Transition Loan Note - Pokagon Band of Potawatomi Indians and Lakes Gaming Inc.
TRANSITION LOAN NOTE
$7,500,000 July 8, 1999
Dowagiac, Michigan
FOR VALUE RECEIVED, The Pokagon Band of Potawatomi Indians (the "Band")
promises to pay to LAKES GAMING, INC., a Minnesota corporation ("Lakes"), such
sums as may be advanced by Lakes to the Band under Section 8.3 of a Development
Agreement between the Band and Lakes dated as of July 8, 1999 (the "Development
Agreement"); provided that the principal amount due hereunder shall not exceed
Seven Million Five Hundred Thousand Dollars ($ 7,500,000.00).
1. Advances. Advances under this Note may, at Lakes' option, be funded
through transfer of funds from the Escrow Account; provided that interest shall
only accrue under this Note on funds advanced through the Escrow Account after
disbursement from the Escrow Account, and shall not begin to accrue on deposit
by Lakes into the Escrow Account.
2. Interest. No interest shall accrue on amounts outstanding hereunder
until two years after the date hereof. Beginning on the second annual
anniversary of the date hereof, interest shall begin accruing on the outstanding
balance as follows:
(a) if the Bank Closing occurs, at a fixed rate equal to the lesser of (i)
Base Rate as of the Bank Closing plus 1% or (ii) 10% (the "Band Interest
Rate"); or
(b) If the Bank Closing does not occur, at a variable rate equal to the
lesser of (i) Base Rate plus 1% or (ii) 10% (the lesser of (i) and (ii)
being referred to as the "Variable Interest Rate"). Lakes shall adjust the
Variable Interest Rate on the then unpaid principal balance, by way of
increase or decrease, in accordance with changes in the Base Rate. Such
changes shall be effective as of the change in the Base Rate (the
"Effective Date").
If the Bank Closing occurs after the second annual anniversary of the date
hereof, interest accruing under this Note prior to the Bank Closing shall be
adjusted retroactively to reflect the Band Interest Rate. "Base Rate" means the
lowest Prime Rate as is published daily in The Wall Street Journal. In the event
that the Wall Street Journal ceases to publish the Prime Rate, then the holder
hereof may in its reasonable discretion select some other generally recognized
comparable indicator of the national Prime Rate.
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3. Repayment.
If the Commencement Date occurs, the Band shall, beginning on the 15th day
of the month following the Commencement Date, make equal monthly payments to
Lakes of principal and interest in an amount sufficient to amortize the
principal amount outstanding as of the Commencement Date over a sixty (60) month
period at the Band Interest Rate, and shall thereafter continue to make payments
in such amount on the 15th day of each succeeding month to and including the
fifteenth day of the sixtieth month following the Commencement Date, when all
remaining principal and interest shall be due and payable.
If the Commencement Date does not occur, principal and interest shall be
repayable to the extent and in the manner provided in the Development Agreement;
provided that payments shall in any event be due and made only from Subsequent
Gaming Facility Revenues, in accordance with the Development Agreement. If
Gaming commences at such a facility and payment is due under this Note in
accordance with the Development Agreement, the Band shall, beginning on the 15th
day of the month following such commencement date, make equal monthly payments
to Lakes of principal and interest in an amount sufficient to amortize the
principal amount outstanding as of such commencement date over a sixty (60)
month period at the Variable Interest Rate, and shall thereafter continue to
make such payments on the 15th day of each succeeding month to and including the
fifteenth day of the sixtieth month following such commencement date, when all
remaining principal and interest shall be due and payable. As of the Effective
Date of a change in the Base Rate, Lakes shall adjust the monthly installments
of principal and interest as of the installment next following the Effective
Date so that the then unpaid principal balance would be amortized in full at the
revised Variable Interest Rate five years after such commencement of gaming.
Lakes shall promptly notify the Band in writing of any changes in the Base Rate
and in the installment payment due.
4. Prepayment. This Note may be prepaid at any time without penalty.
5. Limited Recourse. The obligations of the Band under this Note and any
related awards, judgments or decrees shall be payable solely out of
undistributed or future Net Revenues of the Enterprise and shall be a Limited
Recourse obligation of the Band, with no recourse to tribal assets other than
such Net Revenues (except that, if the Commencement Date does not occur, Lakes
shall also have recourse to Subsequent Gaming Facility Revenues to the extent
provided in the Development Agreement). In no
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event shall Lakes or any other claimant under this Note have recourse to (a) the
physical property of the Facility, (b) Tribal Distributions, (c) assets of the
Band purchased with Tribal Distributions, (d) revenues or assets of any other
gaming facility owned or operated by the Band, or (e) any other asset of the
Band (other than (i), if the Commencement Date does not occur, Subsequent Gaming
Facility Revenues to the extent provided in the Development Agreement, and (ii)
such Net Revenues of the Enterprise).
6. Subordination. Payment of amounts due hereunder shall be subordinated to
the Bank Development Loan, the Equipment Loan and any other third-party loans or
equipment leases to the Band relating to the Facility or, if the Commencement
Date does not occur, or to any loans relating to any other Gaming facility in
Michigan owned by the Band, on such terms as such third party lender shall
reasonably require.
7. Default; Acceleration. All outstanding principal together with accrued
interest shall become immediately due and payable in full, subject to the
limitations on recourse provided above, upon default in the payment of principal
or interest due under this Note if such default is not remedied within thirty
(30) days after receipt by the Band of written notice thereof as provided in the
Development Agreement.
8. Sovereign Immunity. The Band expressly waives its sovereign immunity
from suit for the purpose of permitting or compelling arbitration to enforce
this Note as provided in Article 14 of the Development Agreement and consents 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 Note. If the United States District Court lacks jurisdiction, the
Band consents 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, including without limitation, repossessing or foreclosing
on any real property not in trust, or otherwise giving effect to any judgment
entered; provided, however, that liability of the Band under any judgment shall
always be Limited Recourse, and in no instance shall any enforcement of any kind
whatsoever be allowed against any assets of the Band other than (i), if the
Commencement Date does not occur, Subsequent Gaming Facility Revenues to the
extent provided in the Development Agreement, and (ii) Net Revenues of the
Enterprise. The Band appoints the Chairman of the Pokagon Council
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and the Secretary of the Pokagon Council as its agents for service of all
process under or relating to the Agreements. The Band agrees that service in
hand or by certified mail, return receipt requested, shall be effective for all
purposes under or relating to the Agreements if served on such agents.
9. Arbitration. All disputes, controversies or claims arising out of or
relating to this Note shall be settled by binding arbitration as provided in
Article 14 of the Development Agreement.
10. Business Purposes; Applicable Law. This Note evidences a loan for
business and commercial purposes and not for personal, household, family or
agricultural purposes, and shall be governed by the law of the State of Michigan
and, to the extent applicable, federal law.
11. Defined Terms. Capitalized terms used herein shall have the same
meanings assigned to them in the Development Agreement, and, if not defined in
the Development Agreement, in the Management Agreement between the Band and
Lakes of even date.
12. Miscellaneous.
a. Time is of the essence.
b. The benefits and obligations of this Note shall inure to and be
binding upon the parties hereto and their respective successors and
assigns, provided that any succession or assignment is permitted under
the Development Agreement.
c. Waiver of any one default shall not cause or imply a waiver any
subsequent default.
d. This Note, together with the Development Agreement, the Management
Agreement, the Escrow Agreement, the Transition Loan Note and the
Non-Gaming Land Acquisition Line of Credit the exhibits thereto and all
related documents of near or even date herewith, sets forth the entire
agreement between the parties hereto with respect to the subject matter
hereof. All agreements, covenants, representations, and warranties,
express or implied, oral or written, of the parties with respect to the
subject matter hereof are contained herein and therein. This Note shall
not be supplemented, amended or modified by any course of dealing,
course of performance or uses of trade and may only be amended or
modified by a written instrument duly executed by officers of both
parties.
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THE POKAGON BAND OF POTAWATOMI INDIANS
By: /s/ John Miller
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Its: Council Chairman
By: /s/ Kevin Daughterty
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Its: Secretary
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