have been paid in full. Section 15.04. Successors and Assigns. (a) All covenants and agreements contained by or on behalf of the Tribe in this Agreement and the other Loan Documents shall bind its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. No person who is not a party hereto may rely upon or claim a benefit from this Agreement, other than a successor or assign of the Bank, including a Transferee in the Loan. (b) Tribe acknowledges that Bank may elect to sell, assign, and otherwise transfer to other Persons (each, a Transferee) who have the appropriate State and Tribal license and permits all or portions of, and participations in, Bank's interest in the Loan outstanding (and its commitment to make the Loan) hereunder from time to time upon the Bank or such a Transferee obtaining any governmental authorization required for such a transfer. Such licensing and permitting will not be required in the event of participation of portions of Bank's interest in the Loan, so long as Bank retains an interest in the Loan. The Tribe expressly agrees that the holder of the Loan or interest therein (or commitment to make the Loan hereunder) shall be a "Bank" hereunder; provided however, that as long as the Bank owns an interest in the Loan, the Tribe shall have no obligation to communicate or deal with any Transferee. For purposes of this Section 15.04, Bank may disclose to a potential or actual Transferee any and all information supplied to Bank by or on behalf of Tribe, subject to a confidentiality agreement to be approved by the Tribe, which said approval will not be unreasonably withheld. Tribe agrees to execute and deliver to Bank such documents, instruments, and agreements, including, without limitation, amendments to the Loan Documents, reasonably deemed necessary or desirable by Bank to effect such transfers. Bank will give Tribe ten (10) days written notice of any participation of the Loan. (c) This Agreement is for the benefit of the Bank and for such other Person or Persons as may from time to time become or be the holders of any of the Obligations. The Loan Documents shall be transferrable and negotiable, with the same force and effect and to the same extent as the Obligations may be transferrable, it being understood that, upon the transfer or assignment by the Bank of any of the Obligations, TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 26 31 the legal holder of such Obligations shall have all of the rights granted to the Bank under this Agreement and the other Loan Documents. (d) Subject to the provisions of Section 15.04(b) regarding the dissemination of information to Transferees, Bank will keep confidential all information provided by the Tribe to the Bank regarding the Tribe's Business; provided however, the Bank need not keep confidential and may disclose any such information that: (i) is already in the public domain or becomes available to the public through no breach of this Agreement by the Bank; (ii) is received by the Bank independently from a third party free to disclose such information to the Bank; or (iii) is required to be disclosed pursuant to the order of a court or government agency, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement. Section 15.05. Waivers. No course of dealing on the part of the Bank its officers, employees, consultants or agents, nor any failure or delay by the Bank with respect to exercising any of its rights, powers or privileges under this Agreement or the other Loan Documents shall operate as a waiver thereof. Section 15.06. Cumulative Rights. The rights and remedies of the Bank under this Agreement and the other Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. Section 15.07. Governing Law. This Agreement is, and the other Loan Documents will be, contracts made under and shall be construed in accordance with and governed by the laws of the United States of America and the State of Louisiana. Section 15.08. Amendment. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally or in any manner other than by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. Section 15.09. Entire Agreement. This Agreement sets forth the entire agreement of the Bank and the Tribe with respect to the matters covered herein, and supersedes all prior written or oral understandings with respect thereto. In the event of an express conflict between the provisions of the Agreement and any Loan Document, the provisions of the Agreement shall govern; provided however, the fact that a Loan Document contains a covenant, an obligation, event of default, remedy or other provision not set forth in the Agreement does not constitute such an express conflict. Section 15.10. Limited Sovereign Immunity Waiver; Arbitration; Submission to Jurisdiction, Jury Trial Waiver. (a) Limited Waiver of Sovereign Immunity. The Tribe hereby expressly grants a limited waiver of its sovereign immunity (and any and all defenses based thereon) only from or to any suit, action or proceeding and from any legal process (whether through service of notice, attachment, execution, exercise of contempt powers or otherwise) with respect to any action brought by the Bank against the Tribe seeking to enforce this Agreement and any other Loan Document executed by the Tribe, including, but not limited to, the Equipment Loan Promissory Note, the Commercial Security Agreement, and the Dominion Account Agreement by and between the Tribe and the Bank dated as of the Effective Date and any amendments, supplements or modifications to any such Loan Documents; provided however, any judgment or order rendered in any such suit, action or proceeding shall only apply and be enforceable against Enterprise Assets, including, TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 27 32 without limitation, the Collateral. Any such action brought by the Bank against the Tribe shall be brought only in the Alexandria, Monroe, or Shreveport Divisions of the United States District Court for the Western District of Louisiana, the United States Court of Appeals for the Fifth Circuit, and the United States Supreme Court, and if the United States District Court declines or determines that it lacks jurisdiction, then in the 12th Judicial District Court of Louisiana, Avoyelles Parish (any such court herein referred to as a "Jurisdictional Court"). By the execution and delivery of this Agreement, the Tribe irrevocably consents to and submits to the personal jurisdiction and venue of each such Jurisdictional Court to the extent of the limited waiver set forth herein. The Bank shall have all available legal and equitable remedies, including, without limitation the rights to specific performance, money damages and/or injunctive and declaratory relief and the rights and remedies under the UCC to the extent adopted in the State of Louisiana or to the extent the UCC does not apply, the rights and remedies under the Uniform Commercial Code as in effect under the laws of the Tribe all within the constraints of the above limited waiver of sovereign immunity. The Tribe agrees that the applicable law governing each of the Loan Documents shall be the laws of the State of Louisiana. This limited waiver of sovereign immunity and consent shall be only as stated above. No other consent or waiver either direct or implied is to be inferred from any aspect of this Agreement or any of the Loan Documents. This limited waiver of sovereign immunity is irrevocable only as long as any obligations of the Tribe remain outstanding and in effect under the Loan Documents. (b) Service of Process. The Tribe agrees that process served either personally or by registered mail to its notice address provided in Section 15.01 shall, to the extent permitted by law, constitute adequate service of process in any such suit. Without limiting the foregoing, the Tribe hereby appoints, in the case of any such action or proceeding brought in a Jurisdictional Court, Chairman Earl J. Barbry, Sr., Marksville, Louisiana, to receive for it and on its behalf, service of process in the State of Louisiana with respect thereto, provided the Tribe may appoint any other person, with offices in the State of Louisiana to replace such agent for service of process upon delivery to the Bank of a reasonably acceptable agreement of such new agent agreeing so to act. Nothing herein shall in any way be deemed to limit the ability of the Bank to serve any such writs, process or summonses in any manner permitted by applicable law or to obtain jurisdiction over the Tribe in such other jurisdictions and in such manners as may be permitted by applicable law. (c) Waiver of Jurisdiction of Tribal Courts. The Tribe agrees and consents that it is expressly and irrevocably prohibited from seeking, and will not seek, the exercise of the jurisdiction of any of the courts of the Tribe (whether now or hereafter existing) or other forums (whether now or hereafter existing) of the Tribe over any suit, action or proceeding relating in any manner to the Loan Documents, and the Tribe hereby waives any claim or right that the Tribe may possess to the exercise of such jurisdiction, and any requirement that tribal remedies be exhausted is hereby waived; provided, however, that: (i) in the event that the Bank shall obtain in a Jurisdictional Court any judgment against the Tribe relating to the Loan Documents, then the courts of the Tribe shall have nonexclusive jurisdiction to enforce such judgment without substantive review of such judgment or the basis therefor: and (ii) in the event that the Bank shall elect arbitration as provided in Section 15.10(d), then the courts of the Tribe shall have nonexclusive jurisdiction to enforce any award made in such arbitration against the Tribe, without substantive review of such award or the basis thereof. (d) Arbitration Reference. Subject to the provisions of Section 15.10 (a), any controversy or claim between or among the parties arising out of or relating to this Agreement or any Loan Documents or a claim based on or arising from an alleged tort shall, at the option of the Bank, be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrators shall give effect to statutes of limitation in TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 28 33 determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrators. Judgment upon the arbitration award may be entered in any Jurisdictional Court and in any tribal court. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Jury Trial and Damage Waivers. Each of the Tribe and the Bank hereby (i) irrevocably and unconditionally waives, to the fullest extent permitted by law, trial by jury in any legal action or proceeding relating to any Loan Document and for any counterclaim therein; (ii) irrevocably waives to the maximum extent not prohibited by law, any right it may have to claim or recover in any such litigation any special, exemplary, punitive or consequential damages other than, or in addition to, actual damages; (iii) certifies that no party hereto nor any representative or agent of counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the foregoing waivers, and (iv) acknowledges that it has been induced to enter into this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby by, among other things, the mutual waivers and certifications contained in this provision. No officer of the Bank has the authority to waiver, condition or modify this provision except upon the express authority of the Bank's Board of Directors. Section 15.11. Preparation. No implication or reference shall be drawn from the fact that any party prepared or proposed portions of or the entirety of this Agreement or any of the other Loan Documents and the same shall be construed to have been drafted by and for the benefit of the Bank and the Tribe equally. Section 15.12. Form of Documents. Each agreement, document, instrument, certificate or other writing to be furnished to the Bank under any provision of this Agreement, including but not limited to the Collateral Documents, must be in form and substance satisfactory to the Bank and its legal counsel. Section 15.13. Counterparts. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 15.14 Suspension of Loan. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any interest rate for the Loan for any Interest Period therefor, the Bank determines (which determination made on a reasonable basis shall be conclusive absent manifest error) that: (a) quotations of interest rates for the relevant deposits referred to in the definition of "Base Rate" hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for the Loan as provided in this Agreement; or (b) the relevant rates of interest referred to in the definition of "Base Rate" hereof upon the basis of which the LIBOR Rate for such Interest Period is to be determined do not adequately reflect the cost to the Bank of making or maintaining the Loan for such Interest Period (which determination shall be made on a reasonable basis and the Bank shall furnish the Tribe evidence of the facts leading to such determination); then the Bank shall give the Authorized Officer prompt notice thereof, and so long as such condition remains in effect, the Bank may charge interest on the outstanding balance of the Loan at the Index commencing on the last day of the then current Interest Period. The Bank shall give the Authorized Officer notice describing TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 29 34 in reasonable detail any event or condition described in this Section 15.14 promptly following the Bank's determination that the availability of LIBOR Rate for the Loan is, or is to be, suspended as a result thereof. Section 15.15 Illegality. Notwithstanding any other provision of this Agreement in the event that it becomes unlawful for the Bank to honor its obligation to make or maintain the Loan at the LIBOR Rate hereunder, then the Bank shall promptly notify the Tribe thereof and the Bank's obligation to make or continue the Loan at the LIBOR Rate, shall be suspended and the outstanding principal balance of the Loan shall bear interest at the Index until such time as the Bank may again make and maintain the Loan at the LIBOR Rate. Section 15.16 Year 2000. Tribe agrees to perform all acts reasonably necessary to ensure that (a) the Tribe, the Enterprise, and any other business in which the Tribe holds a substantial interest, and (b) all customers, suppliers, and vendors that are material to the Tribe's business, become Year 2000 Compliant in a timely manner. As used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. The Tribe shall, immediately upon request, provide to the Bank such certifications or other evidence of the Tribe' compliance with the terms hereof as the Bank may from time to time require. Section 15.17 Compliance with 25 U.S.C. '81. In compliance with 25 U.S.C. '81 the residence and occupation of the parties is stated as follows: Party in interest: TUNICA-BILOXI TRIBE OF LOUISIANA Residence: 711 Grand Boulevard Marksville, Louisiana 70532 Occupation: A federally recognized Indian Tribe Party in interest: HIBERNIA NATIONAL BANK Residence: 333 Travis Street Shreveport, LA 71101 Occupation: Commercial bank Scope of Authority: The Tribe is authorized to execute the within document by a resolution adopted by the Tribal Council of the Tribe at a meeting held at Marksville, Louisiana, on April 19, 1999. The Tribal Council exercises its authority in this instance because it believes the purchase of the Equipment related to the Tribe's Class III gaming facility in Marksville, Louisiana, and the financing thereof, to be in accordance with the long-range economic objectives of the Tribe. This document was executed on behalf of the Tribe on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana, and on behalf of the Bank on or about 12:10 p.m. on May 28, 1999, at Marksville, Louisiana. Section 5.18 Signatures. The signature of Earl J. Barbry, Sr., Chairman, or any other officer of the Tribe, wherever contained in any Loan Document, is made solely on behalf of the Tribe and no personal liabilities shall be assumed by any such a signatory. TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 30 35 This instrument shall terminate upon payment in full of the indebtedness evidenced hereby, provided that in any event this instrument shall expire not later than 50 years from the date hereof. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed in multiple originals as of the Effective Date. TRIBE: TUNICA-BILOXI TRIBE OF LOUISIANA By: /s/ Earl J. Barbry, Sr. ----------------------------------- Name: Earl J. Barbry, Sr. Title: Chairman BANK: HIBERNIA NATIONAL BANK By: /s/ Christopher K. Haskew ----------------------------------- Name: Christopher K. Haskew Title: Vice President BIA APPROVAL THE FOREGOING DOCUMENT IS APPROVED PURSUANT TO 25 U.S.C. 81: UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF INDIAN AFFAIRS: BY_______________________________________ AREA DIRECTOR OF THE EASTERN AREA OFFICE OF THE BUREAU OF INDIAN AFFAIRS OF THE SECRETARY OF THE INTERIOR AND THE COMMISSIONER OF INDIAN AFFAIRS, ACTING UNDER DELEGATED AUTHORITY. MEBB 26984.3 TUNICA-BILOXI TRIBE/$6,000,000 EQUIPMENT LOAN AGREEMENT -- PAGE 31 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JAN-02-2000 JUL-04-1999 49,266 0 15,251 0 0 87,610 2,521 1,115 173,239 21,021 975 0 0 106 148,580 173,239 30,001 30,001 4,602 5,557 364 0 49 29,378 12,194 17,184 0 0 0 17,184 1.62 1.60
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