Buyout and Release Agreement of Shingle Springs Project - Kean Argovitz Resorts-Shingle Springs LLC, Lakes KAR-Shingle Springs LLC, Lakes Entertainment Inc. and Lakes Shingle Springs Inc.
BUYOUT AND RELEASE AGREEMENT
(SHINGLE SPRINGS PROJECT)
THIS BUYOUT AND RELEASE AGREEMENT is made and entered into this 30th day of
January, 2003, by and among Kean Argovitz Resorts-Shingle Springs, L.L.C.
("KARSS"), Lakes KAR-Shingle Springs, L.L.C., a Delaware limited liability
company (the "Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming,
Inc. ("Lakes Entertainment"), and Lakes Shingle Springs, Inc. (hereinafter
referred to as "LASS" and which entity is a wholly owned subsidiary of Lakes
Gaming and Resorts, LLC which is a wholly owned subsidiary of Lakes
Entertainment).
RECITALS
WHEREAS, KARSS (a limited liability company owned by Kevin M. Kean ("Kean") and
Jerry A. Argovitz ("Argovitz")) previously entered into a Development Agreement,
Management Agreement and related documents (the "Original Development
Documents") with the Shingle Springs Band of Miwok Indians (the "Tribe") related
to the design, construction and management of an Indian gaming facility on its
tribal lands (the "Project");
WHEREAS, pursuant to a letter agreement dated June 21, 1999 (the "Letter
Agreement") between KARSS and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):
(i) LASS and KARSS created and are the sole members of the Project
Company pursuant to that certain Operating Agreement dated July 29,
1999 (the "Operating Agreement");
(ii) Pursuant to that certain Assignment and Assumption Agreement dated
July 29, 1999 between LASS and the Project Company, KARSS assigned
to the Project Company all of KARSS's right, title and interest in
and to the Original Development Documents;
(iii) Pursuant to that certain Assignment and Assumption Agreement and
Consent to Assignment and Assumption dated July 29, 1999, among Lakes
Entertainment, LASS and KARSS, Lakes Entertainment assigned to LASS
all of Lakes Entertainment's right, title and interest in and to the
Letter Agreement;
(iv) Pursuant to that certain Guaranty dated July 29, 1999 executed by
Lakes Entertainment in favor of KARSS (the "Guaranty"), Lakes
Entertainment guaranteed the obligations of LASS under the Operating
Agreement and certain other documents described with specificity
therein;
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(v) Pursuant to that certain Management Agreement dated July 29, 1999
between LASS and the Project Company (the "LASS Management
Agreement"), the parties agreed that LASS would provide certain
management services on behalf of the Project Company with respect to
the Project;
(vi) Pursuant to the Letter Agreement and the Operating Agreement, LASS
has extended certain loans to the Project Company referred to as the
"Development Loan" and "Equity Advance" which are evidenced by a
certain Promissory Note dated July 29, 1999 made payable by the
Project Company to LASS in (the "Project Company Note"), which Note
is secured by that certain Security Agreement dated July 29, 1999
executed by the Project Company in favor of LASS, pursuant to which
the Project Company granted LASS a security interest in all of its
assets; such Note is also sometimes referred to as the "Interim
Promissory Note"; and
(vii) LASS extended a $970,000 loan to KARSS the repayment of which is
evidenced by certain Promissory Note dated July 29, 1999 made payable
by KARSS to LASS in the original principal amount of $970,000 (the
"KARSS Note"), which Note is secured by that certain Pledge Agreement
dated July 29, 1999 executed by KARSS in favor of LASS (the "KARSS
Pledge Agreement") pursuant to which KARSS granted LASS a security
interest in all of KARSS membership interest and related rights in
and to the Project Company;
WHEREAS, the Original Development Documents were amended and restated pursuant
to that certain Memorandum of Agreement Regarding Gaming Development and
Management Agreement (the "Amended Management Agreement") and related documents
dated as of May 5, 2000 (as heretofore and hereafter amended, the Amended
Management Agreement and such related documents shall be collectively referred
to as the "Amended Development Documents");
WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KARSS has agreed
to enter into this Agreement;
WHEREAS, Kean and Argovitz entered into a Settlement Agreement dated October 22,
2002 that resolved the disputes and litigation between them in order to minimize
the costs of litigation and the risk of economic loss to each of them
individually and to KAR (the "Argovitz Settlement Agreement");
WHEREAS, KARSS believes that its execution of this Agreement is in the best
interest of the Tribe to preserve and protect the Project, from which all tribal
members should benefit, and in order to move the Projects forward in a timely
manner without delay, the parties hereto desire to enter into this Agreement;
and
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WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon conversations with staff of the NIGC, believe this Agreement will
be acceptable to the NIGC and the NIGC will take no affirmative action to
nullify or otherwise disrupt this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. BUYOUT. For and in consideration of $1.00, KARSS hereby absolutely sells
and conveys to LASS all of KARSS right, title and interest in the Project
Company and each of the Joint Venture Documents (the "Transferred Rights"). To
induce and in consideration for each of KARSS, the Project Company, Lakes
Entertainment and LASS executing this Agreement, the Project Company, LASS and
Lakes Entertainment will contemporaneously with the execution of this Agreement
be entering into separate agreements with Argovitz to provide him certain rights
of repurchase in and to the Project Company or in lieu thereof, the payment of
certain sale proceeds, and with Kean to, among other things, provide certain
loans, each as more specifically set forth therein (collectively, the
"Kean-Argovitz Agreements"). In addition KARSS acknowledges, agrees and consents
that LASS intends to cause the Amended Development Documents to be transferred
from the Project Company to LASS and upon the effective date of such transfer,
LASS shall be deemed to be the "Project Company" for all purposes of this
Agreement and shall be deemed to have succeeded to and assumed all of the
Project Company's rights and obligations hereunder.
2. KARSS NOTE. LASS hereby agrees to release KARSS from its obligations under
the KARSS Note and KARSS Security Agreement (but is not otherwise satisfying or
canceling such obligations), which obligations may upon certain events be wholly
or partially assumed by Kean and/or Argovitz as more specifically provided under
their separate Kean-Argovitz Agreements. As of September 30, 2002, the parties
acknowledge that the outstanding principal and interest balances of the KARSS
Note was $970,000 and $224,077 respectively and that no payments have been made
on such Note since September 30, 2002.
3. RELEASE. KARSS hereby releases the Project Company, Lakes Entertainment,
Lakes Resorts, LASS, all of their subsidiaries, and each of their directors,
officers, shareholders, employees, agents and attorneys (collectively, the
"Lakes Related Parties"), and the Lakes Related Parties hereby release KARSS
from any claims or potential claims it or he has or may have against each other
concerning the Project, the Project Company, the Joint Venture Documents or any
of the Amended Development Documents for acts or omissions occurring on or prior
to the effective date of this Agreement, but specifically excluding any claims
arising from any misrepresentation, act or omission or failure to perform any
obligation under this Agreement and any claims under Section 4 hereof.
4. INDEMNIFICATION. KARSS agrees to indemnify and hold harmless each of the
Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of KARSS under this Agreement and any claims or potential
claims from third parties based on any prior dealings between such third
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parties and any of KARSS, Kean or Argovitz concerning the Project, the Project
Company and the subject matter of the Amended Development Documents provided
that the Project Company shall remain responsible to perform its express
obligations set forth in the Amended Development Documents.
Each of the Lakes Related Parties agrees to indemnify and hold harmless KARSS
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation made by Lakes
Entertainment or LASS under this Agreement and any claims or potential claims
from third parties (excluding the rights and obligations set forth in the
Amended Management Agreement and any agreement expressly referred to therein)
based on any prior dealings between such third parties and any of the Lakes
Related Parties concerning the Project, The Project Company and the subject
matter of the Amended Development Documents which were not permitted dealings
thereunder or under the Joint Venture Documents.
5. NONCOMPETE/CONFIDENTIALITY. KARSS agrees that (a) it shall and shall cause
each of its officers, directors, shareholders, equity owners, family members of
any of the foregoing and any entity in which it or any of the foregoing persons
shall directly or indirectly own equity interests (collectively, the "Noncompete
Parties"), to comply with each of the noncompetition and confidentiality
provisions set forth in the Amended Development Documents to the same extent as
if any of such Noncompete Parties was the Project Company thereunder, each of
which provisions are hereby incorporated by reference, and (b) in addition to
the foregoing, that it shall not and shall cause each of the other Noncompete
Parties to not directly or indirectly solicit or enter into any consulting,
brokerage, management, financing or other similar agreement with any Indian
tribe with respect to its gaming enterprise or with any party seeking such an
agreement with such an Indian tribe or other gaming enterprise, related to a
gaming enterprise located or to be located within a fifty (50) mile radius of
the Shingle Springs Tribe's gaming enterprise or the Lake Tahoe area. The
Project Company acknowledges and agrees that neither Argovitz nor Kean have the
ability to control what the other individual may do in the future.
6. REPRESENTATIONS AND WARRANTIES. KARSS to the best of its knowledge hereby
represents and warrants that (a) KARSS has transferred to the Project Company
all rights and assets held by KARSS with respect to the Project, the Original
Development Documents and the Amended Development Documents, (b) except for the
Joint Venture Documents, the Amended Management Agreement and any agreement
expressly referred to therein and any agreements referenced on Schedule 6(c)
hereof, KARSS has not entered into any agreements or understandings with any
party with respect to the Project, (c) KARSS has not taken any act or failed to
take any act that would cause a default or breach by the Project Company of its
obligations under the Amended Development Documents, except those acts
referenced on Schedule 6(c) hereof, (d) KARSS has not directly or indirectly
assigned, conveyed, pledged or otherwise transferred to any party any interest
or rights in the Project, the Project Company or any revenues or profits to be
derived therefrom except for the KARSS Pledge Agreement, and (e) KARSS has the
full legal right and authority to execute, deliver and perform this Agreement
and the consent, authority or signature of no other party is required in
connection therewith.
7. FURTHER ASSURANCES. Each of the parties hereto agrees to execute such
additional
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documents and agreements as are necessary to effectuate the intents and purposes
of this Agreement.
8. GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.
9. DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:
(a) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Minneapolis Minnesota selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title
9 of the United States Code), notwithstanding any conflicting choice of law
provision in any of the documents between the parties; and (iii) be
conducted by the AAA, or such other administrator as the parties shall
mutually agree upon, in accordance with the AAA's commercial dispute
resolution procedures. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and
expenses incurred by such other party in compelling arbitration of any
dispute. The arbitration requirement does not limit the right of any party
to obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver or the exercise of any
foreclosure or self-help remedies, before during or after the pendency of
any arbitration proceeding.
(b) Arbitrator Powers. The arbitrator will determine whether or not an
issue is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will
decide (by documents only or with a hearing at the arbitrator's discretion)
any pre-hearing motions which are similar to motions to dismiss for failure
to state a claim or motions for summary adjudication. The arbitrator may
grant any remedy or relief that a court of such state could order or grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Minnesota Rules of
Civil Procedure or other applicable law. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of
a provisional or ancillary remedy shall not constitute a waiver of the
right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
(c) Miscellaneous. The arbitrator shall award all costs and expenses
of the arbitration proceeding. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude
any arbitration proceeding within 180 days of the filing of the dispute
with the AAA. No arbitrator or other party to an
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arbitration proceeding may disclose the existence, content or results
thereof, except for disclosures of information by a party required in the
ordinary course of its business or by applicable law or regulation. If more
than one agreement for arbitration by or between the parties potentially
applies to a dispute, the arbitration provision most directly related to
the documents between the parties or the subject matter of the dispute
shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the documents or any relationship between
the parties.
10. ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LASS and the Project Company to become
immediately licensed by the NIGC and to immediately allow the Project to move
forward. Should the NIGC take any action to nullify or otherwise disrupt this
Agreement, then the parties shall immediately meet and negotiate in good faith
to agree to such modifications as may be necessary to obtain NIGC approval
hereof while still maintaining the intents and purposes of this Agreement, with
any disputes related thereto resolved by arbitration under Section 9 above.
11. MISCELLANEOUS. Time is of the essence in the performance of this Agreement.
This Agreement and the Joint Venture Documents embody the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that KARSS may not assign its rights or obligations hereunder
without the prior written consent of LASS. This Agreement may be executed in any
number of counterparts and by facsimile, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart, provided that this
Agreement shall not become effective until all parties have executed the same.
12. ACKNOWLEDGMENT OF EUGENE J. KEAN. By signing below, Eugene J. Kean joins
in this Agreement for the sole purposes of acknowledging and agreeing that he
either has no membership or other interest in KARSS or consents and agrees to
the terms of Section 1 hereof including the transfer to LASS of KARSS's rights
and interests in the Project Company, and further that he shall have no further
rights, interests or claims against any of the Lakes Related Parties under this
Agreement or any of the Kean-Argovitz Agreements or otherwise in any manner with
respect to the Project, the Project Company, KARSS, the Development Documents or
any other document or agreement.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the date and
year first above written.
KEAN ARGOVITZ RESORTS-SHINGLE SPRINGS, L.L.C.
By: /s/ Kevin M. Kean
-----------------------------------------
Name: Kevin M. Kean
Its: Manager and Member
And
By: /s/ Jerry A. Argovitz
-----------------------------------------
Name: Jerry A. Argovitz
Its: Manager and Member
LAKES KAR SHINGLE SPRINGS, L.L.C.
By: Kean Argovitz Resorts-Shingle Springs, L.L.C.
Its: Member
By: /s/ Kevin M. Kean
----------------------------------------
Name: Kevin M. Kean
Its: Manager and Member
And
By: /s/ Jerry A. Argovitz
----------------------------------------
Name: Jerry A. Argovitz
Its: Manager and Member
LAKES ENTERTAINMENT, INC.
By: /s/ Timothy L. Cope
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Timothy J. Cope
Its: Chief Financial Officer
[SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT-SHINGLE SPRINGS PROJECT]
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LAKES SHINGLE SPRINGS, INC.
By: /s/ Timothy L. Cope
-----------------------------------------
Timothy J. Cope
Its: Chief Financial Officer
For purposes of agreeing to the terms of Section 12 above:
/s/ Eugene J. Kean
-----------------------------------------
EUGENE J. KEAN
[SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT-SHINGLE SPRINGS PROJECT]