Exhibit 10.4
SUBORDINATION AGREEMENT
This Agreement, dated as of April 18 2003, is made by Xxxx X.
Xxxxxx, an individual resident of the state of Mississippi (the "Subordinated
Creditor"), for the benefit of Xxxxx Xxxxx, an individual resident of the state
of Nevada (the "Senior Lender").
XxxxxxXxxxXxxxxxxxxxxx.xxx, Inc., a Mississippi corporation
(the "Borrower"), is now indebted to the Senior Lender on account of loans or
the other extensions of credit or financial accommodations from the Senior
Lender to the Borrower.
The Borrower is also now indebted to SouthTrust Bank, which
holds a security interest in the Collateral (as defined below) which is prior to
Senior Lender's security interest.
The Subordinated Creditor, an officer of the Borrower, intends
to accept an assignment of SouthTrust Bank's loan and security interest.
As a condition to Senior Lender's consent to such assignment
from SouthTrust Bank to Subordinated Creditor and other accommodations to
Borrower, the Senior Lender has required that the Subordinated Creditor
subordinate the payment of the Subordinated Creditor's loans and other financial
accommodations to the payment of any and all indebtedness of the Borrower to the
Senior Lender. Subordinating his/her interests pursuant to the terms of this
Agreement is in the Subordinated Creditor's best interest.
ACCORDINGLY, in consideration of the loans and other financial
accommodations that have been made and may hereafter be made by the Senior
Lender for the benefit of the Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Subordinated Creditor hereby agrees as follows:
1. Definitions. As used herein, the following terms have the
meanings set forth below:
"Borrower Default" means a Default or Event of Default as
defined in any agreement or instrument evidencing, governing, or issued
in connection with Senior Lender Indebtedness, including, but not
limited to, the Loan Agreement, or any default under or breach of any
such agreement or instrument or related loan documents.
"Collateral" means all collateral now or hereafter securing
payment of the Senior Lender Indebtedness, specifically including, but
not limited to, all of Borrower's right, title and interest in:
(a) that certain Conditional Release and Termination Agreement
between Borrower and Lakes Entertainment, Inc., a Minnesota
corporation, f/k/a Lakes Gaming, Inc. ("Lakes") dated May 20, 1999, as
amended on July 1, 1999, and January 2, 2003, and as may be further
amended from time to time, including without limitation any payments to
be made by Lakes pursuant to the terms of such agreement (the "Lakes
Agreement"); and
(b) that certain civil suit initiated by the Borrower against
Xxxxxx'x Entertainment, Inc. on September 4, 1998 in United States
District Court for District of Minnesota, court file number
98-2058(JEL/JGL), styled as Casino Resource Corporation x. Xxxxxx'x
Entertainment, Inc., and Xxxxxx'x Operating Company, Inc., d/b/a
Xxxxxx'x Southwest Michigan Casino Corporation, Xxxxxx'x Southwest
Michigan Casino Corporation, Xxxxxx X. Xxxxx, Xxxxx X. Xxxx, and Xxxx
Does 1-10, and related claims including without limitation any and all
choses in action, claims, settlements, judgments or other recoveries
related to or based on such suit;
and all proceeds thereof.
"Lakes Payments" means the amounts payable by Lakes to
Borrower pursuant to the terms of the Lakes Agreement, upon the opening
of a casino as contemplated by the First Amended and Restated
Management Agreement between the Pokagon Band of Potawatomi Indians
(the "Tribe") and Great Lakes Gaming of Michigan, LLC, a wholly-owned
subsidiary of Lakes ("Great Lakes"), dated October 16, 2000 (as
heretofore and hereafter amended, the "Management Agreement").
"Lien" means any security interest, mortgage, deed of trust,
pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device, including the interest of each lessor
under any capitalized lease and the interest of any bondsman under any
payment or performance bond, in, of or on any assets or properties of a
person or entity, whether now owned or hereafter acquired and whether
arising by agreement or operation of law.
"Loan Agreement" means that certain Loan Agreement dated as of
January 2, 2003, by and between the Borrower and the Senior Lender as
the same may hereafter be amended, supplemented or restated from time
to time.
"Senior Lender Indebtedness" means any debt of Borrower to
Senior Lender arising from or relating to the Loan Agreement, the
Secured Promissory Note executed by Borrower in favor of Senior Lender,
dated January 2, 2003, and any
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related transaction documents, and each and every other debt, liability
and obligation of every type and description which the Borrower may now
or at any time hereafter owe to the Senior Lender, whether such debt,
liability or obligation now exists or is hereafter created or incurred,
and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest
thereon, and all fees, costs and other charges related thereto
(including all interest, fees, costs and other charges accruing after
the commencement of any case, proceeding or other action relating to
the bankruptcy, insolvency or reorganization of the Borrower, whether
or not allowed in such proceeding or other action), all renewals,
extensions and modifications thereof and any notes issued in whole or
partial substitution therefor.
"Subordinated Indebtedness" means all obligations arising
under the Subordinated Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now
or at any time hereafter owe to the Subordinated Creditor, whether such
debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several.
"Subordinated Note" means the Promissory Note payable by
Borrower to SouthTrust Bank in the principal amount of $198,994.45,
dated September 12, 2002, as assigned by SouthTrust Bank to
Subordinated Creditor by an assignment dated _____________, 2003,
together with all renewals, extensions and modifications thereof and
any note or notes issued in substitution therefor.
2. Subordination. The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in the
manner hereinafter set forth to the payment in full of the Senior
Lender Indebtedness; and regardless of any priority otherwise available
to the Subordinated Creditor by law or by agreement, the Senior Lender
shall hold a first priority Lien in the Collateral, and any Lien
claimed therein by the Subordinated Creditor shall be and remain fully
subordinate to the Lien of the Senior Lender therein for all purposes
whatsoever. The Subordinated Indebtedness shall continue to be
subordinated to the Senior Lender Indebtedness even if the Senior
Lender Indebtedness is subordinated, avoided or disallowed under the
United States Bankruptcy Code or other applicable law. The Subordinated
Creditor hereby authorized the Senior Lender to file with the Secretary
of State's Office in Jackson County, Mississippi a UCC-3 Amendment in
substantially the form attached hereto as Exhibit A.
3. Payments of Principal and Interest. Until all of the Senior
Lender Indebtedness has been paid in full and the Senior Lender has
released its Lien in the Collateral, the Subordinated Creditor shall
not, without the Senior Lender's prior written consent, demand, receive
or accept any payment (whether principal, interest or otherwise)
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from the Borrower in respect of the Subordinated Indebtedness, or
exercise any right of or permit any setoff in respect of the
Subordinated Indebtedness, except that the Subordinated Creditor may
accept scheduled payments (but not prepayments) of principal and
interest required to be paid under the Subordinated Note or documents
evidencing unsecured Subordinated Debt (including scheduled payments of
deferred compensation), so long as no Borrower Default has occurred and
is continuing or will occur as a result of or immediately following any
such payment.
4. Amendment of Subordinated Note; Additional Loans. In no
event shall Subordinated Creditor amend the Subordinated Note or any
related loan documents without Senior Lender's prior written consent.
Subordinated Creditor agrees that it shall not lend any additional
secured funds to Borrower, and that the total amount of secured
Subordinated Indebtedness shall not exceed the principal amount
outstanding on the Subordinated Note. Subordinated Creditor may make
unsecured loans to the Company or defer receipt of compensation from
the Company.
5. Receipt of Prohibited Payments. If the Subordinated
Creditor receives any payment on the Subordinated Indebtedness that the
Subordinated Creditor is not entitled to receive under the provisions
of this Agreement, the Subordinated Creditor will hold the amount so
received in trust for the Senior Lender and will forthwith turn over
such payment to the Senior Lender in the form received (except for the
endorsement of the Subordinated Creditor where necessary) for
application to then-existing Senior Lender Indebtedness (whether or not
due), in such manner of application as the Senior Lender may deem
appropriate. If the Subordinated Creditor exercises any right of setoff
which the Subordinated Creditor is not permitted to exercise under the
provisions of this Agreement, the Subordinated Creditor will promptly
pay over to the Senior Lender, in immediately available funds, an
amount equal to the amount of the claims or obligations offset. If the
Subordinated Creditor fails to make any endorsement required under this
Agreement, the Senior Lender, or any of its officers or employees or
agents on behalf of the Senior Lender, is hereby irrevocably appointed
as the attorney-in-fact (which appointment is coupled with an interest)
for the Subordinated Creditor to make such endorsement in the
Subordinated Creditor's name.
6. Action on Subordinated Indebtedness. The Subordinated
Creditor will not commence any action or proceeding against the
Borrower to recover all or any part of the Subordinated Indebtedness,
or join with any creditor (unless the Senior Lender shall so join) in
bringing any proceeding against the Borrower under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt receivership,
liquidation or insolvency law or statute of the federal or any state
government, or take possession of, sell, or dispose of any Collateral,
or exercise or enforce any right or remedy available to the
Subordinated Creditor with respect to any such Collateral, unless and
until the Senior Lender Indebtedness has been paid in full and the
Senior Lender has released its Lien in the Collateral.
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7. Action Concerning Collateral.
(a) Notwithstanding any Lien now held or hereafter acquired by
the Subordinated Creditor, the Senior Lender may take possession of,
sell, dispose of, and otherwise deal with all or any part of the
Collateral, and may enforce any right or remedy available to it with
respect to the Borrower or the Collateral, all without notice to or
consent of the Subordinated Creditor except as specifically required by
applicable law.
(b) In addition, and without limiting the generality of the
foregoing, if (i) a Borrower Default has occurred and is continuing,
(ii) the Borrower intends to sell or otherwise dispose of any
Collateral to an unrelated third party outside the ordinary course of
business, (iii) the Senior Lender has given written notice thereof to
the Subordinated Creditor, and (iv) the Subordinated Creditor has
failed, within ten (10) days after receipt of such notice, to purchase
for cash the Senior Lender Indebtedness for the full amount thereof,
the Subordinated Creditor shall be deemed to have consented to such
sale or disposition, to have released any Lien it may have in such
Collateral and to have authorized the Senior Lender or its agents to
file partial releases (and any related financing statements such as
"in-lieu" financing statements under Part 7 of Article 9 of the Uniform
Commercial Code) with respect to such Collateral.
(c) The Senior Lender shall have no duty to preserve, protect,
care for, insure, take possession of, collect, dispose of, or otherwise
realize upon any of the Collateral, and in no event shall the Senior
Lender be deemed the Subordinated Creditor's agent with respect to the
Collateral. All proceeds received by the Senior Lender with respect to
any Collateral may be applied, first, to pay or reimburse the Senior
Lender for all costs and expenses (including reasonable attorneys'
fees) incurred by the Senior Lender in connection with the collection
of such proceeds, and, second, to any Senior Lender Indebtedness
secured by the Senior Lender's Lien in that Collateral, in any order
that it may choose.
8. Bankruptcy and Insolvency. In the event of any
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization or arrangement with creditors, whether or not
pursuant to bankruptcy law, the sale of all or substantially all of the
assets of the Borrower, dissolution, liquidation or any other
marshalling of the assets or liabilities of the Borrower, the
Subordinated Creditor will file all claims, proofs of claim or other
instruments of similar character necessary to enforce the obligations
of the Borrower in respect of the Subordinated Indebtedness and will
hold in trust for the Senior Lender and promptly pay over to the Senior
Lender in the form received (except for the endorsement of the
Subordinated Creditor where necessary) for application to the
then-existing Senior Lender Indebtedness, any and all moneys, dividends
or other assets received in any such proceedings on account of the
Subordinated Indebtedness, unless and until the Senior Lender
Indebtedness has been paid in full and the Senior Lender's Lien in the
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Collateral has been terminated. If the Subordinated Creditor shall fail
to take any such action, the Senior Lender, as attorney-in-fact for the
Subordinated Creditor, may take such action on the Subordinated
Creditor's behalf. The Subordinated Creditor hereby irrevocably
appoints the Senior Lender, or any of its officers or employees on
behalf of the Senior Lender, as the attorney-in-fact for the
Subordinated Creditor (which appointment is coupled with an interest)
with the power but not the duty to demand, xxx for, collect and receive
any and all such moneys, dividends or other assets and give acquittance
therefor and to file any claim, proof of claim or other instrument of
similar character, to vote claims comprising Subordinated Indebtedness
to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension and to take such
other action in the Senior Lender's own name or in the name of the
Subordinated Creditor as the Senior Lender may deem necessary or
advisable for the enforcement of the agreements contained herein; and
the Subordinated Creditor will execute and deliver to the Senior Lender
such other and further powers-of-attorney or instruments as the Senior
Lender may request in order to accomplish the foregoing. If the Senior
Lender desires to permit the use of cash collateral or to provide
post-petition financing to the Borrower, the Subordinated Creditor
shall not object to the same or assert that its interests are not being
adequately protected.
9. Restrictive Legend; Transfer of Subordinated Indebtedness.
The Subordinated Creditor will cause the Subordinated Note and all
other notes, bonds, debentures or other instruments evidencing the
Subordinated Indebtedness or any part thereof to contain a specific
statement thereon to the effect that the indebtedness thereby evidenced
is subject to the provisions of this Agreement, and the Subordinated
Creditor will xxxx its books conspicuously to evidence the
subordination effected hereby. At the request of the Senior Lender, the
Subordinated Creditor shall deposit with the Senior Lender the
Subordinated Note and all of the other notes, bonds, debentures or
other instruments evidencing the Subordinated Indebtedness, which
notes, bonds, debentures or other instruments may be held by the Senior
Lender so long as any Senior Lender Indebtedness remains outstanding or
the Senior Lender's Lien in the Collateral has not been terminated. The
Subordinated Creditor is the lawful holder of the Subordinated Note and
has not transferred any interest therein to any other person. Without
the prior written consent of the Senior Lender, the Subordinated
Creditor will not assign, transfer or pledge to any other person any of
the Subordinated Indebtedness or agree to a discharge or forgiveness of
the same.
10. Continuing Effect. This Agreement shall constitute a
continuing agreement of subordination, and the Senior Lender may,
without notice to or consent by the Subordinated Creditor, modify any
term of the Senior Lender Indebtedness in reliance upon this Agreement.
Without limiting the generality of the foregoing, the Senior Lender
may, at any time and from time to time, without the consent of or
notice to the Subordinated Creditor and without incurring
responsibility to the Subordinated Creditor or impairing or releasing
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any of the Senior Lender's rights or any of the Subordinated Creditor's
obligations hereunder:
(a) change the interest rate or change the amount of payment
or extend the time for payment or renew or otherwise alter the terms of
any Senior Lender Indebtedness or any instrument evidencing the same in
any manner;
(b) sell, exchange, release or otherwise deal with any
property at any time securing payment of the Senior Lender Indebtedness
or any part thereof;
(c) release anyone liable in any manner for the payment or
collection of the Senior Lender Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against the
Borrower or any other person (including the Subordinated Creditor); and
(e) apply any sums received by the Senior Lender, by
whomsoever paid and however realized, to the Senior Lender Indebtedness
in such manner as the Senior Lender shall deem appropriate.
The Subordinated Creditor hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the Senior
Lender's remedies permitted by applicable law or agreement.
11. No Commitment. None of the provisions of this Agreement
shall be deemed or construed to constitute or imply any commitment or obligation
on the part of the Senior Lender to make any future loans or other extensions of
credit or financial accommodations to the Borrower.
12. Notice. All notices and other communications hereunder
shall be in writing and shall be (i) personally delivered, (ii) transmitted by
registered mail, postage prepaid, or (iii) transmitted by telecopy, in each case
addressed to the party to whom notice is being given at its address as set forth
below:
If to the Senior Lender:
Xxxxx Xxxxx
0000 Xxxxxxx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
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If to the Subordinated Creditor:
Xxxx Xxxxxx
000 Xxxxxxxxx Xxxx.
Xxxxx Xxxxxxx, XX 00000
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.
13. Conflict in Agreements. If the subordination provisions of
any instrument evidencing Subordinated Indebtedness conflict with the terms of
this Agreement, the terms of this Agreement shall govern the relationship
between the Senior Lender and the Subordinated Creditor.
14. No Waiver. No waiver shall be deemed to be made by the
Senior Lender of any of its rights hereunder unless the same shall be in writing
signed on behalf of the Senior Lender, and each such waiver, if any, shall be a
waiver only with respect to the specific matter or matters to which the waiver
relates and shall in no way impair the rights of the Senior Lender or the
obligations of the Subordinated Creditor to the Senior Lender in any other
respect at any time.
15. Binding Effect; Acceptance. This Agreement shall be
binding upon the Subordinated Creditor and the Subordinated Creditor's heirs,
legal representatives, successors and assigns and shall inure to the benefit of
the Senior Lender and its participants, successors and assigns irrespective of
whether this or any similar agreement is executed by any other Subordinated
Creditor of the Borrower. Notice of acceptance by the Senior Lender of this
Agreement or of reliance by the Senior Lender upon this Agreement is hereby
waived by the Subordinated Creditor.
16. Miscellaneous. The paragraph headings herein are included
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. Faxed copies shall be deemed originals.
17. Governing Law; Consent to Jurisdiction and Venue; Waiver
of Jury Trial. This Agreement shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Minnesota.
Each party consents to the personal jurisdiction of the state and federal courts
located in the State of Minnesota in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient, and agrees that any litigation initiated by any of them in
connection with this Agreement may be venued in either the state or federal
courts located in Hennepin
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County, Minnesota. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS ACKNOWLEDGMENT.
The rest of this page is intentionally left blank.
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IN WITNESS WHEREOF, the Subordinated Creditor has executed
this Agreement as of the date and year first above-written.
/s/ Xxxx X. Xxxxxx
Acknowledgment by Borrower
--------------------------
The undersigned, being the Borrower referred to in the
foregoing Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii)
agrees to all of the terms and provisions thereof, (iii) agrees to and with the
Senior Lender that it shall make no payment on the Subordinated Indebtedness
that the Subordinated Creditor would not be entitled to receive under the
provisions of the Agreement, (iv) agrees that any such payment will constitute a
default under the Senior Lender Indebtedness, and (v) agrees to xxxx its books
conspicuously to evidence the subordination of the Subordinated Indebtedness
effected hereby.
XxxxxxXxxxXxxxxxxxxxxx.xxx, Inc.
By /s/ Xxxx X. Xxxxxx, Its CEO
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CONSENT
This CONSENT is entered into as of May 28, 2003, by Xxxxx Xxxxx, an
individual resident of the State of Nevada ("Xxxxx"), in favor of
XxxxxxXxxxXxxxxxxxxxxx.xxx, Inc., a Mississippi corporation ("BounceBack").
Recitals
X. Xxxxx has advanced $500,000.00 (together with interest and other
amounts due under the Loan Agreement, as defined below, the "Prior Debt") to
BounceBack pursuant to the terms of a Loan Agreement dated January 2, 2003,
between Xxxxx and BounceBack (the "Loan Agreement"). The Loan Agreement
prohibits BounceBack from placing a lien (other than the liens of Xxxxx and
SouthTrust Bank) upon any of the Collateral, as defined in the Loan Agreement.
B. BounceBack desires to obtain additional financing consisting of a
loan in the aggregate principal amount of up to $500,000.00 in one or more
traunches (together with interest and other amounts due under the loan documents
executed by BounceBack in favor of various lenders, the "New Debt") from various
lenders, including S. Xxxx Xxxxxxx, an individual resident of the State of
Mississippi ("New Lenders", and individually each a "New Lender"), secured by
the Collateral.
X. Xxxxx desires to consent to the New Debt subject to the conditions
set forth in this Consent, including the subordination of the payment of the New
Debt to the payment of the Prior Debt, and the subordination of New Lenders'
lien on the Collateral to Xxxxx'x xxxx on the Collateral.
Consent
1. Consent. Xxxxx consents to the proposed loan in the aggregate
principal amount of Five Hundred Thousand and no/100 Dollars ($500,000.00) by
New Lenders to BounceBack to be secured, at least in part, by the Collateral;
provided that, such consent is conditioned upon, as to each New Lender, (i) the
execution and delivery by such New Lender to Xxxxx of a Subordination Agreement
in the form attached hereto as Exhibit A, and (ii) the execution and delivery by
such New Lender, BounceBack, and Lakes Entertainment, Inc. to Xxxxx of a letter
agreement in the form attached hereto as Exhibit B. Notwithstanding the
foregoing, if at any time more than two New Lenders intend to loan funds to
BounceBack, such New Lenders shall appoint an agent who shall enter into a
letter agreement in substantially the form of Exhibit B with Lakes
Entertainment, Inc. and accept payment from Lakes Entertainment, Inc., on behalf
of all such New Lenders.
2. No Additional Loans. In no event shall Xxxxx be deemed to hereby
consent to the advancement of funds by New Lenders to BounceBack in excess of
the aggregate principal amount of up to $500,000.00, or consent to any other
loan by any party to BounceBack.
3. Ratification. Except to the extent that Xxxxx has expressly waived
certain rights under the Loan Agreement by agreeing to New Lenders' proposed
lien against the Collateral, the Loan Agreement has not been amended, modified
or waived in any manner, and it is in full force and effect.
4. Miscellaneous. This Consent shall be governed by the laws of the
State of Minnesota, without regard to conflict of laws provisions thereof. Faxed
copies shall be deemed originals.
IN WITNESS WHEREOF, Xxxxx has executed this Consent as of the date set
forth above.
/s/ Xxxxx Xxxxx
Acknowledged and agreed to: XXXXXXXXXXXXXXXXXXXXXX.XXX, INC.
Date: May 28, 2008 By: /s/ Xxxx X. Xxxxxx
Its: CEO
