Unlimited Guaranty - Lakes Gaming Inc., Lakes Gaming & Resorts LLC and Pokagon Band of Potawatomi Indians
UNLIMITED GUARANTY
GUARANTY, dated as of the 16th day of October, 2000, from the
undersigned LAKES GAMING, INC., a Minnesota corporation ("Lakes"), and LAKES
GAMING AND RESORTS, LLC, a Minnesota limited liability company ("LG & R";
collectively with Lakes, and each of Lakes and LG&R individually, the
"Guarantor") to the POKAGON BAND OF POTAWATOMI INDIANS, a federally recognized
Indian tribe (the "Band").
W I T N E S S E T H :
WHEREAS, the Band and Lakes have entered into a Development Agreement
dated as of July 8, 1999 (the "Development Agreement") and a Management
Agreement dated as of July 8, 1999 (the "Management Agreement"; collectively,
with the Development Agreement, the "Agreements"), pursuant to which the Band
has engaged the Lakes to, among other things, assist the Band in the design,
development, construction and management of a gambling casino and certain
related amenities (as defined in the Development Agreement, the "Facility"); and
WHEREAS, pursuant to the Development Agreement Lakes has agreed to make
certain payments and advances to the Band, including without limitation the
Transition Loan, the Lakes Development Loan and the Non-Gaming Land Acquisition
Line of Credit (collectively the "Lakes Loans"), and the Scholarship Program
Fee, and has agreed to perform development services with regard to the Facility,
all on the terms set out in that Agreement; and
WHEREAS, pursuant to the Management Agreement Lakes has agreed to
manage the Facility on the terms set out in that Agreement; and
WHEREAS, Lakes has informed the Band that it wishes to restructure its
corporate organization by forming a first tier subsidiary, LG&R, to own the
equity in second-tier subsidiaries, including Great Lakes of Michigan, LLC, a
Minnesota limited liability company ("Great Lakes"), that will be engaged in
gaming and gaming-related businesses; and
WHEREAS, in connection with such restructuring Lakes has requested that
the Band consent to (i) the assignment of Lakes' rights and obligations under
the Agreements, the Lakes Loans and all related documentation, including without
<PAGE> 2
limitation the documents listed on the attached Schedule A (the "Related
Documents"; collectively, with the Agreements and the Lake Loans, the
"Obligations"), to Great Lakes, and (ii) the release of Lakes as primary obligor
under the Obligations, in exchange for the execution by Lakes and LG&R of
unconditional guarantees of the obligations of Great Lakes under the
Obligations; and
WHEREAS, under the Agreements Lakes cannot carry out such restructuring
without the Band's consent; and
WHEREAS, the Band is willing to so consent, but only if Lakes and LG&R
execute and deliver this Guaranty and otherwise comply with the terms and
conditions of an Assignment and Assumption Agreement among Lakes, Great Lakes,
LG&R and the Band of near or even date (the "Assignment Agreement"); and
WHEREAS, Lakes and LG&R each directly or indirectly own all the equity
interests in Great Lakes, and will each materially and substantially benefit
from the proposed restructuring and from the agreement of the Band set forth in
the Assignment Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor
hereby agrees as follows:
1. Recitals True. The above recitals are true.
2. Guarantied Obligations. The undersigned Guarantor(s), jointly and
severally, hereby irrevocably and unconditionally guarantee the full
and punctual payment and performance by Great Lakes of all covenants,
obligations and representations of Great Lakes under or relating to the
Obligations, including without limitation the due and punctual payment
by Great Lakes of all advances due under the Lakes Loans and the
Scholarship Program Fee, as such Obligations may be amended, modified
or renewed, as well as all substitutions therefor and renewals,
extensions and rearrangements thereof, together with any and all costs
incurred by Band (including, without limitation, reasonable attorneys'
fees and disbursements) in enforcing this Guaranty or any security
therefore (individually, a "Guarantied Obligation" and collectively,
the "Guarantied Obligations").
3. Demand by the Band; Performance by Guarantor. In the event of a
Guaranty
<PAGE> 3
Event of Default, the Band may make demand upon the Guarantor(s), or
any one of them, for the payment or performance of the Guarantied
Obligation, and each Guarantor binds and obliges it to make such
payment or performance and to pay any related damages forthwith upon
such demand. Each Guarantor further covenants and agrees that Band may
upon a Guaranty Event of Default proceed first and directly against the
Guarantor, without any action, proceeding or suit, whether against
Great Lakes or against any security for the Guarantied Obligations
(hereby intending, among other matters, to waive any defense to this
Guaranty based on impairment of collateral), or any other party liable
for the Guarantied Obligations. This Guaranty is not conditioned upon
the genuineness, validity, or enforceability of the Agreements, the
Related Documents or the Lakes Notes (collectively, the "Transaction
Documents") or any other instruments relating to the creation or
performance of the Guarantied Obligations, or the pursuit by the Band
of any remedies which the Band has now or may hereafter have with
respect thereto under the Transaction Documents.
"Guaranty Event of Default" means (a) either (i) a Lakes Event of
Default under the Development Agreement, (ii) a Manager Event of
Default under the Management Agreement, or (iii) any other default or
breach by Great Lakes under the Guaranteed Obligations; in each case
after all cure periods have expired and either the time within which
arbitration may be demanded has expired or, if arbitration has been
timely demanded, the arbitrator has issued his award and the award
determines that Great Lakes is in default or breach under a Guaranteed
Obligation; or (b) the receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of, or any similar proceeding affecting Great Lakes or
any Guarantor or any of its or their assets.
4. Waiver of Demands, Notices, Diligence, etc. Each Guarantor hereby
assents to all the terms and conditions of the Guarantied Obligations
and the related Transaction Documents and waives (a) demand for the
payment or performance of any Guarantied Obligation (other than a
demand under section 3 hereof); (b) notice of the occurrence of a
default or an Event of Default under the Transaction Documents; (c)
notice of acceptance of any guaranty herein provided for or of the
terms and provisions thereof or hereof by the Band; (d) notice of any
indulgences or extensions granted to Great Lakes or any successor to
Great Lakes or any person or party which shall have assumed the
obligations of Great Lakes or any other obligor in respect of any
Guarantied Obligation; (e) any requirement of diligence or promptness
on the part of the
<PAGE> 4
Band in the enforcement of any of its rights under the provisions of
any Guarantied Obligation or the Transaction Documents; (f) any
enforcement of any Guarantied Obligation against any other party liable
therefor; (g) any right which the Guarantor might have to require the
Band to proceed against any other guarantor of the Guarantied
Obligations or to realize on any collateral security therefor; (h) any
and all notices of every kind and description which may be required to
be given by any statute or rule of law in any jurisdiction (other than
notices required hereunder), to the maximum extent permitted by
applicable law; (i) any and all claims, defenses or objections based
upon the failure of the Band to make demand upon the Guarantor for the
payment or performance of any of the Guarantied Obligations (other than
the demand provided for in section 3 hereof) under applicable law; and
(j) any right to exoneration or marshaling, and, to the maximum extent
permitted by applicable law, any defense based upon or arising from the
Statute of Limitations, and other laws relating to stays of action or
moratorium. Each Guarantor further hereby waives (solely as against
Band) any right to contribution from co-guarantors as well as any right
to exoneration, subrogation or reimbursement until all Guarantied
Obligations are fully and indefeasibly paid or performed and until the
expiration of any applicable preference periods. The Band and Great
Lakes (or any other party to a Guaranteed Obligation) may modify,
renew, waive or extend any Guaranteed Obligation or any provision
thereof and may modify, waive or release any collateral therefor
without the consent of any Guarantor and without altering or releasing
the obligations of Guarantor hereunder.
5. Obligations of Guarantor Unconditional, etc.
a. This Guaranty is a guaranty of payment not collection. This is
a continuing Guaranty, which shall apply to the Guarantied
Obligations which now exist or as the same may change over
time, and to any successive transactions continuing,
compromising, extending, increasing, modifying, releasing or
renewing any Guaranteed Obligation, whether or not notice of
any after-arising Guarantied Obligation or change to the
Guarantied Obligation is given to Guarantor, and whether or
not any and all prior Guarantied Obligations have been fully
paid, performed or observed before a new Guarantied Obligation
arose, and shall apply notwithstanding the dissolution of
Great Lakes or dissolution of any other guarantor of any
Guarantied Obligation. The obligations of the Guarantor upon a
Guaranty Event of Default are and shall be unconditional,
irrespective of the validity, regularity or
<PAGE> 5
enforceability of any Guarantied Obligation or any of the
Transaction Documents or of any claim or defense of any party
relating thereto. This Guaranty shall not be affected by any
action taken under or in respect of any Guarantied Obligation,
in the exercise of any right or remedy therein or thereby
conferred, or by any failure or omission on the part of the
Band to enforce any right given thereunder or hereunder, or
any remedy conferred thereby or hereby; or by any lack of
diligence on the part of Band to enforce, assert or exercise
any right, power or remedy granted hereunder, under the
Agreements or any other Guarantied Obligation, or any
documents relating thereto (including without limitation any
failure to perfect a security interest in or lien on any
security for any Guarantied Obligation); or by any release or
surrender of any security or any other guaranty at any time
existing for the benefit of Band or in respect of any
Guarantied Obligation or any modification to any of the
foregoing; or by any sale, lease or transfer by Great Lakes to
any person of any and all of its properties; or by any action
of the Band granting indulgence or extension or accommodations
to, or waiving or acquiescing in any default by, Great Lakes
or any successor to Great Lakes, or any person or party which
shall have assumed its or their obligations or any other party
liable for any Guarantied Obligation; or any compromise,
settlement or other arrangement with Great Lakes or any other
party liable for any Guarantied Obligation; or by the release
or discharge by operation of law of Great Lakes from the
performance or observance of any obligation, covenant or
agreement contained in the Agreements or the Transaction
Documents or any document relating to any Guaranteed
Obligation or by reason of the dissolution of Guarantor or
Great Lakes or any other defense of Great Lakes or any
successor to Great Lakes; or by any modification or alteration
of any Guarantied Obligation or by any circumstance whatsoever
(with or without notice to or knowledge of the Guarantor)
which could vary the risk of the Guarantor hereunder; it being
the purpose, intent and agreement of the Guarantor that the
obligations of the Guarantor hereunder are and shall upon a
Guaranty Event of Default be absolute and unconditional under
any and all circumstances and shall not be discharged except
by payment or performance as herein provided, and then only to
the extent of such payment or performance, subject, however,
to renewal, extension or reinstatement pursuant to the
provisions of Section 8 hereof.
b. Any claim against Great Lakes to which the Guarantor may be or
<PAGE> 6
become entitled (including, without limitation, claims by
subrogation, reimbursement, contribution, indemnity, or
otherwise) by reason of any payment or performance by the
Guarantor in satisfaction and discharge, in whole or in part,
of its obligations under this Guaranty and any other rights
against Great Lakes shall be and hereby are made subject and
subordinate to the prior payment or performance in full of the
Guaranteed Obligations and until such time Guarantor shall not
be entitled to and shall not claim any subrogation to any
claim of Band, nor any right of set-off or counterclaim
against Great Lakes.
c. The Band shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein and no
election by the Band to proceed against any party, or on any
obligation, shall constitute a waiver of the Band's right to
proceed against any Guarantor on obligations other than those
set out herein, or against other parties, unless the Band has
expressly waived such right in writing. Specifically, but
without limiting the generality of the foregoing, no action or
proceeding by the Band under any document or instrument
evidencing the Guarantied Obligations shall serve to diminish
the liability of Guarantor under this Guaranty except to the
extent that the Band finally and unconditionally shall have
realized indefeasible payment by such action or proceeding.
All rights and remedies of the Band shall be cumulative.
d. Guarantor represents and warrants that any and all information
delivered to Band by Guarantor and Great Lakes is true,
accurate and complete as of the date hereof and covenants and
agrees to provide Band with such further information as is
required under section 13.5(ii) of the Development Agreement
and, after a default hereunder, such further information as to
Guarantor's financial condition and affairs as the Band may
require.
6. Direct Obligation. This Guaranty is a primary and original obligation
of Guarantor, is not merely the creation of a surety relationship, and
is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect
to future changes in conditions. Each Guarantor agrees that it is
directly, jointly and severally with any other guarantor of the
Guarantied Obligations, liable to the Band, that the obligations of
Guarantor hereunder are independent of the obligations of Great Lakes
<PAGE> 7
or any other Guarantor, and that a separate action or proceeding may be
brought against Guarantor, whether such action is brought against Great
Lakes or any other guarantor or whether Great Lakes or any other
guarantor is joined in such action or proceeding. Guarantor agrees that
upon the occurrence of a Guaranty Event of Default its liability
hereunder shall be immediate and shall not be contingent upon the
exercise or enforcement by the Band of whatever remedies it may have
against Great Lakes or any other guarantor, or the enforcement of any
lien or realization upon any security the Band may at any time possess.
Guarantor agrees that any release which may be given by the Band to
Great Lakes or any other obligor or any other guarantor shall not
release Guarantor. Guarantor consents and agrees that the Band shall be
under no obligation to marshal any property or assets of Great Lakes or
any other guarantor in favor of Guarantor, or against or in payment of
any or all of the Guarantied Obligations. The Band shall upon a
Guaranty Event of Default have the right to proceed first and directly
against each Guarantor under this Guaranty. Guarantor acknowledges that
there are no conditions precedent to the effectiveness of this Guaranty
and that this Guaranty is in full force and effect and is binding on
Guarantor upon execution and delivery to the Band.
7. Subordination. Guarantor hereby agrees that any and all present and
future indebtedness of Great Lakes owing to Guarantor is subordinated
to payment, in full, in cash, of the Guarantied Obligations. In this
regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness after the occurrence and during the continuance of a
Guaranty Event of Default until the Guarantied Obligations have been
indefeasibly paid and performed in full.
8. Reinstatement.
a. It is the intention of the parties hereto that this Guaranty
shall remain in full force and effect until all of the
Guarantied Obligations have been fully and indefeasibly paid,
performed and satisfied; until Great Lakes is no longer
obligated to the Band under or in respect of the Guarantied
Obligations or any documents relating thereto; and until the
expiration of any applicable preference periods. This Guaranty
shall continue to be effective or be reinstated, as the case
may be, if at any time any amount received by the Band in
payment of the Guarantied Obligations is rescinded or must
otherwise be restored or returned upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any
Guarantor or Great Lakes or upon the appointment of any
intervenor or conservator of, or trustee or similar official
for any Guarantor or Great Lakes or any substantial part of
either of their respective properties, or if any payment made
in respect of any Guarantied Obligation is subsequently
<PAGE> 8
invalidated, declared to be fraudulent or preferential, or
otherwise returned for any reason, all as though such payments
had not been made.
b. The Guaranteed Obligations shall not be considered
indefeasibly paid for purposes of this Guaranty unless and
until all payments to the Band are no longer subject to any
right on the part of any person, including Great Lakes, Great
Lakes as debtor in possession, or any trustee (whether
appointed under the Bankruptcy Code or otherwise) of Great
Lakes' assets to invalidate or set aside such payments or to
seek to recoup the amount of such payments or any portion
thereof, or the declare the same to be fraudulent or
preferential. Until such full and final performance and
indefeasible payment of the Guaranteed Obligations whether by
Guarantor or Great Lakes, the Band shall have no obligation
whatsoever to transfer or assign its interest in the
Transaction Documents to Guarantor. In the event that, for any
reason, any portion of such payments to Band is set aside or
restored, whether voluntarily or involuntarily, after the
making thereof, then the obligation intended to be satisfied
thereby shall be revived and continued in full force and
effect as if said payment or payments had not been made, and
Guarantor shall be liable for the full amount the Band is
required to repay plus any and all costs and expenses
(including attorneys' fees) paid by the Band in connection
therewith.
9. Warranties and Representations. Each Guarantor hereby warrants and
represents to the Band that:
a. this Guaranty constitutes a legal, valid and binding
obligation of each Guarantor, and is fully enforceable in
accordance with its terms; and
b. neither the execution or delivery of this Guaranty nor
fulfillment of or compliance with the terms and provisions
hereof, will conflict with, or result in a breach of the
terms, conditions or provisions of, constitute a default under
or result in the creation of any lien, charge or encumbrance
upon any property or assets of any Guarantor under any
agreement or instrument to which it is now a party or by which
it may be bound.
10. Notices, etc. All notices, requests and other communications to any
Guarantor hereunder shall be in writing and shall be sent to the
address of Lakes and with the copies set forth in Section 15.4 of the
Development Agreement. Any notice or demand so mailed shall be deemed
received on the date of actual
<PAGE> 9
receipt, on the third business day following mailing as herein set
forth or one day following delivery to a courier service, whichever
first occurs.
11. Multiple Debtors or Guarantors. If more than one Guarantor signs this
Guaranty, or if there are multiple guarantors, as to any such
circumstances, this Guaranty shall take effect as a separate guarantee
on the same terms from each Guarantor to Band with respect to the
Guarantied Obligations of each debtor, except as otherwise expressly
provided in this section; and each such Guarantor identified on the
signature page hereto is jointly and severally liable for the
Guarantied Obligations. Each Guarantor's obligation under this Guaranty
may be modified or released only by written agreement signed by the
Band and such Guarantor, without the consent or agreement of any other
Guarantor. No Guarantor's obligations under this Guarantee shall be
impaired, reduced or otherwise affected by any such modification or
release nor by the invalidity or unenforceability of the obligations of
any other Guarantor. This Guaranty shall bind all signatories to this
Guaranty, notwithstanding a failure by any party or entity named in
this Guaranty as Guarantor to sign this or any Guaranty. All Guarantors
of the Guarantied Obligations shall be and are jointly and severally
liable under this Guaranty or their guaranties, as applicable, and
default by any one guarantor shall constitute a default for all
guarantors. A default by any one debtor of the Band or any Guarantor
shall constitute default by all Guarantors with respect to all the
Guarantied Obligations of all debtors of the Band. Suit may be brought
against the Guarantors, jointly and severally, and against any one or
more of them, or less than all of them, without impairing the rights of
Band, its successors or assigns, against the other of the Guarantors;
and Band may agree with any one or more of the Guarantors that such
Guarantor or Guarantors shall be liable for such sum or sums as Band
may see fit and may release any of such Guarantors from all further
liability to Band for the Guaranteed Obligations guaranteed hereunder
without impairing the right of Band to demand and collect the balance
of the Guaranteed Obligations from the other Guarantors not so
released.
12. Survival of Guaranty, etc. This Guaranty shall inure to the benefit of
and be binding upon each Guarantor and the Band and their respective
successors and assigns, including any subsequent assignees of any of
the Guarantied Obligations permitted under the ss.10.5(b) of the
Development Agreement. This Guaranty is intended to take effect as a
sealed instrument. This Guaranty is for the benefit of Band and in the
event the Agreement or any Guarantied Obligation are transferred or
assigned in accordance with the Development
<PAGE> 10
Agreement, said transferee or assignee shall be entitled to the
benefits hereof and to enforce the performance and observance of the
terms and provisions hereof to the same extent as if said transferee or
assignee was a party or signatory hereto and any such transferee shall
be recognized as the Band hereunder.
13. Gender and Number; Counterparts. Whenever the context so requires the
masculine gender shall include the feminine and/or neuter and the
singular number shall include the plural, and conversely in each case.
This Guaranty may be executed in separate counterparts which together
shall be deemed to constitute one binding document.
14. Severability. If any obligation or portion of this Guaranty is
determined to be invalid or unenforceable under law, it shall not
affect the validity or enforceability of any remaining obligations or
portions hereof.
15. Amendments. This Guaranty may not be amended as to any Guarantor except
by an agreement in writing signed by such Guarantor and the Band.
16. Additional Payment. All payments, advances, charges, costs and
expenses, including reasonable attorneys' fees, made or incurred by
Band in connection with the enforcement of this Guaranty shall be paid
by Guarantor immediately without demand, together with interest at a
rate per annum equal to the interest rate in effect for advances under
the Lakes Loans, if (a) the Band makes demand on Guarantor under ss.3
above and Guarantor fails to timely demand arbitration under this
Guaranty, or (b) Guarantor makes a timely demand for arbitration or the
Band or Great Lakes demand arbitration, and the arbitration award in
either case finds in the Band's favor on any issue being arbitrated.
17. Governing Law; Jurisdiction. This Guaranty shall be construed in
accordance with and governed by the internal laws of the State of
Minnesota.
18. Arbitration. Any disputes under this Guaranty shall be subject to
arbitration as provided in ss.14.2 of the Development Agreement;
provided that (a) any demand for arbitration shall be made by Guarantor
within 30 days after the Band makes demand on Guarantor under ss.3
above, and (b) such arbitration shall determine only the liability of
Guarantor under this Guaranty, and shall not extend to determination of
liability of the Band to any Guarantor (whether in the form of setoff,
recoupment or affirmative counterclaim). Guarantor shall be bound by
any issue determined by an award in an arbitration between Great
<PAGE> 11
Lakes and the Band, regardless of whether Lakes is a party to such
arbitration. The Band may at its option join Guarantor as a party in an
arbitration between Great Lakes and the Band prior to a Guaranty Event
of Default, and such arbitration may determine the existence of a
Guaranty Event of Default and Guarantor's liability hereunder.
19. Limited Waiver of Sovereign Immunity. The Band expressly waives its
sovereign immunity from suit for the purpose of permitting or
compelling arbitration as provided in ss.18; provided that such limited
waiver extends only to arbitration of the liability of Guarantor under
this Guaranty, and does not extend to determination of liability of the
Band to any Guarantor (whether in the form of setoff, recoupment or
affirmative counterclaim). The Band and Guarantor each consent to be
sued in the United States District Court for the District in which the
Gaming Site is located (or, if the Gaming Site has not been designated,
for the Western District of Michigan - Southern Division), the United
States Court of Appeals for the Sixth Circuit, and the United States
Supreme Court for the purpose of compelling arbitration or enforcing
any arbitration award or judgment arising out of this Guaranty, subject
to the above limitation. If the United States District Court lacks
jurisdiction, the Band and Guarantor consent to be sued in the Michigan
State Court system for the same limited purpose. The Band waives any
requirement of exhaustion of tribal remedies. Without in any way
limiting the generality of the foregoing, the Band expressly authorizes
any governmental authorities who have the right and duty under
applicable law to take any action authorized or ordered by any such
court, and to take such action to give effect to any judgment entered
for such limited purpose; provided, however, that in no instance shall
any enforcement of any kind whatsoever be allowed against any assets of
the Band. The Band appoints the Chairman of the Pokagon Council and the
Secretary of the Pokagon Council as its agents for service of all
process under or relating to this Guaranty. The Band agrees that
service in hand or by certified mail, return receipt requested, shall
be effective for all purposes under or relating to this Guaranty if
served on such agents. The Guarantor irrevocably consents to the
service of process in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the
Guarantor in accordance with the provisions of ss.10. The foregoing,
however, shall not limit the Band's rights to serve process in any
other manner permitted by law or to bring any legal action or
proceeding or to obtain execution of judgment in any other
jurisdiction. The Guarantor irrevocably waives any objection which it
may now have or may have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Guaranty and hereby
further
<PAGE> 12
irrevocably waives any claim that the State of Michigan is not a
convenient forum for any such suit, action or proceeding.
20. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Agreements.
IN WITNESS WHEREOF, the undersigned have executed this Guaranty as a
sealed instrument by duly authorized officers of the undersigned as of the date
first above written.
LAKES GAMING, INC.
BY:
NAME: Timothy J. Cope
ITS: Chief Financial Officer
LAKES GAMING AND RESORTS, LLC
BY:
NAME: Timothy J. Cope
ITS: Chief Financial Officer
SEEN AND AGREED AS OF
THE DATE ABOVE WRITTEN
THE POKAGON BAND OF POTAWATOMI INDIANS
BY:
---------------------------------------
John Miller
ITS: Council Chairman
BY:
-----------------------------------------
Marie Manley
ITS: Secretary