Acquisition and Participation Agreement - MRD Gaming LLC and Lakes Gaming and Resorts LLC
ACQUISITION AND PARTICIPATION AGREEMENT
This Agreement is made this 7th day of August, 2000, by and between MRD Gaming,
LLC, a Nevada limited liability company, 600 Whitney Ranch Drive, C-15,
Henderson, NV 89014 ("MRD"); and Lakes Gaming and Resorts, LLC, 130 Cheshire
Lane, Minnetonka, MN 55305, a Minnesota limited liability company ("Lakes").
PRELIMINARY STATEMENT AND CERTAIN DEFINITIONS
A. MRD'S BUSINESS, THE TRIBES AND THE PROJECTS. MRD is in the business of
financing, developing, equipping, constructing and starting-up casino projects
for Indian tribes in the State of California (MRD's "Business"). MRD and its
affiliates have secured written agreements (the Project Contracts") with the
Paskenta Band of Nomlaki Indians, Corning, California; and the Cloverdale
Rancheria of Pomo Indians, Cloverdale, California (the "Tribes"); for the
development of casino projects on Indian lands for each of the Tribes (each a
"Project", or collectively, the "Projects") following the passage of Proposition
1 A in California permitting Class III Indian Gaming (as defined in the National
Indian Gaming Regulatory Act, or "IGRA"). The Project being developed with the
Paskenta Band is hereinafter called the "Paskenta Project" and the Project being
developed with the Cloverdale Rancheria is hereinafter called the "Cloverdale
Project." MRD has filed a certificate of conversion with the California
Secretary of State, to convert to a California limited liability company, but
the conversion is not complete.
B. THE BUSINESS OF LAKES. Lakes is engaged, in part, in the business of
developing and managing casino projects for Indian tribes.
C. EXISTING PROJECT COMPANIES AND ASSETS. United Gaming Holding Co., LLC is a
Maryland limited liability company ("United"), which is owned by SCG Gaming
Enterprises, LLC, which is controlled by Franklin Capital Group and its
affiliated investors (collectively, except for United, "Franklin"). United has
formed and now owns two Maryland limited liability companies, Pacific Coast
Gaming - Santa Rosa, LLC and Pacific Coast Gaming - Corning, LLC, which hold the
Project Contracts for the Cloverdale Project and the Paskenta Project,
respectively (each a "Project Company and, collectively, the Project
Companies"), and are managed by MRD. Pursuant to the Project Contracts, the
Project Companies hold the development rights granted by the Tribes with respect
to each of the Projects (the "Development Rights"), some of which were acquired
on July 6, 2000, from Ruth Michels and her affiliated entities ("Michels").
Prior to the date of this Agreement, Franklin, United and Michels have provided
funds, in the amount of $1,121,811, to MRD and to the Tribes for development of
the Projects pursuant to the Project Contracts (the "Advanced Funds").
D. PURPOSES AND CERTAIN CONDITIONS OF AGREEMENT. Lakes and MRD have negotiated
certain terms and conditions under which Lakes is willing to provide limited
financing for the Projects in the form of loans to MRD and each of the Project
Companies after they are acquired by MRD and Lakes. Except for temporary lending
to be provided by Lakes to MRD under Section 17, certain specific conditions of
Lakes' participation as the new provider of funding for the Projects are that
MRD: (1) acquire all right, title and interest to the equity interests in the
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Project Companies; (2) the assets of the Project Companies must include at least
all right, title and interest to the Development Rights, the Project Contracts
and any other assets of the Project Companies (the "Other Assets"), including
the Development Rights and Other Assets acquired by Franklin and/or United from
Pacific Coast Gaming, LLC, a Wisconsin limited liability company owned by
Michels; (3) assign to Lakes an interest in each of the Project Companies in
accordance with the provisions of Section 7, and (4) contribute to the
appropriate Project Company all of MRD's interests (if any) in such Development
Rights, Project Contracts, Other Assets, and other rights MRD may have in the
Projects in accordance with the provisions of Section 7. All of the Development
Rights, Project Contracts and Other Assets held by the Project Companies,
including without limitation those acquired or held by MRD and contributed to
the Project Companies hereunder, and any other rights of MRD and its
subsidiaries and affiliates with respect to the Projects are hereinafter
collectively referred to as the "Project Assets." The purpose of this Agreement
is to set forth the specific terms and conditions of that business relationship
between the parties.
AGREEMENT
Now, therefore, in consideration of the facts and intentions recited above
(which are a part of this Agreement) and the mutual agreements hereinafter set
forth, the adequacy and sufficiency of which, as adequate legally binding
consideration, are acknowledged by Lakes and MRD, the parties agree as follows:
1. ACQUISITION OF PROJECT COMPANIES, DEVELOPMENT RIGHTS, PROJECT CONTRACTS AND
OTHER ASSETS. As an express condition of any lending under this Agreement,
except for temporary funding to be provided by Lakes under Section 17, Lakes
requires MRD to purchase from Franklin and United 100% of the equity interests
in the Project Companies (the "Franklin Buy-out"), subject to the condition that
the Project Companies which shall then hold all of the Project Assets not
already held by MRD or its subsidiaries (including without limitation those
acquired from Michels), pursuant to a detailed written agreement (a true and
complete copy of which shall be delivered to Lakes when it is fully executed),
which shall contain the material terms and conditions set forth in the brief
letter agreement between MRD and Franklin attached hereto as Exhibit A and
hereby made a part hereof (the "Buy-out Terms"), the terms and conditions set
forth in the following paragraph and such other terms and conditions as Franklin
and MRD shall mutually agree (with the approval of Lakes, which shall not be
unreasonably withheld or conditioned, or unduly delayed), and subject to the
terms of this Agreement. The Buy-out Terms include reimbursement to Franklin of
the actual amount of funds Franklin and Michels have advanced to MRD and the
Tribes for the Projects to the date of this Agreement (the "Advanced Funds"),
and a premium amount due Franklin for having taken the initial investment risk
in the Projects (the "Premium").
When MRD purchases the equity interests in the Project Companies in the Franklin
Buy-out, and when a portion of such interests are thereafter assigned by MRD to
Lakes (or its subsidiaries) hereunder, such interests shall be free and clear of
all liens and encumbrances;
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and the Project Companies shall not have any debts or other liabilities or
obligations, except for any loans and funding commitments owed to the Tribes
under the Project Contracts. This condition shall be supported by warranties,
representations, and covenants of indemnification, to the extent customary in
equity purchases, either given by Franklin to MRD and its assigns or, to the
extent it is not appropriate for Franklin to do so (because MRD has had the
entire control or knowledge of the matter), by MRD to Lakes in a supplement to
this Agreement. MRD represents and warrants to Lakes that Exhibit B attached
hereto contains a complete listing of all written (and a written summary of any
oral) Project Contracts and no others exist except as described therein.
On and after the closing of the Franklin Buy-out in accordance with the Buy-out
Terms, Lakes shall loan to MRD funds sufficient to fund a part of the cost of
the Franklin Buy-out, subject to the limitations set forth below. Lakes will
make two loans to MRD for this purpose. The first loan shall be called the
"Cloverdale Premium Loan," the proceeds of which shall be used exclusively by
MRD to pay Franklin the agreed upon Premium (and any interest due thereon) for
having taken the initial investment risk in the Cloverdale Project. The second
loan shall be called the "Buy-out Reimbursement Loan," the proceeds of which
shall be used exclusively by MRD to (a) reimburse Franklin for the Advanced
Funds expended by Franklin and Michels to the date the Franklin Buy-out has been
consummated with respect to both of the Projects, and (b) to fund any amounts
advanced by Lakes to MRD pursuant to Section 17.
The amount of the Buy-out Reimbursement Loan shall not exceed $1,121,811, plus
(a) any amounts advanced by Franklin for the Projects with the approval of Lakes
(which approval shall not be unreasonably withheld, conditioned or unduly
delayed) between July 15, 2000, and the date Lakes first begins to lend funds to
the Project Companies hereunder; and (b) any amounts advanced by Lakes to MRD
pursuant to Section 17. The amount of the Cloverdale Premium Loan shall not
exceed $2,200,000, plus interest accrued and paid to Franklin on the unpaid
balance of its Premium after the opening of the temporary casino of the
Cloverdale Project. Except as otherwise provided in Section 17, the Buy-out
Reimbursement Loan and the Cloverdale Premium Loan will be funded by Lakes only
as and when the funds are required by MRD to perform its related payment
obligations to Franklin under the Buy-Out Terms. The Buy-out Reimbursement Loan
and the Cloverdale Premium Loan shall be subject to the terms and conditions set
forth in Sections 4 and 5.
2. PROJECT DEVELOPMENT LOANS. If MRD successfully completes the Franklin Buy-out
in accordance with the Buy-out Terms, Lakes further agrees to loan to each of
the Project Companies funds in the amounts set forth in Exhibit C attached
hereto and hereby made a part of this Agreement (the "Project Development
Loans"), which loans shall not exceed $23,500,000 in the aggregate. That limit
includes any amounts advanced by Lakes to MRD under the Buy-out Reimbursement
Loan, including without limitation any advances under the first paragraph of
Section 17, but excludes the Cloverdale Premium Loan. The terms of each of the
Project Development Loans shall be as set forth in Section 3.
3. PROJECT DEVELOPMENT LOAN TERMS. Each of the Project Development Loans shall
bear
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simple interest on any unpaid principal balance at an annual rate of 1% over the
"High Wall Street Journal Prime Lending Rate" as defined in the money rate
section of the Wall Street Journal (the "Prime Rate"), compounded annually if
not paid earlier. Interest on each Project Development Loan shall accrue only on
funds actually advanced by Lakes to the borrowing Project Company, beginning
when such funds are advanced. The interest rate shall be adjusted monthly, based
upon the Prime Rate on the first business day of each month; and that interest
rate shall apply to all advances and loan balances remaining unpaid by the
borrower during that month.
The principal balance of the Project Development Loan made to each Project
Company shall be amortized over sixty (60) months from the date when the Project
is first open for gaming to the general public. If any advances occur on a
Project Development Loan after that date, the new principal balance shall be
re-amortized over the balance of that period. Subject to any such
re-amortization, each Project Development Loan shall be repaid in equal monthly
payments of principal, plus accrued interest.
The first payment on the Project Development Loan made to each Project Company
shall be due and shall be made on the 20th day of the first full month beginning
after the date the Tribe involved with that Project Company makes its first
payment of variable lease fees (as defined in its Project Contracts) to the
Project Company.
Each Project Company shall grant Lakes a security interest in all of the assets
of the Project Company, including without limitation all of its Project Assets
and all loan payments and lease fees due to the Project Company from the Tribe
involved with that Project Company, to secure payment of the Project Development
Loan and that portion of the Buy-out Reimbursement Loan assumed by that Project
Company pursuant to Section 5. Each of such loan obligations of a Project
Company shall also be cross-collateralized by the assets of the other Project
Company.
Except as otherwise set forth below in this Section 4 or in Section 10, the loan
payments on each Project Development Loan shall be made after the payment of
Overhead Fees (as defined in Section 10) to both parties. If Net Cash Flows (as
defined in Section 9) of one Project Company are insufficient to make the full
Project Development Loan payment due from such Project Company, the unpaid
amount shall be paid first from Net Cash Flows of the other Project Company and
second, in subsequent months, from Net Cash Flows of both Project Companies
available after the payment of Overhead Fees to MRD and Lakes. Any loan payments
made by one Project Company on behalf of the other Project Company shall be
treated as an inter-company loan to the Project Company whose obligation was
satisfied, with interest to accrue at the same rate due on the Project
Development Loans; and any such inter-company loan shall be repaid from Net Cash
Flows of the creditor Project Company before any further distribution of Net
Cash Flows to the equity members of that Project Company.
4. CLOVERDALE PREMIUM LOAN TERMS. The Cloverdale Premium Loan shall bear simple
interest on any unpaid principal balance at an annual rate of 1% over the "High
Wall Street Journal Prime Lending Rate" as defined in the money rate section of
the Wall Street Journal ("Prime Rate"), compounded annually if not paid earlier.
Interest on such loan shall accrue only
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on funds actually advanced by Lakes to MRD, beginning when such funds are
advanced. The interest rate shall be adjusted monthly, based upon the Prime Rate
on the first business day of each month; and that interest rate shall apply to
all loan balances and advances unpaid during that month.
The Cloverdale Premium Loan shall be amortized over sixty (60) months from the
first date when the Cloverdale Project is first open for gaming to the general
public and, if any advances occur on the Cloverdale Premium Loan after that
date, the new principal balance shall be re-amortized over the balance of that
period. Subject to any such re-amortization, the Cloverdale Premium Loan shall
be repaid in equal monthly payments of principal and accrued interest.
The first payment by MRD on the Cloverdale Premium Loan shall be due and shall
be made no later than the 20th day of the first full month beginning after MRD
begins receiving its share of Net Cash Flows (as defined in Section 9) from the
Project Company engaged in the Cloverdale Project.
To secure MRD's obligation to repay the Cloverdale Premium Loan, MRD shall grant
Lakes a first priority security interest in: (a) MRD's Overhead Fees (as defined
in Section 10), (b) MRD's share of Net Cash Flows from the Project Companies,
(c) all Project Assets, (d) MRD's equity interests in the Project Companies, and
(f) any other assets hereafter acquired by MRD that relate to the Projects
(collectively, the "MRD Permanent Collateral"); provided, however, that the
security interest granted to Lakes with respect to MRD's share of Net Cash Flows
from the Project Company engaged in the Paskenta Project may be subject to any
first priority security interest granted by MRD (not to exceed 50% of such
share) to Franklin to secure the deferred payment obligation due Franklin from
MRD with respect to the Premium payable to Franklin by MRD with respect to the
Franklin Buy-out of interests in the Project Company involved in the Paskenta
Project.
During the Cloverdale Premium Loan payment period, MRD shall pay fifty per cent
(50%) of its share of Net Cash Flows it becomes entitled to receive each month
from the Project Company involved with the Cloverdale Project, up to the amount
of principal and accrued interest due in that month (or remaining unpaid for any
prior month) under the Cloverdale Premium Loan. Any payment deficiencies in
amounts due on the Cloverdale Premium Loan as a result of the foregoing
provision or otherwise shall be paid from the first Net Cash Flows distributable
to MRD in any subsequent month, subject to that fifty percent (50%) limitation.
Payments shall be credited first to collection costs, if any, second to interest
and then to principal. Any payment deficiency under this paragraph shall not be
a default of the terms of this Agreement.
5. BUY-OUT REIMBURSEMENT LOAN TERMS. The Buy-out Reimbursement Loan shall bear
simple interest on any unpaid principal balance at an annual rate of 1% over the
"High Wall Street Journal Prime Lending Rate" as defined in the money rate
section of the Wall Street Journal ("Prime rate"), compounded annually if not
paid earlier. Interest on such loan shall accrue only on funds actually advanced
by Lakes to MRD beginning when such funds are advanced. The interest rate shall
be adjusted monthly, based upon the Prime Rate on the first business day of each
month; and that interest rate shall apply to all loan balances and advances
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unpaid during that month.
The portion of the Buy-out Reimbursement Loan pertaining to each Project (which
amount for each Project is set forth on Exhibit D attached hereto and hereby
made a part hereof) shall be amortized over sixty (60) months from the first
date when that Project first opens for gaming to the general public. The Buy-out
Reimbursement Loan for each Project shall be repaid in equal monthly payments of
principal, plus accrued interest.
The first payment on the portion of the Buy-out Reimbursement Loan related to
each Project shall be due and shall be made on the 20th day of the first full
month beginning after the date on which the Tribe involved with such Project
makes its first payment of variable lease fees (as defined in its Project
Contracts) to the Project Company involved with that Tribe.
Upon the acquisition of each Project Company, MRD shall assign to such Project
Company all of MRD's obligations and rights under the Buy-out Reimbursement
Loan, to the extent such obligations and rights pertain to the Project to be
engaged in by such Project Company; and such Project Company shall assume such
obligations, relieving MRD of all liability for such portion of the Buy-out
Reimbursement Loan. After the acquisition of both Project Companies, they alone
shall be jointly and severally liable for repayment of the Buy-out Reimbursement
Loan Amount to Lakes.
To secure MRD's obligation to repay the Buy-out Reimbursement Loan before it is
assumed by the Project Companies, MRD shall grant Lakes a first priority
security interest in: (a) MRD's Overhead Fees (as defined in Section 10), (b)
any and all Project Assets held by MRD or any of its subsidiaries, (c) MRD's
equity interests (if any) in the Project Companies, and (d) any and all other
assets now held or hereafter acquired by MRD (collectively, the "MRD Temporary
Collateral" and together with, the MRD Permanent Collateral, hereinafter the
"MRD Collateral"); provided, however, that the security interest granted to
Lakes with respect to MRD's equity interest (if any) in the Project Company
engaged in the Paskenta Project may be subject to any first priority security
interest granted by MRD (not to exceed 50% of such interest) to Franklin to
secure the deferred payment obligation due Franklin or United from MRD with
respect to the Premium payable to Franklin by MRD with respect to the Franklin
Buy-out of interests in the Project Company involved in the Paskenta Project;
and provided further that the security interest granted to Lakes with respect to
MRD's interests in Pacific Coast Gaming - Fresno, LLC, any other entity engaged
in a casino development project for the Big Sandy Band of Western Mono Indians,
Auberry, California, and any project contracts and other assets related thereto
may be subject to any first priority security interest granted by MRD to
Franklin, United and/or any third party to secure the deferred payment
obligation due Franklin from MRD with respect to MRD's purchase of such
interests and/or the financing of such development.
To secure payment of the Buy-out Reimbursement Loan after it is assumed by the
Project Companies, each Project Company shall grant Lakes a security interest in
all of the Project Company's assets, including without limitation all of its
Project Assets, and all loan payments and lease fees that become due to such
Project Company from the Tribe involved in its Project. The Buy-out
Reimbursement Loan shall be cross-collateralized by such assets of each Project
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Company.
6. STRUCTURE OF PROJECT COMPANIES. After MRD purchases the Project Companies,
MRD and Lakes shall merge each of them into a separate Project Company for each
Project, which shall be a Minnesota limited liability company organized
generally as set forth below and in the second paragraph of Section 17;
provided, however, that doing so will not unduly interfere with securing
approvals required by Lakes from the Tribes. If merging the Project Companies
into new Project Companies would unduly interfere with securing Tribal approvals
required by Lakes, then MRD and Lakes shall amend and restate the organizational
documents of each of the Project Companies to conform in so far as possible to
the following forms of organizational documents. The Articles of Organization,
Member Control Agreement and Bylaws of each Project Company shall include the
applicable provisions of this Agreement (including without limitation those set
forth in the second paragraph of Section 17) and such other provisions as are
customary for Minnesota (or, if applicable, Maryland) limited liability
companies organized to conduct similar ventures; and shall be substantially in
the forms to be prepared and approved in good faith by the parties (which
approval shall not be unreasonably withheld or conditioned or unduly delayed)
and attached hereto as Exhibits E, F and G within ten (10) ten days after the
date of this Agreement (the "Project Company Documents").
7. ASSIGNMENTS OF INTERESTS IN PROJECT COMPANIES. Upon completion of the
Franklin Buy-out, (a) MRD shall assign to Lakes a 65% equity interest in the
profits, losses and distributions of Net Cash Flows (as defined in Section 9) of
each of the Project Companies (with the other rights set forth in Sections 8, 9
and 10), in partial satisfaction of MRD's obligations to pay principal to Lakes
under the Cloverdale Premium Loan, which satisfaction shall be in an amount
equal to 50% of the Premium ultimately payable to Franklin and allocable to the
Cloverdale Project; (b) MRD shall contribute its right, title and interest (if
any) in any Project Assets not held by the Project Companies to the capital of
the Project Company involved in the Project that relates to such Project Assets;
(c) MRD shall retain a 35% equity interest in the profits, losses and
distributions of Net Cash Flows of each of the Project Companies (with the other
rights set forth in Sections 8, 9, 10 and 12); (d) Lakes and MRD shall adopt the
Project Company Documents with respect to each Project Company pursuant to
Section 6; and (e) the Project Companies shall assume the Buy-out Reimbursement
Loan pursuant to Section 5.
8. MANAGEMENT. Lakes and MRD shall each have a 50% voting interest with respect
to each Project Company. Lakes and MRD, or their designated representatives,
will each have an equal vote on key decisions that must be made with respect to
each Project Company. In the event that the parties cannot reach agreement on a
key decision, the parties agree to mediate the dispute as set forth in Section
21, and if resolution still cannot be reached, to arbitrate the dispute as set
forth in Section 22. Both parties shall make every reasonable effort to
capitalize on the other's expertise in the operation of each Project Company and
in the development of the Projects.
9. ALLOCATION OF PROFITS AND DISTRIBUTION OF NET CASH FLOWS. In consideration of
the Buy-out Reimbursement Loan, the release by Lakes of 50% of the principal
balance otherwise payable by MRD under the Cloverdale Premium Loan, and Lakes'
future assistance in the planning, development and start-up of each Project,
Lakes shall receive a 65% interest in the profits and Net Cash Flows (as defined
below) of each Project Company. For MRD's efforts prior to this
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date in securing the Projects, for MRD's purchase of the equity interests in the
Project Companies, and for MRD's future management of the Projects, MRD shall
receive the remaining 35% interest in the profits and Net Cash Flows of each
Project Company.
"Net Cash Flows" with respect to a Project Company are defined as: gross
variable and fixed lease fees (as defined in the Project Contracts) received by
the Project Company, plus loan payments and all other fees, amounts and payments
received by the Project Company from the applicable Tribe under the Project
Contract or otherwise with respect to the Project, less Overhead Fees described
in Section 10, Project Manager Costs described in Section 11, franchise fees,
third party financing costs and payments of amortized amounts due Lakes on the
Project Development Loan and that portion of the Buy-out Reimbursement Loan
assumed by the Project Company. Attached hereto as Exhibit H and hereby
incorporated herein is an example showing the determination of Net Cash Flows
for the first 12 months of the each Project.
10. OVERHEAD FEES. MRD and Lakes shall each receive an aggregate amount of
$80,000 each month (the "Overhead Fees"), which shall be paid from and allocated
between the two Project Companies as the parties may agree, to cover their
respective overhead expenses during the entire period in which any Project
Contract remains in effect with a Tribe. If the parties do not agree otherwise,
Overhead Fees shall be allocated equally between each Project Company in
existence at the time of payment. Except as otherwise set forth below, Overhead
Fees shall be paid before Project Manager Costs described in Section 11,
payments by the Project Companies of the Project Development Loans and Buy-out
Reimbursement Loan and any distributions of Net Cash Flows.
Payment of the Overhead Fees shall commence as of the date this Agreement is
executed by the parties and continue on the first day of every month thereafter
until both Project Contracts terminate. In the event that the Project Companies
have not been formed by that commencement date, and until they are formed, Lakes
shall make the Overhead Fee payments on behalf of the Project Companies pursuant
to Section 17. Any amounts paid by Lakes pursuant to this sentence shall be
added to the Buy-out Reimbursement Loan to be assumed by the Project Companies.
During the first six (6) consecutive months after commencement of payment of the
Overhead Fees, if the Net Cash Flows are insufficient to pay the entire Overhead
Fees for both Lakes and MRD, MRD's fees shall be paid first, and any difference
between such Net Cash Flows and MRD's Overhead Fees shall be paid by Lakes and
added to the Buy-out Reimbursement Loan or, if applicable, the Project
Development Loan for each Project. If, after the first six (6) months, Net Cash
Flows are insufficient to pay all of the Overhead Fees in any given month, the
Overhead Fees payable to each of Lakes and MRD shall be limited to a partial
payment that is the greater of $30,000 or the available Net Cash Flow from both
Project Companies, with the remainder of the unpaid Overhead Fees for that month
to be forfeited. Notwithstanding the foregoing, upon the occurrence of any
payment default under the Cloverdale Premium Loan, Buy-out Reimbursement Loan or
any Project Development Loan, any Overhead Fees or other amounts thereafter
payable to MRD by the Project Companies shall be paid to Lakes as payment on
such loans until the payment defaults have been cured.
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Payment of Lakes' Overhead Fees shall commence at the same time as those due
MRD. Lakes' Overhead Fees shall be paid after all Overhead Fees due to MRD are
paid and to the extent that Net Cash Flows are available. All unpaid Overhead
Fees due Lakes shall be paid before any further distributions of Net Cash Flows
are made.
11. BUDGETS, PROJECT MANAGER COSTS AND CASH FLOW PROJECTIONS. MRD represents and
warrants to Lakes that attached hereto as Exhibit I are construction,
development and equipment budgets for each Project; that such budgets contain
MRD's best estimate, as of the date of this Agreement, of all costs and expenses
necessary to develop, construct, equip and open each of the Projects; and that
MRD is not aware of any other costs or expenses except as expressly set forth
therein.
MRD represents and warrants to Lakes that MRD has included in the budgets for
each Project certain Project costs payable to parties independent of MRD or
Lakes, including a full-time on-site lender representative for each Project (who
will be an employee of the Project Companies), rent for office space, third
party consulting fees and other overhead payable to such independent third
parties and directly related to each Project, as more specifically described on
Exhibits J and K attached hereto (the "Project Manager Costs"), which contain
MRD's best estimates of such costs as of the date of this Agreement. The Project
Manager Costs, subject to the approval of Lakes as to the amount thereof, shall
be initially paid by advances from Lakes under the Project Development Loans
until Tribal loan payments or any lease fees are received from each Project.
MRD also represents and warrants to Lakes that attached hereto as Exhibit L are
MRD's most recent projections for the gross cash flows and Net Cash Flows with
respect to each of the Projects, which projections contain MRD's best estimate
of all such amounts; and MRD is not aware of any other revenues or related costs
and expenses necessary to complete the Projects, except as expressly set forth
therein and in the related Project Manager Costs budgets also attached hereto as
Exhibits J and K.
12. BONUS PAYMENT TO MRD ON OPENING OF GAMING FACILITIES. Lakes agrees to pay
MRD certain bonus payments as follows: (a) $500,000 after the opening of the
temporary facility for the Cloverdale Project; and (b) $1,000,000 after the
opening of the permanent casino for each Project. These bonus payments shall be
paid only from Lake's share of Net Cash Flows from the Project Company that
opened the gaming facility, after any portion of such share that must be paid to
Franklin with respect to the Premium. If Net Cash Flows of a Project Company are
insufficient to pay the entire bonus amount, the unpaid balance shall be paid
from the share of Net Cash Flows payable to Lakes from that Project Company in
subsequent months.
13. THIRD PARTY DEBT FINANCING AND NIGC APPROVAL OF CLOVERDALE. Lakes and MRD
shall cooperate fully to negotiate and secure third party debt financing for
each of the Projects (a) in such amounts as they may mutually agree in good
faith are required, and (b) on such terms as they may mutually accept in good
faith, which acceptance shall not be unreasonably withheld or conditioned or
unduly delayed.
If such financing cannot be obtained on mutually acceptable terms for a specific
Project, or the
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NIGC or the BIA shall have determined at any time that Class III Indian Gaming
(as defined in IGRA) cannot be lawfully conducted pursuant to IGRA at the
proposed location of the Cloverdale Project's casino on land being leased from
an individual member of the Cloverdale Tribe, then in either case Lakes shall
have the option, in its sole discretion, to cease further funding of that
Project, cause the liquidation of the Project Company responsible for that
Project, accelerate payment of the Buy-out Reimbursement Loan and Project
Development Loan applicable to that Project and, if the Project is the
Cloverdale Project, accelerate payment of the Cloverdale Premium Loan.
The parties agree and understand that Lakes' shall subordinate its security
interests in the Project Assets (excluding any other MRD Collateral), which
secure the various loans to be made pursuant to this Agreement, to the rights of
any senior third party lenders if so required by any such lender; provided,
however, that such subordination is upon such terms that are reasonably
acceptable to Lakes.
If Lakes ceases funding and causes the liquidation of any Project Company
pursuant to this Section 13 (a "Terminated Project Company"), neither MRD nor
any of its affiliates shall thereafter be involved, directly or indirectly, as
developers, managers, financiers, consultants or otherwise, with respect to any
gaming activities (a "New Project") of the Tribe involved in the Project that
had been assigned to the Terminated Project Company, unless Lakes is offered the
first right of refusal to participate in such New Project on terms and
conditions similar to those provided in this Agreement, or other terms and
conditions as are offered to any proposed third party investor with MRD in the
New Project. If Lakes does not exercise such right of first refusal, MRD shall,
upon or before entering into any contract to develop a New Project with that
Tribe, cause the repayment in full of any unpaid balance on each of the
following loans made by Lakes: (a) that portion of the Buy-out Reimbursement
Loan due from the Terminated Project Company, (b) the Project Development Loan
made to the Terminated Project and (c) if the Terminated Project Company was
responsible for the Cloverdale Project, the Cloverdale Premium Loan.
14. TIMING. Time is of the essence in completing the transactions that are the
subject of this Agreement. The parties agree to fully cooperate and to use their
best efforts to obtain all necessary consents of the Tribes to the transfer of
ownership of the Project Companies, to acquire the Project Companies, complete
the Project Company Documents and re-organize the Project Companies no later
than August 31, 2000, or such additional time as may be reasonably required to
meet scheduling requirements for each of the Tribes to give its consent to the
involvement of Lakes hereunder, in lieu of Franklin and United.
15. CONFIDENTIALITY OF NEGOTIATIONS. Lakes and MRD agree to keep the fact of
their discussions and negotiations confidential until otherwise mutually agreed
in writing or unless in the reasonable opinion of counsel to Lakes disclosure is
required under any applicable securities laws or under the applicable rules of
the NASDAQ market system or any other listing or stock exchange.
16. REPRESENTATIONS AND WARRANTIES OF MRD. MRD represents and warrants to Lakes
that the
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statements contained in this Section 16 are correct as of the date of
this Agreement and will be correct and complete as of the date on which each of
the Project Companies has assumed its share of the Buy-out Reimbursement Loan
(the "Closing Date"), as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 16, except as
otherwise set forth in the disclosure schedule delivered by MRD to Lakes on the
date hereof and attached hereto (the "MRD Disclosure Schedule"). The MRD
Disclosure Schedule will be arranged in Sections and paragraphs corresponding to
the numbered and lettered Sections and paragraphs contained in this Agreement.
(a) Organization and Good Standing of MRD. MRD is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Nevada, with all requisite power and authority to carry on the
business described in paragraph A of the Preliminary Statement (the "Business")
and to own any Project Assets it now owns, the equity interests in the Project
Companies to be acquired hereunder, and any other properties it owns. MRD is
owned by Matthew R. Daly, a resident of the State of Nevada, and Robert Daly, a
resident of the State of Minnesota; and is duly authorized to conduct the
Business and is in good standing under the laws of each jurisdiction where such
qualification is required, except to the extent that the failure to do so would
not have a material adverse effect on MRD. MRD has full corporate power and
authority and all licenses, permits, and other governmental authorizations
necessary to carry on the Business and to own an equity interest in the Project
Companies, except to the extent that the failure to do so would not have a
Material Adverse Effect with respect to MRD or either of the Project Companies.
All licenses and permits held by MRD and material to the Business, the Project
Assets or either of the Project Companies are valid and in full force and effect
and no proceedings which could result in the termination or impairment of any
such license or permit are pending or, to the knowledge of MRD, threatened.
Except as set forth in Section 16(a) of the MRD Disclosure Schedule, neither MRD
nor any of the Project Companies is not in violation of, nor has MRD received
any notice of any violation of, nor does any state of facts exist that could
reasonably be expected to lead to a penalty or termination of, any license or
permit which could reasonably be expected to have a material adverse effect on
the Business, the Project Assets, either of the Project Companies or any other
MRD Collateral.
(b) Authorization of Transaction. MRD has the legal power, authority
and capacity to execute and deliver this Agreement, and the agreements and
instruments to be executed and delivered by MRD in connection herewith, and to
perform its obligations hereunder and thereunder. This Agreement has been, and
the agreements and instruments to be executed and delivered by MRD in connection
herewith will be, on or prior to the Closing Date, duly executed and delivered,
and constitute or upon execution and delivery will constitute the valid and
legally binding obligations, of MRD, enforceable in accordance with their terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally. No
authorization, consent, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person is required to authorize, or is required in connection with, the
execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of MRD with Lakes, United or
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<PAGE> 12
Franklin, except those forth in Section 16(b) of the MRD Disclosure Schedule,
which shall be obtained by MRD on or prior to the Closing Date, except to the
extent that the failure to do so would not have a material adverse effect with
respect to the Business, the Project Assets, either of the Project Companies or
any other MRD Collateral.
(c) Non-contravention; Defaults. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) assuming the receipt of all required regulatory approvals referred to
in Section 16(b), violate any constitution, statute, regulation or rule; (ii) to
the knowledge of MRD, violate any injunction, judgment, order, decree, ruling or
other restriction of any government, governmental agency, or court to which MRD
or either of the Project Companies is subject; or (iii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license or instrument to which
MRD or either Project Company is a party or by which MRD or either Project
Company is bound or to which any Project Assets, either of the Project Companies
or any other MRD Collateral are subject, except for any such matter that would
not have a material adverse effect with respect to MRD, any Project Assets,
either of the Project Companies or any other MRD Collateral. There is no pending
or, to the knowledge of MRD, threatened action, suit, claim, proceeding, inquiry
or investigation before or by any governmental authority against or affecting
MRD or either of the Project Companies, involving or to restrain or prevent the
consummation of the transactions contemplated by this Agreement, that might
reasonably be expected to materially and adversely affect the right of MRD or
Lakes to acquire either of the Project Companies or the rights of the Project
Companies to own the Project Assets, the right of MRD to acquire or own an
equity interest in the Project Companies or any other MRD Collateral, the right
of MRD to operate the Business or the rights of the Project Companies to utilize
the Development Rights and perform the Project Contracts in substantially the
manner in which they are currently utilized or performed or contemplated to be
utilized or performed under this Agreement or the Project Contracts.
(d) Title to MRD Collateral. Except as shown in Section 16(d) of the
MRD Disclosure Schedule, MRD is the true and lawful owner of the Project Assets
held in its name on the date of this Agreement and, immediately after MRD
acquires the Project Companies in the Franklin Buy-out, and before Lakes
acquires its equity interest in the Project Companies, MRD will be true and
lawful owner of all of the equity of the Project Companies and any other Project
Assets held by MRD. If and when MRD acquires the Project Companies in the
Franklin Buy-out, (i) MRD will then have all necessary power and authority to
assign an equity interest in the Project Companies to Lakes (to the extent
provided hereunder), free and clear of any taxes, security interests, contracts,
commitments, equities, claims and demands (other than the rights of the Tribes
under the Project Contracts); (ii) MRD will transfer to Lakes good title to the
equity interest in the Project Companies specified in Section 7, free and clear
of any security interests, contracts, commitments, equities, claims and demands
(other than the rights of the Tribes under the Project Contracts; (iii) MRD will
transfer to the Project Companies its remaining interest (if any) in the Project
Assets, free and clear of any security interests, contracts, commitments,
equities, claims and demands (other than the rights of the Tribes under the
Project Contracts);
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<PAGE> 13
and (iv) MRD will grant to Lakes a security interest in all of the MRD
Collateral, free and clear of any security interests, contracts, commitments,
equities, claims and demands (other than the rights of the Tribes under the
Project Contracts), except as otherwise expressly provided in Section 5.
(e) Financial Statements. Attached hereto as part of Exhibit M are the
unaudited balance sheet and income statements for MRD and each of the Project
Companies (the "Financial Statements") as of and for the six (6) months ended
June 30, 2000 (the "Most Recent Fiscal Month End"). The Financial Statements
(excluding any notes) are true, correct and complete, have been prepared in
accordance with GAAP (except with regard to notes) applied on a consistent basis
throughout the period covered thereby, and present fairly the financial
condition of MRD or the respective Project Company as of such date and the
results of its operations for such period, and is consistent with its books and
records (which books and records are correct and complete). Except as shown in
Section 13(e) of the MRD Disclosure Schedule, since the Most Recent Fiscal Month
End, there has not been any event or occurrence that could reasonably be
expected to result in a material adverse effect on the Business. The Project
Assets or either of the Project Companies.
(f) Undisclosed Liabilities. Except as shown in Section 16(f) to the
MRD Disclosure Schedule (which shall include all existing liabilities of the
Project Companies and MRD under the Project Contracts), MRD does not have any
material liabilities with respect to the Business and the Project Companies do
not have any material liabilities other than their respective obligations for
future performance under the Project Contracts; and, to the knowledge of MRD
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against MRD or either Project
Company giving rise to any liability, except for (i) liabilities set forth on
the balance sheets contained in the Financial Statements and (ii) liabilities
that have arisen after the Most Recent Fiscal Month End in the ordinary course
of business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any material breach of contract, breach of warranty,
tort, infringement, or violation of law.
(g) Legal Compliance. Except as shown in Section 16() of the MRD
Disclosure Schedule, neither of the Project Companies nor MRD (with respect to
its Business), (i) has complied in all material respects with all applicable
gaming laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state and local
governments (and all agencies thereof); (ii) has had any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
filed or commenced against it alleging any failure so to comply and, to the
knowledge of MRD, no such actions have been threatened, or (iii) is subject to
or in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any governmental entity.
(h) Tax Matters. Except as described in Section 16(h) of the MRD
Disclosure Schedule, MRD and each of the Project Companies has timely and
properly filed all federal, state, local and foreign Tax returns and reports and
forms that it is or has been required to file,
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<PAGE> 14
either on its own behalf or on behalf of its employees or other persons or
entities, including but not limited to income, profits, franchise, sales, use,
occupation, property, excise, ad valorem and payroll (including employee taxes
withheld) taxes ("Taxes" or each a "Tax"), all such returns, reports and forms
being true and complete in all material respects; and has paid all material
Taxes, including penalties and interest, if any, that have become due pursuant
to such returns or reports or forms or pursuant to assessments received by MRD
or a Project Company. No Tax deficiencies have been determined nor, to MRD's
knowledge, proposed tax assessments charged against MRD or either of the Project
Companies and, to MRD's knowledge, there exists no basis for any such
deficiencies. No Internal Revenue Service or other governmental Tax authority
audit of MRD or either of the Project Companies is pending nor, to MRD's
knowledge, threatened against MRD, any of its subsidiaries or either of the
Project Companies; and the results of any completed Tax audits of such entities
are properly reflected in the Financial Statements. Neither MRD nor any of the
Project Companies has granted any extension to any Tax authority of the
limitation period during which any Tax Liability may be asserted.
(i) Project Contracts. Except as described in Section 16(i) of the MRD
Disclosure Schedule, with respect to each of the Project Contracts, (i) such
contract is legal, valid, binding, enforceable and in full force and effect;
(ii) such contract will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby, subject to the receipt of any consent required
to assign equity interests in the Project Companies or merge them into Minnesota
limited liability companies; (iii) neither MRD nor any of the Project Companies
is, nor to MRD's knowledge is any other party to such contract, in breach or
default; nor, to MRD's knowledge has any event occurred that, with notice or
lapse of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder; (iv) to MRD's knowledge no party to
such contract has repudiated any provision thereof; (v) to MRD's knowledge there
are no disputes, oral agreements, or forbearance programs in effect as to such
contract; (vii) neither MRD nor the Project Company holding such contract has
assigned, transferred, conveyed, mortgaged, deeded in trust, nor encumbered any
interest in such contract; and (viii) such contract has received all approvals
of governmental authorities (including licenses and permits) required to be
obtained by MRD, the Project Company holding such Contract or any Tribe in
connection with the performance thereof; and has been performed by MRD and the
Project Company holding such contract in accordance therewith and with
applicable laws, rules, and regulations, except where any failure to do so would
not result in any material adverse effect with result to MRD, either of the
Project Companies, any of the Project Assets or any other MRD Collateral.
(j) Commitments. Except as set forth in Section 16(j) of the MRD
Disclosure Schedule or in the Financial Statements, with respect to the
Business, the Project Assets, either of the Project Company or any other MRD
Collateral, MRD has not entered into nor is any of the MRD Collateral or MRD's
Business or the business or any Project Assets of either of the Project
Companies bound by, whether or not in writing, any: (i) partnership or joint
venture agreement; (ii) deed of trust or other security agreement; (iii)
guaranty or suretyship, indemnification or contribution agreement or performance
bond; (iv) employment, consulting or compensation agreement or arrangement,
including agreements arising as a result of the election or retention in
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<PAGE> 15
office of any director or officer; (v) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent to another;
(vi) any agreement relating to any matter or transaction in which an interest is
held by a person or entity which is an "affiliate" of MRD as that term is
defined in Rule 144(a)(i) under the Securities Act of 1933, as amended, or any
"associate" of any such affiliate as that term is defined in Regulation 14A of
the general rules and regulations under the Securities Exchange Act of 1934, as
amended; (vii) any contract containing non-competition covenants that would
affect the Business, any of the Project Assets or either of the Project
Companies; or (viii) any other agreement or commitment not made in the ordinary
course of business or that would have a materially adverse effect on or is
otherwise material to the Business or the financial condition of MRD or either
of the Project Companies (all of the foregoing are hereinafter collectively
referred to as the "Commitments").
True, correct and complete copies of the written Commitments, and true,
correct and complete written descriptions of the oral Commitments, have
heretofore been delivered to Lakes. There are no existing defaults, events of
default or events, occurrences or acts that, with the giving of notice or lapse
of time or both, would constitute defaults by MRD or either of the Project
Companies or, to the knowledge of MRD any other party thereto; and no penalties
have been incurred by MRD or either of the Project Companies (or, to the
knowledge of MRD by any other person), nor to the knowledge of MRD are any
amendments pending with respect to the Commitments, except as described in
Section 16(j) of the MRD Disclosure Schedule or in the Financial Statements. The
Commitments are in full force and effect and are valid and enforceable
obligations of MRD or a Project Company (as applicable) and, to the knowledge of
MRD the other parties thereto, in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally; and to the knowledge of MRD
no defenses, off-sets or counterclaims have been asserted, or may be made by any
party thereto; nor has MRD or either of the Project Companies waived any rights
thereunder, except as described in Section 16(j) of the MRD Disclosure
Schedule.
Except as contemplated herein, MRD has no knowledge of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any material Commitment or agreement, or of any fact that would justify the
exercise of such a right. Except as described in Section 16(j) of the MRD
Disclosure Schedule, MRD does not currently contemplate, nor have any knowledge
that any other person or entity currently contemplates, any amendment or change
to any Commitment.
(k) Insurance. MRD is not required to maintain any insurance at the
present time pursuant to any Project Contract or other Commitment. Any Project
Assets owned by MRD are not insured. Each of the Project Companies currently
maintains all insurance it is required to maintain pursuant to its Project
Contracts, and such other liability and property insurance as is reasonably
necessary to protect its insurable interests.
(l) Litigation. Except as set forth in Section 16(l) of the MRD
Disclosure
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<PAGE> 16
Schedule or claims for which MRD or a Project Company is fully insured, with
respect to the Project Companies, any other MRD Collateral and the Business,
neither MRD nor either of the Project Companies is: (i) subject to any
outstanding injunction, judgment, order, decree, ruling, or charge naming MRD or
a Project Company; or (ii) a party or, to the knowledge of MRD threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in Section
16(l) of the MRD Disclosure Schedule, if any, could reasonably be expected to
result in any material adverse effect on MRD, its Business, either of the
Project Companies or any other MRD Collateral.
(m) Books of Account. The books of account of MRD and each of the
Project Companies have been kept accurately in all material respects and in the
ordinary course of business. In all material respects, the transactions entered
therein represent bona fide transactions and the revenues, expenses, assets
(and, to the knowledge of MRD) all liabilities of MRD and each of the Project
Companies have been properly recorded in its respective books.
(n) Disclosure. All information that is described herein or in the MRD
Disclosure Schedule and has been furnished to Lakes by MRD in connection
herewith, is true, correct and complete in all material respects. The
representations and warranties contained in this Section 16 and the information
in the MRD Disclosure Schedule do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 16 and the MRD Disclosure
Schedule not misleading.
17. COMMENCEMENT OF FUNDING/ADDITIONAL TRANSACTION DOCUMENTS. Upon (a) execution
of this Agreement; (b) the execution of the letter agreement between MRD and
Franklin attached hereto as Exhibit A, as described in Section 1; and (c) the
execution by MRD of loan agreements, security agreements and promissory notes
for funds to be advanced pursuant to this paragraph, Lakes shall begin funding
Overhead Fees due MRD and advances to the Tribes and MRD (including
reimbursement of MRD for past advances) for expenses of the Projects (except for
money to be paid to Franklin for the Cloverdale Premium and for reimbursement of
Franklin's costs), to the extent actually needed to meet payment obligations to
the Tribes or governmental authorities under the Project Contracts, irrespective
of whether any other documents have been completed for this transaction;
provided, however, at the time of each such
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<PAGE> 17
requested advance: (i) no event of default, material breach or material
misrepresentation by MRD under this Agreement or any related document or
agreement shall be in existence; (ii) MRD shall provide to Lakes a written
summary of the types and amounts of costs to be paid therefrom, together with
copies of any related invoices and other documents as may be requested by Lakes;
(iii) the maximum aggregate amount of all such advances shall not exceed
$1,000,000; and (iv) no such advance under this paragraph shall be made after
August 31, 2000. Any such advances shall be added to and included in the Buy-out
Reimbursement Loan and, upon completion of the Franklin Buy-out, shall be
assumed by the Project Company that receives the benefit of such advance.
Following August 31, 2000, Lakes' obligation to continue to advance funds
pursuant to the previous sentence, and MRD's obligations to manage the Projects
pursuant to this Agreement are subject to the satisfaction of the following
conditions and, in the case of documentary conditions, such documents shall each
be in form and substance reasonably acceptable to Lakes and MRD: (1) the
completion of the Franklin Buy-out by MRD in accordance with the requirements of
this Agreement, including any necessary consent of the Tribes; (2) the
assignment by MRD of equity interests in the Project Companies to Lakes, as
provided herein; (3) the execution (and filing with government authorities, as
required by law) of appropriate Project Company Documents acceptable to the
parties with respect to each Project Company, embodying the material terms of
this Agreement and standard and customary provisions, including without
limitation equity transfer restrictions, rights of first refusal and equity
redemption provisions to take effect in the event of a member's withdrawal and
other events, generally for fair market value (except as otherwise provided in
Section 20), as determined pursuant to a reasonable mechanism absent agreement
of the parties, by taking into account all relevant facts including the present
value of the affected member's share of future Net Cash Flows from each Project
for the remaining term of the Project Contracts; (4) the execution by each
Project Company of loan agreements, promissory notes and security agreements
reasonably acceptable to the parties, providing for the Project Development
Loans and its assumption of the applicable portion of the Buy-out Reimbursement
Loan; and (5) the execution by the parties and the Project Companies of such
additional documents as the parties mutually agree are reasonably necessary to
accomplish the objectives of this Agreement (all of the documents described in
this paragraph being hereinafter collectively referred to as the "Additional
Transaction Documents"). Upon the execution of this Agreement, the parties agree
to promptly negotiate in good faith and enter into the Additional Transaction
Documents.
From the date of this Agreement, and until this Agreement is terminated or the
Franklin Buyout is completed and the Project Companies have become obligated to
repay the Buy-out Reimbursement Loan and the Project Development Loan, (a) MRD
shall continue to act as the manager of each Project Company, to work with the
Tribes and to perform all of the obligations of the developer and lender under
the Project Contracts; provided, however, that all of such actions of MRD during
such period shall be subject to the approval of Lakes as if Lakes were a member
of each of the Project Companies under the Project Company Documents; and (b)
MRD shall remain liable for repayment of all funds advanced by Lakes to MRD
under the first paragraph of this Section 17, and shall remain liable for such
repayment even if this Agreement
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is terminated and the Franklin Buy-out does not occur.
18. MRD EVENT OF DEFAULT; TERMINATION OF MRD FROM PROJECTS. The occurrence of
any of the following events shall be considered an "MRD Event of Default" under
this Agreement: (a) loss by MRD or Matthew R. Daly ("Daly") of any gaming
license for any Project, if such license is not reinstated following the
exhaustion of all legal remedies; (b) the conviction of MRD or Daly of criminal
misconduct directly related to gaming activities or related to MRD's
relationship with Lakes or the any of the Tribes; (c) the death, resignation or
disability of Daly or any other key employee of MRD to the extent such death,
resignation or disability prevents MRD from performing its day-to-day Project
management duties and obligations under this Agreement, the Project Company
Documents of either of the Project Companies or any Project Contract; and, if
such key employee is not Daly, he or she is not replaced within sixty (60) days
following the event in question; (d ) intentional misconduct of Daly or MRD that
unreasonably threatens or jeopardizes the continued payment or performance by
any Tribe of its obligations under its agreements with the applicable Project
Company, if such misconduct is not cured, before or following written notice
from Lakes, within thirty (30) days or such lesser time as may be necessary to
avoid any interruption of such continued payments or performance by any Tribe
(the "MRD Cure Period"); (e) any fraud or dishonesty of MRD or Daly with respect
to either of the Projects or either of the Project Companies that does or
reasonably could be expected to have a material adverse effect on such Project
Company or Project; (f) a material breach of this Agreement or the Project
Company Documents of either Project Company by MRD that does or reasonably could
be expected to deprive Lakes of a significant benefit under this Agreement or
such Project Company Documents, if such breach is not cured before the end of
the MRD Cure period; or (g) the substantial failure or refusal by MRD to perform
any of its obligations under this Agreement or its management obligations under
the Project Company Documents of either Project Company if such failure or
refusal has or reasonably could be expected to have a material adverse effect on
Lakes or any Project, or is or reasonably could be expected to constitute a
material breach of any agreement to which any Project Company is a party, and
such refusal or failure is not cured before the end of the MRD Cure Period.
Within sixty (60) days following the occurrence of an MRD Event of Default,
Lakes, notwithstanding any other provision of this Agreement, any related loan
documents, any Project Company Documents with respect to a Project Company, or
any Additional Transaction Documents, may unilaterally terminate this Agreement
and, if MRD and Lakes have become members of the Project Companies, may also
unilaterally terminate the management positions of MRD and its representatives
with respect to either or both of the Project Companies, by giving MRD a written
notice of such MRD Event of Default; and may thereafter proceed to redeem MRD's
equity interests in either or both of the Project Companies under Section 20. No
termination of this Agreement by Lakes shall release MRD or the Project
Companies of their respective obligations to repay any loans made to them by
Lakes.
19. LAKES EVENT OF DEFAULT; TERMINATION OF LAKES FROM PROJECTS. The occurrence
of any of the following events shall be considered a "Lakes Event of Default"
under this Agreement: (a) any failure by Lakes to provide any material amount of
funding under any of its lending commitments under this Agreement if such
failure is not cured, before or following written
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notice from MRD, within either thirty (30) days or such lesser time as may be
necessary to prevent MRD or any of the Project Companies from defaulting in any
material financial obligation that was to have been met with such funding (the
"Lakes Cure Period"); (b) the conviction of Lakes of criminal misconduct
directly relating to gaming activities or related to Lakes' relationship with
MRD; (c) intentional misconduct of Lakes that unreasonably threatens or
jeopardizes the continued payment by the Tribes of their respective obligations
under their agreements with each Project Company, if such misconduct is not
cured before the end of the Lakes Cure Period; or (d) a material breach by Lakes
of this Agreement or the Project Company Documents of either Project Company
that deprives MRD of a significant benefit under this Agreement or such Project
Company Documents, if such breach is not cured before the end of the Lakes Cure
Period.
Within sixty (60) days following the occurrence of a Lakes Event of Default, MRD
may cause unilaterally terminate this Agreement and, if Lakes has advanced any
funds to MRD and/or the Project Companies, MRD and the Project Companies may
also suspend any payment obligations to Lakes until MRD obtains an alternate
investor to replace Lakes, by giving Lakes a written notice of such Lakes Event
of Default; provided, however, that if an alternative investor has not been
found within ninety (90) days, Lakes may require the suspended payments to
recommence until such time as MRD obtains an alternative investor to replace
Lakes. If MRD exercises its option to suspend such payments, and does not elect
to terminate this Agreement, MRD shall not relieve Lakes of any obligation to
continue providing any previously agreed funding during that period, unless and
until MRD notifies Lakes that it has obtained an alternate investor. Once MRD
obtains an alternate investor, MRD shall terminate this Agreement (if not
previously terminated) and relieve Lakes of any further financing obligations,
and MRD shall, at its option, either prepay Lakes the unpaid balance on any or
all outstanding notes for prior financing to MRD and the Project Companies
hereunder, or bring current all payments owed to Lakes with respect to such
financing, and continue meeting those obligations in accordance with the terms
of the note obligations to Lakes. No termination of this Agreement by MRD shall
release MRD or the Project Companies of their respective obligations to repay
any loans made to them by Lakes.
20. REDEMPTION OF PROJECT COMPANY EQUITY IN CERTAIN EVENTS. In the event Lakes
and MRD have become equity members of the Project Companies, and either (a)
Lakes exercises its option under Section 18 to terminate this Agreement and
relieve MRD of its management duties with respect to one or both of the Project
Companies, or (b) MRD exercises its option under Section 19 to replace Lakes as
financier for the Projects, then either party shall have the right to require
the Project Companies to redeem the equity interests of the terminated party in
the Project Companies. The terms of such redemption, including the manner of
calculating the redemption price, shall be mutually agreed and incorporated into
the Project Company Documents for the Project Companies, and shall limit the
redemption price due to an MRD Event of Default or Lakes Event of Default (other
than a person's death or disability), as applicable, to the terminated party's
capital account balance in each Project Company, less any actual damages (not
including any consequential or punitive damages) due to such default. If MRD's
equity interests in the Project Companies are being redeemed solely as the
result of the death or disability of Daly or another key employee of MRD, the
redemption price shall be based
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<PAGE> 20
on the fair market value of such equity interests, determined pursuant to the
Project Company Documents in accordance with the standards set forth in the
second paragraph of Section 17.
In the event of any redemption of the equity interest of MRD in either or both
of the Project Companies, pursuant to this Section 20 or otherwise, Lakes will
be entitled to cause each Project Company to offset against the redemption price
any amount remaining due Lakes from MRD with respect to the Cloverdale Premium
Loan.
MRD acknowledges that the primary business of Lakes and certain of its
affiliates is the operation and management of gaming facilities; and that Lakes
and certain of its affiliates must obtain and maintain in effect various
approvals, findings of suitability, licenses, permits and registrations
(collectively "Gaming Licenses") from various gaming authorities. Likewise,
Lakes recognizes that MRD and certain of its affiliates may be subject to
similar regulations. The remaining provisions of this Section 20, as they apply
to MRD, its owners and each of their affiliates other than Lakes or any of its
affiliates (a "Non-Lakes Party"), shall also apply in the same manner to any
other successor to MRD that is a Non-Lakes Party. The remaining provisions of
this Section 20, as they apply to Lakes, its officers and directors and each of
their affiliates, other than MRD or any of its affiliates (a "Non-MRD Party"),
shall also apply in the same manner to any other successor to Lakes that is
Non-MRD Party.
If (a) any Non-Lakes Party or any of its affiliates, or any other individual or
entity who directly or indirectly owns or has any interest in a Non-Lakes Party
or is otherwise affiliated with a Non-Lakes Party, is found by any gaming
authority with competent jurisdiction to be unsuitable or unqualified to be
associated with Lakes or any affiliate of Lakes; or (b) Lakes determines in good
faith that the continued association of Lakes with the Non-Lakes Party may
reasonably be expected to result in (i) the disapproval, adverse modification or
non-renewal of any contract or agreement under which Lakes or any subsidiary or
other affiliate of Lakes has sole or shared authority to manage any gaming
facility; or (ii) the loss or non-reinstatement of any Gaming License, then
Lakes shall give the Non-Lakes Party written notice of such finding or
determination. Such notice shall describe the situation or relationship that is
the basis for such finding or determination.
Such Non-Lakes Party shall, promptly after its receipt of the written notice
from Lakes specifying such finding or determination, take all actions required
to terminate or discontinue or otherwise cure, to the satisfaction of Lakes and
any gaming authority having jurisdiction over Lakes or any affiliate of Lakes,
the situation or relationship described in the notice given by Lakes. If, within
thirty (30) days after such Non-Lakes Party's receipt of the notice given by
Lakes (or such shorter period of time as may be required or requested by any
gaming authority), such Non-Lakes Party fails or is unable to take such actions
to the satisfaction of Lakes and any gaming authority having jurisdiction, such
Non-Lakes Party may at any time within such period give Lakes written notice of
such failure or inability or, if such Non-Lakes Party has not already given such
notice, Lakes may at the end of such period give a notice of such failure or
inability to such Non-Lakes Party and each of the Project Companies in which
such Non-Lakes Party has any interest. In the event any notice of such failure
or inability is given (whether or not on a timely basis), then each Project
Company shall then have the right and option to purchase such Non-Lakes Party's
entire
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interest in the Project at a redemption price based upon the fair market
value of such interest, as determined pursuant to the applicable Project Company
Documents or, if applicable, pursuant to the first paragraph of this Section 20;
and, if a Project Company does not exercise such option, Lakes shall have the
right and option to purchase such interest at the same price available to the
Project Company.
All of the foregoing provisions regarding any Non-Lakes Party shall also apply
to any Non-MRD Party, and MRD shall have the same rights as Lakes with respect
to determinations relating to, and actions resulting from, conduct and
activities of a Non-MRD Party.
21. MEDIATION. Except with respect to matters for which either party believes it
necessary to seek equitable relief permitted under a written agreement, or
otherwise to prevent irreparable harm to such party, each party agrees to enter
into mediation of all disputes involving this Agreement or any aspect of their
relationship, for a minimum of four (4) hours, prior to the initiation of any
legal action or claim against the other. Upon written notice by either party to
the other of the initiating party's desire to mediate, the party receiving the
notice shall select an independent entity that provides mediation services to
select a mediator in the proceeding. The mediator selected must have knowledge
and experience of gaming activities, and must have at least ten (10) years'
experience in real estate development and financing matters. If the party
receiving the notice of intent to mediate does not provide the name of such an
organization within ten (10) days from the date the notice of intention to
mediate is received, then the other party may forego mediation of the issue(s)
and commence legal action or, at its option, select the organization to provide
mediation services. If one party selects an organization that is unwilling to
serve as mediator, or cannot provide a mediator with the required expertise,
then the other party may select the organization.
Once the organization is designated and agrees to accept the appointment as
mediator, the organization shall be directed to schedule a mediation proceeding
at a time mutually convenient to both parties. The mediation shall be held
within thirty (30) days following receipt by the mediation organization of
notification that its services shall be retained. If the parties cannot agree on
a date for mediation, then the mediation organization shall select a date it
believes is reasonable for the parties, given all of the alleged conflicts in
dates. The parties shall equally share the cost of the mediator. The mediator
shall select the location for the mediation, but unless otherwise agreeable to
each party, the mediation shall take place at a site the mediator believes to be
a neutral site in terms of its proximity to each party. If any default notice
has been issued by either party, and such default is subject to cure before
becoming an Event of Default on the part of such party, the period for cure
shall be tolled until the mediation is complete if the request for mediation is
made at least ten (10) days before such action or event shall become an Event of
Default. Such tolling shall not, however, apply to any payments owed to third
parties if the failure to make such payment would result in any significant
penalties to any of the parties or either of the Project Companies.
22. CONFIDENTIAL ARBITRATION. Except with respect to matters for which either
party believes it necessary to seek equitable relief permitted under a written
agreement, any dispute arising directly or indirectly out of, pursuant to, or
under this Agreement, and any other dispute between
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any of the parties hereto, however arising, which the parties are not able to
resolve on their own or through mediation, shall be resolved by arbitration in
Minneapolis, Minnesota, which arbitration shall be administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules then
in effect, except that (a) the question whether or not a dispute is arbitrable
under this Agreement shall be a matter for binding arbitration by the
arbitrators, such question shall not be determined by any court and, in
determining any such question, all doubts shall be resolved in favor of
arbitrability; (b) discovery shall be permitted in accordance with the Minnesota
Rules of Civil Procedure, subject to supervision as to scope and appropriateness
by the arbitrators; and (c) judgment on the award may be entered in any court of
competent jurisdiction. All aspects of such arbitration shall be conducted in
the strictest confidence, and each party agrees not to disclose any information
concerning any dispute or arbitration hereunder to any person except as may be
required by law or this Agreement.
23. INDEPENDENT CONTRACTORS. Each of the parties recognize that they are
independent contractors vis-a-vis each other, and neither party shall be bound
by any agreement, representation or warranty made by the other party except as
is specifically contemplated by any of the agreements between the parties.
Further, neither party shall have any responsibility or liability for any of the
businesses of the other party.
24. REPRESENTATIONS OF LAKES. Lakes represents and warrants to MRD that the
statements contained in this Section 24 are correct and complete, as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 24 except as otherwise set forth in the
disclosure schedule delivered by Lakes to MRD on the date hereof and attached
hereto (the "Lakes Disclosure Schedule"). The Lakes Disclosure Schedule will be
arranged in Sections and paragraphs corresponding to the numbered and lettered
Sections and paragraphs contained in this Agreement.
(a) Organization of Lakes and Project Subsidiaries. Lakes is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Minnesota. Lakes is a wholly owned subsidiary of Lakes
Gaming, Inc. Lakes has formed wholly owned limited liability companies under the
laws of the State of Minnesota to perform its obligations under this Agreement
with respect to each of the Projects and, as of the Closing Date, each such
subsidiary will be duly organized, validly existing, and in good standing under
the laws of the State of Minnesota (the "Lakes Subsidiaries").
(b) Authorization of Transaction. Lakes has the legal power, authority
and capacity to execute and deliver this Agreement, and the agreements and
instruments to be executed and delivered by Lakes in connection herewith, and to
perform its obligations hereunder and thereunder; and as of the Closing Date,
each of the Lakes Subsidiaries will have such legal power, authority and
capacity with respect to the Project Company in which it will invest. This
Agreement has been, and the agreements and instruments to be executed and
delivered by Lakes and the Lakes Subsidiaries in connection herewith will be,
duly executed and delivered by Lakes and the Lakes Subsidiaries, and constitute
or upon execution and delivery will constitute the valid and legally binding
obligations of Lakes and the Lakes Subsidiaries, as applicable, enforceable in
accordance with its terms, except as enforcement may be limited by general
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<PAGE> 23
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally. Lakes need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(c) Noncontravention; Defaults. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, or rule; (ii) violate
any injunction, judgment, order, decree, ruling or other restriction of any
government, governmental agency, or court to which Lakes or any of the Lakes
Subsidiaries is subject or any provision of its charter or bylaws; or (iii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license
or instrument to which Lakes or any of the Lakes Subsidiaries is a party or by
which it is bound or to which any of its assets is subject.
(d) Legal Compliance. Lakes (i) has complied in all material respects
with all applicable gaming laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of
federal, state and local governments (and all agencies thereof); (ii) has had no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice filed or commenced against it alleging any failure so to
comply and, to the knowledge of Lakes, no such actions have been threatened, and
(iii) is not subject to or in default with respect to any judgment, writ,
injunction, decree, rule or regulation of any government entity that is likely
to have a material adverse effect on Lakes' ability to consummate the
transactions contemplated by this Agreement and to provide the financing
required under this Agreement.
(e) Capabilities. Except as disclosed in Section 24(e) of the Lakes
Disclosure Schedule, Lakes is not subject to any actions, suits, proceedings,
hearings or investigations, and is not subject to any other restrictions, either
by nature of its contractual obligations or otherwise, that are likely to have a
material adverse effect on Lakes' ability to consummate the transactions
contemplated by this Agreement and to provide the financing required under this
Agreement.
(f) Due Diligence. Lakes represents and warrants that it has done
extensive due diligence with respect to the Projects and their prospects, and is
not relying upon any representation or warranty of MRD with respect to the
potential gaming revenues, potential Net Cash Flows and projected expenses for
any Project Company, except for the projections expressly required to be
delivered by MRD to Lakes hereunder. Lakes further acknowledges that all
projections prepared by MRD with respect to the Projects or their potential are
only good faith estimates of what MRD believes to be practical, based on its
present knowledge and the market studies for each Project commissioned by MRD
from Urban Systems, Inc. (true and complete copies of which have been delivered
to Lakes). Lakes acknowledges that it is relying upon its own evaluation of the
potential for the Projects based upon its own experience in Indian gaming. Lakes
further warrants that it has had adequate time to conduct its due diligence and
to review all projections given to Lakes by MRD and believes those projections
to be reasonable based on information available to Lakes.
25. INDEMNIFICATION. Each of the parties hereby indemnify and hold the other
party, and its
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<PAGE> 24
members, directors, officers, employees and agents (the "Indemnified Parties"),
harmless, at all times against and with respect of any and all damages, costs,
liabilities, losses, judgments, penalties, fines, expenses or other costs
(including reasonable attorneys' fees, costs of defense and cost of collection)
(collectively, "Losses") arising from or relating to (i) any breach by any party
(the "Indemnifying Party") of any of its representations, warranties, covenants
or agreements made in this Agreement or in any other agreement, document or
instrument delivered by the Indemnifying Party in connection with this
transaction, and (ii) any Losses the Indemnified Parties will suffer as a result
of any other business activities of the Indemnifying Party unrelated to the
Projects.
Any party asserting a right of indemnification provided for under this Agreement
in respect of, or arising out of or involving a claim or demand made by an
unrelated person, firm, governmental authority or entity against the Indemnified
Parties (a "Third Party Claim") shall notify the Indemnifying Party in writing
of the Third Party Claim, and shall furnish the Indemnifying Party with copies
of any pleadings, correspondence or other documents relating thereto that are in
the Indemnified Parties' possession from time to time. The Indemnifying Party
shall then defend against, settle or compromise such Third Party Claim at the
expense of such Indemnifying Party, except that the Indemnified Party shall have
the right (but not the obligation) to participate in the defense of any such
claim through counsel selected by it and at the Indemnifying Party's expense.
The obligation to indemnify shall arise upon assertion of any Third Party Claim
that, if proven to be correct, would result in an obligation on the part of the
Indemnifying Party to indemnify the Indemnified Parties, even if either the
Indemnifying Party or the Indemnified Parties dispute the merits of the claim.
For any indemnification other than a Third Party Claim, the Indemnified Parties
shall provide to the Indemnifying Party a statement of the claim, stating the
nature and basis of such claim. The Indemnified Parties shall, on request,
provide all information and documentation reasonably necessary to support and
verify any Losses which such person believes gives rise to a claim for
indemnification and shall give the Indemnifying Party reasonable access to its
books, records and personnel for the purpose of investigating and verifying any
such claim.
MRD acknowledges and agrees that none of the terms and provisions of this
Section 25 (excluding the terms of the first paragraph of this Section 25) shall
apply to the exercise of rights and remedies that Lakes shall have with respect
to the enforcement and collection of the Project Development Loans, the
Cloverdale Premium Loan or the Buy-out Reimbursement Loan under terms and
provisions of this Agreement or any applicable promissory note or other related
loan documents.
26. GENERAL PROVISIONS.
(a) Attorneys Fees and Other Costs. If any legal action, including
arbitration, is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, misrepresentation in connection with any of
the provisions of this Agreement or the relationship between the parties, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other reasonable costs incurred in that action or
proceeding, in addition to any
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<PAGE> 25
other relief to which it may be entitled.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(c) Assignability. Neither the rights nor the obligations of any party
to this Agreement may be transferred or assigned without the consent of the
other party. Either party may assign or pledge as security its economic rights
under this Agreement or in a Project Company with the consent of the other
party, which consent shall not be unreasonably withheld, conditioned, or unduly
delayed. MRD expressly consents to Lakes assigning its rights and obligations to
any of its wholly owned subsidiaries (which shall then be bound by all of the
terms, conditions, guaranties and representations contained in this Agreement);
provided, however, that Lakes shall retain the responsibility for providing all
financing required under this Agreement, and shall guarantee the performance of
any of its subsidiaries to which this Agreement may be assigned, with respect to
the provision of such financing.
(d) Benefit. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto, and their permitted successors and
assigns, and the parties hereby agree for themselves and their permitted
successors and assigns to execute any instrument and to perform any acts which
may be necessary or proper to carry out the purposes of this Agreement.
(e) Notices. All notices, requests or demands and other communication
from either of the parties hereto to the other shall be in writing and shall be
considered to have been duly given (i) when delivered personally, (ii)
twenty-four (24) hours after sent by telephone facsimile transmission, (iii) the
next business day when sent via a nationally recognized overnight courier for
next business day delivery to the recipient and (iv) four (4) business days
after sent by certified, or registered mail, postage prepaid, to the other
party. Such notices, requests, demands and other communication may be sent by
any of the foregoing means, but if faxed, mailed, or sent by overnight courier,
shall be directed to the addresses (or fax) indicated below, or such other
addresses (or fax) as may be provided in writing to each party from time to
time:
(1) If to Lakes: Lakes Gaming & Resorts, LLC
130 Cheshire Lane
Minnetonka, MN 55305
Attention: Tim Cope
Fax: 612 449-7064
with a copy to: Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South 7th Street
Minneapolis, MN 55402
Attention: Brian J. Klein
Fax: 612 672-8397
(2) If to MRD: MRD Gaming, LLC
600 Whitney Ranch Drive, C- - 15
Henderson, NV, 89014
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<PAGE> 26
Attention: Matthew R. Daly
Fax: 702 547-9015
with a copy to: Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attention: Charles S. Modell
Fax: 952 896-1511
(f) Publicity. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement, and the execution of
this Agreement, shall be jointly planned and coordinated by and between MRD and
Lakes (and by any Tribe referred to in the publicity), and shall not be released
by either party without consent of the other, subject to any disclosure rights
of Lakes set forth in Section 15.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Minnesota, without giving
effect to any choice of law provision or rule (whether of the State of Minnesota
or any other jurisdiction) that would cause application of the laws of any
jurisdiction other than the State of Minnesota.
(h) Venue. Any dispute concerning the interpretation of this Agreement,
or the performance or breach thereof, shall be exclusively venued in the state
or federal courts located in Hennepin County, Minnesota, and each of the parties
agrees to submit to personal jurisdiction in such venue for a resolution of such
dispute.
(i) Entire Agreement. This Agreement, the exhibits attached hereto and
any other instruments executed pursuant hereto shall constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and shall supersede any prior agreement or understanding, whether
written or oral, between the parties. Any waiver of any rights or obligations of
the parties shall not be binding upon the other party unless given in writing.
This Agreement may only be amended by a writing signed by the party against whom
enforcement is sought.
[The remainder of this page has been intentionally left blank.]
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[Signature page of Acquisition and Participation Agreement between Lakes Gaming
and Resorts, LLC and MRD Gaming, LLC]
This Agreement has been executed on the date first written above.
MRD GAMING, LLC
/s/ Matthew R. Daley
-------------------------------------------
By: Matthew R. Daly
Its: Manager/ Member
LAKES GAMING AND RESORTS, LLC
/s/ Timothy J. Cope
-------------------------------------------
By: Timothy J. Cope
Its Manager:
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