Insurance Receivable Agreement - Lakes Gaming Inc. and Grand Casinos Inc.
INSURANCE RECEIVABLE AGREEMENT
THIS INSURANCE RECEIVABLE AGREEMENT (this "Agreement"), dated
as of December 31, 1998, is entered into by and among LAKES GAMING, INC., a
Minnesota corporation ("Lakes") and GRAND CASINOS, INC., a Minnesota corporation
("Company").
RECITALS
A. Lakes and Company have entered into a Distribution Agreement, dated
as of December 31, 1998 and certain ancillary agreements thereto (collectively,
the "Distribution Agreement"), which provide for, among other things, (i) the
transfer by Company to Lakes of all of the operations, assets and Liabilities of
Company and its subsidiaries comprising the Non-Mississippi Business (as defined
therein) and (ii) the distribution (the "Distribution") to the holders of
Company's common stock of all of the outstanding shares of Lakes' common stock.
B. A material condition to the consummation of the transactions
contemplated by the Distribution Agreement is that the parties hereto enter into
this Agreement.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. Defined Terms.
For purposes of this Agreement:
"Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"Claim" has the meaning set forth in Section 3(a).
"Counter Notice" has the meaning set forth in Section 3(a).
"Liabilities" means any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Notice" has the meaning set forth in Section 3(a).
2. Declaration of Trust. As a non-exclusive source of payment
with respect to (i) Claims made under Section 5(b) (the "Overrun Claims") and
(ii) Company's receipt of cash proceeds totaling [$8.3] million (the "Class A
Claims") and [$5.1] million (the "Class B Claims,") (collectively, the Class A
Claims and the Class B Claims are referred to herein as the "Hurricane Claims"),
respectively, relating to insurance claims for real and personal property
damaged in Hurricane Georges at the Grand Casino Gulfport and Grand Casino
Biloxi (including all related hotels and facilities) located in Gulfport and
Biloxi, Mississippi, respectively, Lakes grants and transfers to Company to
hold, and Company is hereby authorized and directed by Lakes to accept, and
Company hereby accepts, in trust under this Agreement, for the benefit of
Company, its affiliates, subsidiaries and all other present and future holders
of any of the Hurricane Claims and each and all of their members, successors and
assigns, all right, title and interest in to $9,000,000 (collectively, the
"Initial Trust Estate," and together with any and all present and future
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income, distributions, substitutions, replacements and proceeds of or from the
Initial Trust Estate, the "Trust Estate"). Company shall have and hold the
foregoing Trust Estate until released to Company or Lakes in accordance with the
terms hereof, in trust under and subject to the terms and conditions set forth
herein for the benefit of Company and as a source of funds for the enforcement
of the payment, observance and performance of all the Hurricane Claims. Company
and Lakes hereby consent to the foregoing declaration of trust and agree that
the Trust Estate is to be held and applied by Company subject to the further
covenants, conditions and trust set forth herein.
3. Appointment of the Lakes Representative and the
Company Representative.
(a) Lakes hereby designates its:
Chairman of the Board,
President and Chief Executive Officer
and Chief Financial Officer
each of whom is authorized to act alone, as their duly appointed agents and
attorneys-in-fact, with full power of substitution, in any and all capacities,
for all purposes of this Agreement (each, the "Lakes Representative"). Actions
and inactions by such Lakes Representatives under this Agreement shall be
binding and conclusive on Lakes and may be conclusively relied upon by the other
parties hereto. Lakes, upon 10 days' written notice to the other parties, may
remove any person appointed as a Lakes Representative or appoint another person
as a Lakes Representative. No Lakes Representative shall be liable for any
action taken or omitted by it, or any action suffered by it to be taken or
omitted, in good faith, and in the exercise of its own best judgment.
(b) Company hereby appoints its:
Executive Vice President and Chief Financial Officer,
Executive Vice President - Law and Corporate Affairs and Secretary and
Vice President and Controller
each of whom is authorized to act alone, as their duly appointed agents and
attorneys-in-fact, with full power of substitution, in any and all capacities,
for all purposes of this Agreement (each, the "Company Representative"). Actions
and inactions by the Company Representatives under this Agreement shall be
binding and conclusive on Company and may be conclusively relied upon by the
other parties hereto. Company, upon 10 days' written notice to the other
parties, may remove any person appointed as a Company Representative or appoint
another person as a Company Representative. No Company Representative shall be
liable for any action taken or omitted by it, or any action suffered by it to be
taken or omitted, in good faith, and in the exercise of its own best judgment.
4. Payment of Claims.
(a) From time to time on or before the release
of the entire Trust Estate, the Company Representative may deliver a notice (a
"Notice") to the Lakes Representative specifying in reasonable detail the nature
and dollar amount of any claim (a "Claim") that Company has with respect to the
Section 5 Claims or the Hurricane Claims; Company may make more than one Claim
with respect to any underlying state of facts. If the Lakes Representative gives
notice to the Company Representative disputing any Claim (a "Counter Notice")
within 15 days following its receipt of the Notice, such Claim shall be resolved
as provided in Section 3(b). Lakes must have a reasonable basis in giving any
such Counter Notice and shall set forth in reasonable detail the basis of its
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objection to the Claim in the Counter Notice. If no Counter Notice is received
by the Company Representative within such 15-day period, then (i) the dollar
amount of the Claim, as set forth in the Notice, shall be deemed established for
purposes of this Agreement and the agreement(s) under which the Claim arose and
(ii) at the end of such 15-day period, Company shall be entitled to pay the
dollar amount claimed in the Notice.
(b) If a Counter Notice is received with respect to a
Claim, the parties shall promptly meet and confer and attempt in good faith to
resolve the objection. If they succeed, Company shall be entitled to promptly
pay the dollar amount of the Claim in accordance with such resolution. If the
parties shall not succeed within 5 business days of Company's receipt of the
Counter Notice, they shall, within an additional 10 business days, commence and
thereafter promptly complete an arbitration proceeding in accordance with the
provisions of Section 9.14 of the Distribution Agreement. Thereafter, Company
shall be entitled to pay the dollar amount of the Claim in accordance with the
arbitrator's award when received.
5. Release of Trust Estate.
(a) Company shall transfer and release to Lakes
the Trust Estate as promptly as practicable after (1) cash proceeds in an amount
equal to all of the Hurricane Claims are received by Company after the date
hereof and (2) either (x) Company substantially completes construction of the
repairs and replacements contemplated by the existing Company capital plan
relating to the Hurricane Claims (the "Capital Plan") or (y) 150 days have
elapsed since the date of this Agreement; provided, however, that if Company is
not diligently pursuing the collection of the Class B Claims or a portion
thereof, then Company shall release the Trust Estate when Company receives cash
proceeds in an amount equal to all of the Hurricane Claims, less those Class B
Claims not being diligently pursued.
(b) The parties agree that cost overruns associated
with completion of the Capital Plan will be funded from the Trust Estate;
provided that such cost overruns do not arise from a change in the scope of the
repairs and/or replacements outlined in the Capital Plan.
(c) Upon the final distribution of all of the
Trust Estate in accordance with the terms of this Agreement, this Agreement
shall terminate, except that the provisions of Sections 6 through and including
16 hereof shall survive such termination.
6. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given (i) when received if
personally delivered, (ii) when receipt is automatically acknowledged if
transmitted by telecopy, electronic or digital transmission method, (iii) the
day after it is sent, if sent for next day delivery to an address within the
United States and Puerto Rico by recognized overnight delivery service (e.g.
Federal Express), (iv) the third day after it is sent, if sent for next day
delivery to any other address by recognized international delivery service, and
(v) upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
(a) If to Lakes or the Lakes Representative:
Lakes Gaming, Inc.
130 Cheshire Lane
Minnetonka, Minnesota 55305
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Attn: Chairman of the Board
Telecopy: (612) 449-8509
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell
Telecopy: (612) 672-8397
(b) If to Company or the Company Representative:
Grand Casinos, Inc.
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President and
Chief Financial Officer and General
Counsel
Telecopy: (702) 699-5190 and
(702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: (973) 643-6500
7. [Intentionally Omitted].
8. Modification: Waiver. Subject to applicable law, this
Agreement may be amended, modified or supplemented, with respect to any of the
terms contained herein, only by written agreement of the parties and the rights,
remedies, immunities and benefits created hereby or arising hereunder in favor
of any person may be waived by it only by an instrument in writing signed by it.
No such right, remedy, immunity or benefit shall be deemed waived by reason of
such person's failure to act, oral statements or course of conduct, including
any grant of a waiver on a different or prior occasion.
9. Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties.
10. Assignment. This Agreement, and the rights, interests and
obligations hereunder, shall not be assigned (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
foregoing provisions of this Section 9, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
11. Governing Law. This Agreement shall be construed and
interpreted, and the rights of the parties shall be determined, in accordance
with the laws of the State of New York (without reference to the choice of
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law provisions).
12. Interest in Trust Estate. Lakes has no right to receive
any of the Trust Estate and is entitled to no payments with respect thereto,
except to the extent transferred and released to Lakes as herein provided,
effective upon such transfer and release.
13. Severability. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby. Upon any such holding that any provision of this Agreement
is null, void or unenforceable, the parties will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent possible. Except as
otherwise contemplated by this Agreement, to the extent that a party hereto took
an action inconsistent herewith or failed to take action consistent herewith or
required hereby pursuant to an order or judgment of a court or other competent
authority, such party shall incur no Liability unless such party did not in good
faith seek to resist or object to the imposition or entering of such order or
judgment.
14. Arbitration. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance or
injunctive relief thereof.
15. Remedies Cumulative. All rights and remedies of each party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
[Signature page to follow]
"COMPANY"
GRAND CASINOS, INC.,
a Minnesota corporation
By: /s/ Timothy J. Cope
--------------------------------
Name: Timothy J. Cope
Title: Chief Financial Officer
"LAKES"
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LAKES GAMING, INC,
a Minnesota corporation
By: /s/ Timothy J. Cope
--------------------------------
Name: Timothy J. Cope
Title: Chief Financial Officer