Exhibit 10.1

 

Execution Copy

 

AMENDMENT NO. 1 TO SUBORDINATION
AND INTERCREDITOR AGREEMENT

 

This Amendment No. 1 to Subordination and Intercreditor Agreement (“Amendment
No. 1”), dated as of April 24, 2014, is entered into by and among PENN NATIONAL
GAMING, INC., a Pennsylvania corporation (the “Senior Lender”), LAKES JAMUL
DEVELOPMENT, LLC, a Minnesota limited liability company (and together with its
Affiliates, the “Subordinate Lender”), and JAMUL INDIAN VILLAGE, a federally
recognized Indian tribe (and together with any Affiliates, the “Borrower”).

 

RECITALS

 

WHEREAS, the Senior Lender and Subordinate Lender and Borrower have entered into
that certain Subordination and Intercreditor Agreement dated as of August, 29,
2012 (the “Subordination Agreement”) whereby the Subordinate Lender has agreed
to, among other things, subordinate its liens and security interest in the
Collateral securing the Subordinate Loan to the liens and security interest of
the Senior Lender in the Collateral securing the Senior Loan.

 

WHEREAS, the Borrower has requested, and the Senior Lender and Subordinate
Lender are willing to agree to amend the Subordination Agreement to permit any
lender or noteholder that provides Refinancing Indebtedness (defined below) to
benefit from the Subordination Agreement as an Additional Senior Lender having
all of the rights and obligations of a Senior Lender under the Subordination
Agreement, on the terms and conditions set forth herein; and

 

WHEREAS, the Borrower, Senior Lender and Subordinate Lender wish to amend
certain other provisions of the Subordination Agreement governing the payment of
the Subordinate Loan.

 

Now, Therefore, in consideration of the foregoing, the mutual agreements and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.     Interpretation. All capitalized terms used herein shall have the meanings
assigned thereto in the Subordination Agreement, unless otherwise defined
herein.

 

2.     Additional Definitions. As used herein, the following term shall have the
meaning given to it below, and the Subordination Agreement is hereby amended to
include, in addition and not in limitation, the following definitions:

 

“Additional Senior Lender” shall have the meaning given to such term in Section
29 hereof.

 

“Amendment No. 1” means Amendment No. 1, dated as of April 24, 2014, to this
Agreement.

 

 
 

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“Final Maturity Date” means the date that is seven (7) years after the Opening
Date.

 

“Modification Agreement” means the Modification Agreement dated as of the date
hereof between Subordinate Lender and Borrower.

 

“Prime Rate” shall mean the prime interest rate from time to time of JPMorgan
Chase & Co. (or any successor bank).

 

“Proposed Management Agreement” means the proposed Management Agreement between
the Tribe and San Diego Ventures, Inc. (an Affiliate of Senior Lender), a
redacted copy of which is attached hereto as Exhibit A, in the form so attached
and without giving effect to any modifications thereto as may hereafter be made.

 

“Refinancing Documents” means any loan agreement, credit agreement, indenture,
bond, note or other instrument (including all security documents and all other
ancillary documents executed in connection therewith) evidencing Refinancing
Indebtedness.

 

“Refinancing Indebtedness” means any indebtedness however characterized, whether
as senior bank debt, mezzanine loans, term loans, revolving credit facilities,
bonds whether public or private and regardless of tax status, or any other form
of financial obligation or accommodation, in each case issued or incurred (a)
any portion of which is used to refinance, replace, refund or repay the
then-outstanding Senior Loan, in whole or in part or (b) any portion of which is
characterized as a participation, syndication, or other risk-sharing arrangement
with the then-outstanding Senior Loan, whether or not the Senior Lender retains
an economic interest in the Senior Loan, whether with the same or different
lenders, holders, agents or arrangers, in each case so long as (x) the terms of
such indebtedness are consistent with the requirements of Section 11, (y) if
such indebtedness is issued or incurred later than six months after the Opening
Date, then the ratio of Borrower’s total indebtedness (excluding ordinary course
trade payables) to its annualized EBITDA does not exceed 5.0 to 1.0, and (z) the
proceeds of such indebtedness are not used for any distribution to equity owners
or for any substantial expansion of the Project beyond existing Project plans,
which generally anticipate a 70,000 square foot casino with 52 game tables, 1700
slot machines, and structured parking. By way of example, and without limiting
the foregoing, if the then-outstanding Senior Loan is outstanding in the amount
of $40,000,000, the Borrower incurs new indebtedness and commitments in the
amount of $400,000,000, and a portion of the proceeds of such new indebtedness
is used to repay the then-outstanding Senior Loan, then the entire amount of
such new indebtedness (and not merely the portion used to repay the
then-outstanding Senior Loan) shall be “Refinancing Indebtedness” for all
purposes under this Agreement.

 

3.     Amendments to Existing Defined Terms. The following definitions are
hereby amended and restated in their entirety as follows:

 

“Agreement” shall mean this Subordination and Intercreditor Agreement dated as
of August 29, 2012, by and among Senior Lender, Lakes, and the Tribe, as amended
by the First Amendment to Subordination and Intercreditor Agreement dated as of
April 24, 2014, and as may be further amended, restated, or modified from time
to time in accordance herewith.

 

 
 

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“Paid In Full” shall mean that the Senior Loan Obligations have been
indefeasibly paid in full in cash or other immediately available funds and any
commitment of Senior Lender to make further advances has been terminated; and
"Payment In Full" shall have the meaning corresponding thereto in context.
Notwithstanding the foregoing, any payment of the Senior Loan Obligations using
proceeds of Refinancing Indebtedness shall not result in a Payment In Full but
shall instead have the effect described in Section 29.

 

“Senior Lender” means Penn National Gaming, Inc., a Pennsylvania corporation,
any successor to or assignee of the Senior Loan or the Senior Loan Documents or
any portion thereof, and any lender providing all or any portion of Refinancing
Indebtedness.

 

“Senior Loan” means any and all obligations of the Borrower due to the Senior
Lender pursuant to the Senior Loan Documents, and/or the Refinancing Documents
(if any), all in an aggregate principal amount not to exceed $400,000,000.

 

“Senior Loan Documents” means any promissory notes arising out of or relating to
the Project and payable to Senior Lender (including but not limited to the Notes
as defined in the Pre-Development Agreement), and related loan documents
(including but not limited to the Senior Security Agreement and any other
security documents), this Agreement, the Pre-Development Agreement, any
Ancillary Agreements and the Refinancing Documents (if any).

 

“Senior Loan Obligations” shall mean any and all obligations and advances
arising out of or related to the Senior Loan Documents (including for the
avoidance of doubt the Refinancing Documents (if any)) without regard to the
application of the proceeds of any such advances, in an aggregate principal
amount not to exceed $400,000,000, together with all interest, prepayment
premiums and other sums (including but not limited to closing costs, legal fees
and costs, and any and all related expenses) arising out of or related to the
Senior Loan Documents (including for the avoidance of doubt the Refinancing
Documents (if any)).

 

“Senior Security Agreement” shall mean the Security Agreement dated as of August
29, 2012, entered into by Borrower for the benefit of Senior Lender, as such
agreement may be amended, restated, or modified from time to time.

 

“Subordinate Loan Documents” means each of the documents evidencing and/or
securing the Original Subordinate Notes (including but not limited to those
documents referenced in Recital A) and any other obligation of Borrower to
Subordinate Lender arising out of or relating to the Original Subordinate Notes
or the Project, including without limitation the Consolidated Restated
Promissory Note referred to in Amendment No. 1 and the Operative Documents
referred to in the Modification Agreement, together with any additional advances
and collateral loan and security documents hereafter executed and delivered to
the holder thereof as further security for such obligations, all as amended by
this Agreement and the Modification Agreement and as may be further amended from
time to time in accordance with Section 25(b) of this Agreement.

 

4.     Principal Balance and Interest Rates. Section 4 of the Subordination
Agreement is hereby amended to read in its entirety as follows:

 

 
 

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“4.     Subordination of Subordinate Lender’s Right to Receive Payments;
Amendments to Subordinate Loan Documents. Except as expressly set forth in this
Section 4, until the Senior Loan Obligations have been Paid in Full, Borrower
will not make, give or permit, directly or indirectly, in any manner, in cash or
other property, by setoff or otherwise, any payment, prepayment or additional
security of or for all or any part of the Subordinate Loan and/or any other
purpose whatsoever, and Borrower shall not make and Subordinate Lender shall not
accept any payments whatsoever, including, without limitation, interest or
principal, with respect to the Subordinate Loan. Notwithstanding the foregoing
or anything to the contrary in the Subordinate Loan Documents:

 

(a)     Borrower and Subordinate Lender hereby agree and acknowledge as follows:

 

(i)     The outstanding balance of the Subordinate Loan as of the Effective Date
is $60,000,000, which amount includes the unpaid principal indebtedness, all
accrued and unpaid interest, penalties, and fees, any capitalized interest and
any principal amounts that Subordinate Lender may have internally adjusted. It
is further agreed and acknowledged that this amount shall represent the new,
aggregate unpaid principal amount under the Subordinate Loan as of the Effective
Date (subject to increase as provided in this Agreement, the “New Subordinate
Principal Amount”);

 

(ii)     The New Subordinate Principal Amount shall be increased to $61,000,000,
effective on the third anniversary of the Acceptance Date, if the Opening Date
has not occurred on or before the third anniversary of the Acceptance Date.

 

(iii)     Interest on the New Subordinate Principal Amount, as of the Effective
Date and at all times thereafter until the Senior Loan Obligations have been
Paid In Full, shall accrue as follows: (A) as of the Effective Date, no interest
shall accrue initially; (B) if the Opening Date occurs on or before the third
anniversary of the Acceptance Date, then interest shall accrue on the New
Subordinate Principal Amount at a simple fixed rate of Four-and-One-Quarter
percent (4.25%) per annum, effective as of the Opening Date; and (C) if the
Opening Date does not occur on or before the third anniversary of the Acceptance
Date, then interest shall accrue on the New Subordinate Principal Amount at a
simple variable rate equal to the Prime Rate plus two percent (2.0%) per annum
(such rate to be adjusted monthly and determined on the first business day of
each month), effective as of the third anniversary of the Acceptance Date.

 

(iv)     Interest so accrued pursuant to Section 4(a)(iii)(C) above shall be
capitalized and added to the New Subordinate Principal Amount (and not paid in
cash) until the Opening Date, with such capitalization to occur on a monthly
basis when and as interest would otherwise be payable as if the Opening Date had
occurred on such third anniversary. Interest accruing after the Opening Date
(but not any interest so capitalized prior to the Opening Date) may be paid in
cash, subject to the terms and conditions of this Agreement, to the extent
sufficient cash is available therefor (with any interest remaining unpaid after
the application of any such cash payment to be so capitalized).

 

 
 

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(b)     Until the Senior Loan Obligations have been Paid in Full, no payments
(whether of principal, interest, fees, charges, or otherwise) shall be made to
Subordinate Lender under the Subordinate Loan except that, (i) at all times on
or before the Final Maturity Date, so long as (A) no Senior Loan Default has
occurred and is continuing and (B) without limiting the foregoing, all accrued
and unpaid interest under the Senior Loan Documents and any other payments and
charges due under the Senior Loan Documents (whether by reason of acceleration
or otherwise) have been paid to Senior Lender, the Borrower may pay, and the
Subordinate Lender may accept, monthly payments of accrued and unpaid interest
on the Subordinate Loan, in arrears, pursuant to the terms of the Subordinate
Loan Documents, but in any event in an amount not to exceed the amount described
in Section 4(a)(iii), and (ii) at all times after the Final Maturity Date, so
long as (A) no Senior Loan Default (other than failure to repay the Senior Loan
in full on or before the Final Maturity Date) has occurred and is continuing,
(B) all accrued and unpaid interest under the Senior Loan Documents and any
other payments and charges due under the Senior Loan Documents, and principal
payments at the same monthly, quarterly, or annual rate of amortization as
existed immediately prior to the Final Maturity Date, have been paid to Senior
Lender, the Borrower may pay, and the Subordinate Lender may accept, monthly
payments of accrued and unpaid interest on the Subordinate Loan, in arrears,
pursuant to the terms of the Subordinate Loan Documents, but in any event not to
exceed the amount described in Section 4(a)(iii), and in addition, monthly
payments of principal on the Subordinate Loan in an amount not to exceed
$1,500,000 in any calendar quarter. The provision contained in clause (ii) of
this paragraph 4(b) is intended only to address the hypothetical situation in
which Borrower and Senior Lender agree to “continue indefinitely in default”
after the Final Maturity Date, and it does not imply any obligation on the part
of Senior Lender to forbear or delay exercise of remedies after maturity.

 

(c)     Without limiting the foregoing, except as expressly permitted in Section
4(b)(ii), no payments of principal of, or fees or other charges related to, the
Subordinate Loan shall be made to Subordinate Lender until such time as the
Senior Loan Obligations have been Paid In Full.

 

(d)     If Subordinate Lender receives any payment in violation of the foregoing
provisions, such payment shall be deemed received in trust for Senior Lender,
and Subordinate Lender shall promptly deliver such payment to Senior Lender in
accordance with the provisions of Section 10 hereof.

 

(e)     Borrower and Subordinate Lender agree, and Senior Lender acknowledges,
that to the extent of any inconsistency between this Agreement and the
Subordinate Loan Documents, this Agreement shall control.”

 

5.     Extension of Standstill Period. Clause (c) of Section 5 of the
Subordination Agreement is hereby amended by replacing each occurrence therein
of the term “90 days” with “four months”.

 

 
 

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6.     Restriction on Extension of Maturity Date. Section 11(b) of the
Subordination Agreement is hereby amended to read in its entirety as follows:

 

“(b)     the terms and conditions upon which the Senior Loan was or may
hereafter be incurred and the instruments evidencing the same and the Senior
Loan Documents, including collateral security documents and guaranties, may be
amended or modified from time to time, including, without limitation, to
increase principal or interest rates thereunder, accelerate the maturity date or
other due dates for payment, and any other amendment or modification agreed to
by Senior Lender and Borrower (provided, however, that (i) the principal amount
of the Senior Loan Obligations (including any Refinancing Indebtedness) may not
exceed $400,000,000 in the aggregate and (ii) the final maturity date of the
Senior Loan Obligations (including the final maturity date of any Refinancing
Indebtedness) may not be extended to a date later than the Final Maturity Date,
in each case without the written consent of Subordinate Lender), and no such
modification or amendment, whether before or after the Final Maturity Date,
shall affect Subordinated Lender’s obligations hereunder, and the Senior Loan
Obligations and the Lien securing payment thereof shall remain senior in all
respects to the Subordinate Loan Obligations and the Lien securing payment
thereof, to the full extent provided in this Agreement, including without
limitation Sections 2 through 4 hereof.”

 

7.     Termination of Subordination Agreement. Section 20 of the Subordination
Agreement is hereby amended to read in its entirety as follows:

 

“20.     Termination. This Agreement shall terminate and cease to be of any
further force or effect upon Payment In Full of the Senior Loan Obligations, and
the fulfillment of the conditions to the release of the Senior Security
Agreement.”

 

8.     Addition of Certain Bonus Payments. Section 28 of the Subordination
Agreement is hereby amended to read in its entirety as follows:

 

“28.     Minimum Guaranteed Payment; Bonus Payments; Management Fees. In the
event a Management Agreement is entered into between the Senior Lender or an
Affiliate of Senior Lender (together with any successor manager, each a
“Manager”) and Tribe, Subordinate Lender agrees that the Subordinate Loan
Obligations, including any payment in respect of Subordinate Loan Obligations
constituting proceeds of the Collateral, shall be expressly subject and
subordinate to (a) the minimum guaranteed payment, as required pursuant to 25
CFR 531.1(f) and the Commencement Date Bonus and any Bonus Payment (as those
terms are defined in the Proposed Management Agreement) with the aggregate
amount of all such payments and bonuses not to exceed $12,000,000 per year, and
(b) any management fees and licensing fees payable to any such Manager or any
Affiliate thereof, all of the above as provided within such Proposed Management
Agreement.”

 

The Proposed Management Agreement shall be deemed a Management Agreement for
purposes of the Subordination Agreement.

 

9.     Refinancing Indebtedness. The Subordination Agreement is hereby amended
by adding a new Section 29 as follows:

 

 
 

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“29.     Refinancing Indebtedness.

 

(a)     The parties hereto agree that any Refinancing Indebtedness, whether
provided by the Senior Lender, an Affiliate thereof, or other person (any such
Affiliate or other person, an “Additional Senior Lender”), shall automatically
constitute Senior Loans hereunder, and any Additional Senior Lender shall be
deemed a Senior Lender in all respects hereunder. The Subordinate Lender hereby
agrees that the Subordinate Loan Obligations (and the Liens on Collateral
securing any Subordinate Loan Obligations) will at all times be junior and
subordinate in all respects to any such Refinancing Indebtedness and the
Borrower's obligations under such Refinancing Indebtedness will automatically be
treated as Senior Loan Obligations for all purposes of this Agreement, including
for purposes of lien priority and rights in respect of the Collateral as set
forth herein.

 

(b)     The Subordinate Lender shall promptly enter into such documents and
agreements (including amendments and supplements to this Agreement) as Borrower
or any Additional Senior Lender reasonably requests to provide any Additional
Senior Lender the rights contemplated hereby, in each case consistent in all
material respects with the terms of this Agreement.

 

(c)     Any Additional Senior Lender will promptly agree in a writing addressed
to the Subordinate Lender to be bound by the terms of this Agreement and such
Additional Senior Lender shall be as fully a party hereto as if such Additional
Senior Lender were an original signatory hereto.

 

(d)     Borrower’s incurrence of any Refinancing Indebtedness shall not obligate
Subordinate Lender to agree to any modification of the Modification Agreement or
of the other Subordinate Loan Documents.”

 

10.     Representations, Warranties and Covenants.

 

(a)     Of Subordinate Lender. Subordinate Lender represents, warrants and
covenants to Senior Lender that:

 

(i)     Subordinate Lender has the power and authority to execute, deliver and
perform this Amendment No. 1.

 

(ii)     This Amendment No. 1 has been duly authorized by all necessary action
of Subordinate Lender, has been duly executed and delivered by Subordinate
Lender and constitutes the valid and binding obligations of Subordinate Lender
enforceable against Subordinate Lender in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting rights of creditors
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).

 

 
 

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(iii)     Neither the execution, delivery or performance by Subordinate Lender
of this Amendment No. 1 nor compliance by it with the terms and provisions
hereof, (A) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (B) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the property or assets of
Subordinate Lender pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement, loan agreement, partnership agreement or any other
agreement, contract or instrument to which Subordinate Lender is a party or by
which it or any of its property or assets is bound or to which it may be
subject, or (C) will violate any provision of the organizational documents of
Subordinate Lender.

 

(iv)     All of the representations and warranties of Subordinate Lender set
forth in the Subordination Agreement, as amended hereby, are true and correct in
all material respects on and as of the date hereof, as if made on the date
hereof, except to the extent any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such date.

 

(b)     Of Senior Lender. Senior Lender represents and warrants to Subordinate
Lender that:

 

(i)     Senior Lender has the power and authority to execute, deliver and
perform this Amendment No. 1.

 

(ii)     This Amendment No. 1 has been duly authorized by all necessary action
of Senior Lender, has been duly executed and delivered by Senior Lender and
constitutes the valid and binding obligations of Senior Lender enforceable
against Senior Lender in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting rights of creditors generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).

 

(iii)     Neither the execution, delivery or performance by Senior Lender of
this Amendment No. 1 nor compliance by it with the terms and provisions hereof,
(i) will contravene any provision of any law, statute, rule or regulation or any
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the property or assets of Senior Lender pursuant to the
terms of any indenture, mortgage, deed of trust, credit agreement, loan
agreement, partnership agreement or any other agreement, contract or instrument
to which Senior Lender is a party or by which it or any of its property or
assets is bound or to which it may be subject, or (iii) will violate any
provision of the organizational documents of Senior Lender.

 

(iv)     All of the representations and warranties of Senior Lender set forth in
the Subordination Agreement, as amended hereby, are true and correct in all
material respects on and as of the date hereof, as if made on the date hereof,
except to the extent any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such date.

 

 
 

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(v)     As of the date of this Amendment No. 1, Senior Lender has made advances
to or on behalf of the Borrower (such advances constituting Senior Loan
Obligations) in an aggregate principal amount exceeding $5,000,000, and such
Senior Loan Obligations remain outstanding.

 

(c)     Of Borrower. Borrower represents and warrants to Subordinate Lender and
Senior Lender that:

 

(i)     Borrower has the power and authority to execute, deliver and perform
this Amendment No. 1.

 

(ii)     This Amendment No. 1 has been duly authorized by all necessary action
of Borrower, has been duly executed and delivered by Borrower and constitutes
the valid and binding obligations of Borrower enforceable against Borrower in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

(iii)     Neither the execution, delivery or performance by Borrower of this
Amendment No. 1 nor compliance by it with the terms and provisions hereof, (i)
will contravene any provision of any law, statute, rule or regulation or any
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the property or assets of Borrower pursuant to the terms of
any indenture, mortgage, deed of trust, credit agreement, loan agreement,
partnership agreement or any other agreement, contract or instrument to which
Borrower is a party or by which it or any of its property or assets is bound or
to which it may be subject, or (iii) will violate any provision of the
organizational documents of Borrower.

 

(iv)     All of the representations and warranties of Borrower set forth in the
Subordination Agreement, as amended hereby, are true and correct in all material
respects on and as of the date hereof, as if made on the date hereof, except to
the extent any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
in all material respects as of such date.

 

(v)     As of the date of this Amendment No. 1, Senior Lender has made advances
to or on behalf of the Borrower (such advances constituting Senior Loan
Obligations) in an aggregate principal amount exceeding $5,000,000, and such
Senior Loan Obligations remain outstanding.

 

11.     Acknowledgment of Security Interests. The Borrower hereby acknowledges,
confirms and agrees that each of the Senior Lender and Subordinate Lender has,
and shall continue to have, valid, enforceable and perfected security interests
in and liens upon the Collateral heretofore granted by the Borrower to the
Senior Lender or the Subordinate Lender pursuant to the Senior Loan Documents or
the Subordinate Loan Documents, as the case may be, or otherwise granted to or
held by the Senior Lender or the Subordinate Lender.

 

 
 

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12.     Acknowledgment of Subordination. Subordinate Lender hereby acknowledges
a Lien on Collateral securing any Senior Loan Obligations (including for the
avoidance of doubt any Senior Loan Obligation arising out of Refinancing
Indebtedness) will at all times be senior and prior in all respects to any Lien
on such Collateral securing Subordinate Loan Obligations.

 

13.     Further Assurances. Subordinate Lender and Borrower each will, at
Borrower’s expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable, or that Senior Lender or any
prospective lender that is considering providing Refinancing Indebtedness may
reasonably request, in order to protect any right or interest granted hereby or
to enable Senior Lender to exercise and enforce its rights and remedies under
this Amendment No. 1 and the Senior Loan Documents and to confirm that the
Subordinate Loan Documents remain subject to the Senior Loan Documents in
accordance with the provisions of the Subordination Agreement as amended by
Amendment No.1.

 

14.     Conditions Precedent. This Amendment No. 1 shall be effective when each
of the Senior Lender and Subordinate Lender shall have received an executed
original hereof, together with each of the following:

 

(a)     The Modification Agreement; and

 

(b)     The Consolidated Restated Promissory Note dated as of the date hereof,
and effective as of August 29, 2012, duly executed by Borrower, in the form
appended to the Modification Agreement.

 

15.     Waiver of Default. The covenant set forth in the trailing paragraph of
Section 4 of the Subordination Agreement (as such paragraph existed prior to
effectiveness of this Amendment No. 1) has been breached as a result of the
failure of Borrower and Subordinate Lender to enter into, on or before September
28, 2012, written agreements amending the Subordinate Loan Documents in such a
manner as to be consistent with the Subordination Agreement, and as a result of
such breach, a Senior Loan Default exists. Upon effectiveness of this Amendment
No. 1, the Senior Lender hereby agrees to waive such Senior Loan Default.

 

16.     Jurisdiction. Each of the parties hereby (a) submits to the jurisdiction
of the Permitted Court for purposes of enforcing this Amendment No. 1 and the
Subordination Agreement as amended hereby in the manner provided herein, and (b)
waives and agrees not to assert (by way of motion, as a defense or otherwise) in
any suit, action, proceeding or dispute properly brought or maintained before
the Permitted Court in accordance with this Amendment No. 1 and the
Subordination Agreement as amended hereby, any claim that (i) such party is not
subject personally to the jurisdiction of the Permitted Court, (ii) such party
is immune from extraterritorial injunctive relief, (iii) such suit, action,
proceeding or dispute may not be brought or maintained in the Permitted Court,
or should be dismissed on the grounds of forum non conveniens, or should be
transferred to any court other than the Permitted Court, or (iv) that this
Amendment No. 1 or the subject matter hereof may not be enforced in or by the
Permitted Court.

 

 
 

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17.     Counterparts. This Amendment No. 1 may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.

 

[Signatures begin on next page]

 

 
 

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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of the
date set forth above.

 

 

Borrower:

     

JAMUL INDIAN VILLAGE

     

By:  /s/ Raymond Hunter                    

 

Name:   Raymond Hunter                    

 

Title:  Chairman                                     

 

And:  /s/ Erica Pinto                             

Name:     Erica Pinto                              

Title:  Vice Chairman                             

     

Subordinate Lender:

     

LAKES JAMUL DEVELOPMENT, LLC

     

By:  /s/ Timothy Cope                          

 

Name:   Timothy Cope                          

 

Title:  President / CFO                           

     

Senior Lender:

     

PENN NATIONAL GAMING INC.

     

By:  /s/ Robert S. Ippolito                      

 

Name:   Robert S. Ippolito                      

 

Title:  VP / Sec / Treas                             

 

 
 

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EXHIBIT A

Proposed Management Agreement

 

[see attached]

 

 

 

 

 

 

 
 

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MANAGEMENT AGREEMENT

 

BETWEEN

 

THE JAMUL INDIAN VILLAGE OF CALIFORNIA

 

AND

 

SAN DIEGO GAMING VENTURES, LLC

 

DATED AS OF ______________________, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

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MANAGEMENT AGREEMENT

 

This MANAGEMENT AGREEMENT (the “Agreement”) has been entered into as of this __
of ___________________, 2014, by and between THE JAMUL INDIAN VILLAGE OF
CALIFORNIA, a federally recognized Indian Tribe (the “Tribe”) and SAN DIEGO
GAMING VENTURES, LLC, a Delaware limited liability company (the “Manager”).

 

RECITALS

 

A.     The Tribe is a federally recognized Indian Tribe enjoying a
government-to-government relationship with the United States and possessing
certain inherent powers of self-government. The Tribe is the beneficial owner of
approximately six (6) acres of reservation land located within the exterior
boundaries of the State of California held by the United States of America in
trust for the Tribe (the “Property”), more particularly described in the
attached Exhibit A-1, which is hereby incorporated by this reference. The Tribe
exercises jurisdiction over the Property pursuant to its powers of
self-government and consistent with the resolutions and ordinances of the Tribe.

 

B.     The Tribe is dedicated, through the operation of a Gaming Facility, to
(i) provide employment and improve the social, economic, education and health
needs of its members, (ii) increase the revenues of the Tribe, and (iii) enhance
the Tribe’s economic self-sufficiency and self-determination.

 

C.     The Tribe is seeking expertise for the management and operation of the
Gaming Facility. The Manager has represented to the Tribe that the Manager and
its Affiliates have the knowledge, experience and managerial capacity to manage
a Gaming Facility on the Property and that the Manager is willing and able to
provide such experience, expertise and instruction.

 

D.     The Tribe desires to grant the Manager access to and the exclusive right
and obligation to manage, operate and maintain the Gaming Facility and any
ancillary property or expansion thereof during the Term of this Agreement and in
accordance with the provisions of this Agreement.

 

E.     This Agreement is entered into pursuant to the IGRA. All Gaming conducted
at the Gaming Facility shall comply with all Legal Requirements.

 

ARTICLE 1

DEFINITIONS

 

“Bonus Payment” has the meaning set forth in Section 2.2(c)(iv).

 

“Commencement Date” means the date upon which the Gaming Facility is open to the
public and offering Class III Gaming.

 

“Commencement Date Bonus” has the meaning set forth in Section 7.5.

 

 
 

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“Fiscal Year” means the period commencing on January 1 of each year and ending
on December 31 of the same year.

 

“Gross Gaming Revenue (Win)” means the net win from Gaming activities which is
the difference between Gaming wins and losses before deducting costs and
expenses (including any deduction for Promotional Allowances), determined in
accordance with GAAP consistently applied.

 

“Gross Revenues” means all revenues of any nature derived directly or indirectly
from the Gaming Facility including Gross Gaming Revenue (Win), food and beverage
sales and other rental or other receipts from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires, provided that such lessees, sublessees, and
licensees and concessionaires are not subsidiaries or Affiliates of the
Manager), parking fees, and revenue recorded for Promotional Allowances, but
excluding any Tribal Tax, all as determined in accordance with GAAP consistently
applied.

 

“Guaranteed Monthly Payment” means, consistent with 25 U.S.C. 2711(b)(3), that
payment due to the Tribe each month commencing in the month after the
Commencement Date occurs in accordance with Section 7.5 hereof.

 

“IGRA” means the Indian Gaming Regulatory Act of 1988, Public Law 100-497, 25
U.S.C. § 2701 et seq., as amended from time to time.

 

“Increased Guaranteed Monthly Payment” has the meaning set forth in Section 7.5.

 

“Lakes” means Lakes Jamul Development, LLC.

 

“License Agreement” means that certain Intellectual Property License, Branding
and Marketing Agreement between Perm National Gaming, Inc. and the Tribe dated
April 3, 2013, attached hereto as Exhibit C. as amended from time to time in
accordance therewith.

 

“License Fee” has the meaning set forth in Section 8.3.

 

“Loan Agreement” shall mean any and all obligations and advances arising out of
or related to the Senior Loan Documents (including for the avoidance of doubt
the Refinancing Documents (if any) without regard to the application of the
proceeds of any such advances, in an aggregate principal amount not to exceed
$400,000,000, together with all interest, prepayment premiums and other sums
(including but not limited to closing costs, legal fees and costs, and any and
all related expenses) arising out of or related to the Senior Loan Documents
(including for the avoidance of doubt the Refinancing Documents (if any).

 

“Monthly Disbursements” has the meaning set forth in Section 7.5.

 

 
 

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“Net Revenues” means, with respect to any period of time, all revenues from the
business operations conducted in or at the Gaming Facility during such period
(whether in the form of accounts, general intangibles, payment intangibles,
cash, or deposit accounts, and including (i) revenues from Gaming, (ii) revenues
from the operation of any hotel, restaurant, food and beverage service, retail
outlet, meeting space, swimming pool, fitness center, spa or any other
businesses operating on the Property, and (iii) any monies received by any
Tribal Affiliate or the Tribe as damages or settlement recovery in connection
with any litigation concerning the Compact or the right of any Tribal Affiliate
or the Tribe to conduct Gaming on any lands held or to be acquired by either for
such purposes), but less (a) Operating Expenses; (b) amounts paid out as, or
paid for, prizes; (c) any credits or refunds made to customers, guests, or
patrons of the Gaming Facility not constituting an Operating Expense and not
applied in any prior period to reduce revenues; and (d) cash or proceeds of any
lost or discarded claims generated by a Gaming Machine or otherwise arising out
of any other Gaming activities at the Gaming Facility that are not retained by
the Gaming Facility. It is intended that this definition of Net Revenues be
consistent with 25 U.S.C. § 2703(9).

 

“NIGC” means the National Indian Gaming Commission.

 

“Operating Expenses” means the total sum of all expenses incurred for the
benefit of the operation of the Gaming Facility and approved as necessary under
this Agreement, including the following:

 

 

i.

Compensation for Gaming Employees;

 

 

ii.

expenses and costs for Off-site Employees as set forth in Section Error!
Reference source not found.;

 

 

iii.

operating equipment and Operating Supplies for the Gaming Facility;

 

 

iv.

utilities;

 

 

v.

repairs and maintenance of the Gaming Facility, including repairs and
maintenance of on- and off-Property infrastructure adjacent to the Gaming
Facility necessary to accommodate the business of the Gaming Facility;

 

 

vi.

interest payments on debt service including the Subordination Agreement,
Subordinated Debt Instrument and the Loan Agreement;

 

 

vii.

interest on installment contract purchases or other interest charges on debt
approved by the Business Board;

 

 

viii.

insurance and bonding required pursuant to the terms of this Agreement;

 

 

ix.

advertising and marketing, including busing and other transportation of patrons
to the Gaming Facility and Promotional Allowances;

 

 

x.

accounting, attorney and other professional fees, including those of both the
Tribe and the Manager directly related to the operations of the Gaming Facility
during the Term;

 

 

xi.

security costs;

 

 
 

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xii.

reasonable travel expenses for employees (including Off-Site Employees) directly
related to the operation of the Gaming Facility;

 

 

xiii.

lease payments for Furnishings and Equipment including any capital lease
payments, to the extent approved by the Business Board;

 

 

xiv.

trash removal;

 

 

xv.

costs of goods sold by the Gaming Facility;

 

 

xvi.

other expenses designated as operating expenses in accordance with GAAP;

 

 

xvii.

expenses specifically designated as operating expenses in this Agreement;

 

 

xviii.

depreciation and amortization of the Gaming Facility, the Furnishings and
Equipment and all other assets in accordance with GAAP;

 

 

xix.

recruiting and training expenses for Gaming Employees;

 

 

xx.

fees due to the NIGC under the IGRA;

 

 

xxi.

any required payments to the State or local governments made by or on behalf of
the Gaming Facility or the Tribe pursuant to the Compact;

 

 

xxii.

any charitable contributions by the Gaming Facility included in the budget or
otherwise approved by the Business Board;

 

 

xxiii.

the License Fee (or Reduced License Fee, as applicable);

 

 

xxiv.

Pre-Opening Expenses capitalized and treated as an expense during the first year
after the Commencement Date (or over three years as approved by the Business
Board); and

 

 

xxv.

all payments made by the Gaming Facility to unaffiliated third parties to
mitigate environmental or other impacts of the Gaming Facility.

 

“Subordination Agreement” means that certain Subordination and Intercreditor
Agreement, dated August 29, 2012, between Penn National Gaming, Inc., Lakes and
the Tribe, as defined therein, as amended by that certain Amendment No. 1 to
Subordination and Intercreditor Agreement, dated March ___, 2014, between Penn
National Gaming, Inc., Lakes and the Tribe, as further amended, from time to
time in accordance therewith, which amends the Subordinate Loan Documents.

 

 
 

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“Subordinated Debt Instrument” means that certain Consolidated Restated
Promissory Note, dated March ___, 2014 between, Lakes and the Tribe, as amended
from time to time in accordance therewith.

 

 

Article 2
COVENANTS

 

In consideration of the mutual covenants contained in this Agreement, the
parties agree and covenant as follows:

 

2.1           Engagement of Manager. Subject to the limitations and terms and
conditions set forth in this Agreement, the Tribe hereby retains and engages the
Manager as the sole and exclusive manager for the supervision, direction and
control of the management of all of the functions and employees of the Gaming
Facility and the Manager hereby accepts such retention and engagement.

 

2.2           Effective Date; Term; Term Extensions.

 

(a)      

 

(b)               Term. The term of this Agreement shall begin on the Effective
Date and continue until the seventh (7th) anniversary of the Commencement Date,
subject to extension upon NIGC approval as provided in Section 2.2(c) (such
term, as the same may be extended pursuant to Section , the “Term”).

 

(c)               Term; Extensions. The Tribe and Manager agree that in each of
the first three (3) consecutive twelve-month periods of the Term, the parties
shall negotiate with each other in good faith to amend this Agreement, each such
amendment to provide for a one (1)-year extension of the Term, effective as of
the first, second and third anniversaries of the Commencement Date (such
extensions respectively, the “First Extension Year”, the “Second Extension
Year,” and the “Third Extension Year”, and each a “Extension Year”), and shall
include the terms indicated below, as applicable:

 

(i)       First Extension. The amendment providing for the First Extension Year
shall provide that (A) the annual license fee payable pursuant to Section in
respect of the first year of the Term and the First Extension Year, shall be the
Reduced License Fee (and not the License Fee), and (B) the percentage used to
calculate (pursuant to Section ) the Management Fee payable with respect to the
last twelve months of the Term (the “Final Year”) shall be twenty-nine percent
(29%).

 

(ii)      Second Extension. The amendment providing for the Second Extension
Year shall provide that (A) the annual license fee payable pursuant to Section
in respect of the Second Extension Year shall be the Reduced License Fee (and
not the License Fee), and (B) the percentage used to calculate (pursuant to
Section ) the Management Fee payable with respect to the twelve-month period
immediately prior to the Final Year (the “Second Final Year”) shall be
twenty-nine percent (29%), and (C) the percentage used to calculate (pursuant to
Section ) the Management Fee payable with respect to the Final Year shall be
twenty-eight percent (28%).

 

 
 

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(iii)     Third Extension. The amendment providing for the Third Extension Year
shall provide that (A) the annual license fee payable pursuant to Section in
respect of the Third Extension Year through the remainder of the Term shall be
the Reduced License Fee (and not the License Fee), (B) the guaranteed monthly
payment payable pursuant to Section in respect of the Third Extension Year
through the remainder of the Term shall be the Increased Guaranteed Monthly
Payment (and not the Guaranteed Monthly Payment), (C) the percentage used to
calculate (pursuant to Section ) the Management Fee payable with respect to the
twelve-month period immediately prior to the Second Final Year shall be
twenty-nine percent (29%), (D) the percentage used to calculate (pursuant to
Section ) the Management Fee payable with respect to the Second Final Year shall
be twenty-eight percent (28%), and (E) the percentage used to calculate
(pursuant to Section ) the Management Fee payable with respect to the Final Year
shall be twenty-seven percent (27%).

 

(iv)     Extension Bonus Payment(s). The Tribe shall be entitled to receive Six
Million Dollars ($6,000,000) (each, a “Bonus Payment”) upon each of (A) NIGC
approval of the First Extension Year and (B) NIGC approval of the Second
Extension Year. Any Bonus Payment shall be payable to the Tribe ratably
($500,000 per month) over the First Extension Year and Second Extension Year, as
applicable.

 

(v)      General; Limitations. The parties agree that nothing in this Agreement
is intended to require the Tribe to agree to any Extension during the good faith
negotiations contemplated by this Section .

 

 

Article 3
MANAGEMENT OF THE GAMING FACILITY

 

Article 4
PERSONNEL AND VENDORS

 

Article 5
PRE-OPENING BUDGET; OPERATING BUDGET AND ANNUAL PLAN

 

Article 6
LIENS

 

Article 7
MANAGEMENT FEE, REIMBURSEMENTS, DISBURSEMENTS,
AND OTHER PAYMENTS

 

7.1          Management Fee.  Subject to the provisions of Section , the Tribe
hereby authorizes the Manager to pay itself on or before the twenty-first (21st)
day of each month after the calendar month in which the Commencement Date falls,
from the Gaming Facility Bank Account(s), a fee which is equal to thirty percent
(30%) of Net Revenues, subject to reduction pursuant to Section 2.2 (c)(the
“Management Fee”). In no event shall the Management Fee exceed, in the
aggregate, thirty percent (30%) of the Net Revenues per annum (the “Cap”). The
Management Fee shall not include, and the Cap shall not apply to, any of the
following: (a) reimbursements to the Manager for Operating Expenses incurred by
the Manager or any of its Affiliates provided that such costs are included in
the Operating Budget and Annual Plan and approved by the Business Board, (b)
non-Gaming fees and Compensation, including payments made to the Manager or its
Affiliates for advances (including interest on such advances and any other
payments arising out of or relating to such advances), (c) payments of the
License Fee pursuant to the License Agreement, or (d) payments made pursuant to
the Loan Agreement or any other instrument evidencing amounts owed to the
Manager and/or its Affiliates. To the extent that Net Revenues are insufficient
to pay the applicable Management Fee, such amounts due but not paid shall accrue
and be paid to the Manager immediately out of available future Net Revenues.

 

 
 

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7.2          Disbursements.  As and when received by the Manager, Gross Revenues
shall be deposited in the Depository Account. Gross Revenues in the Gaming
Facility Bank Account(s) over the Minimum Balance shall be disbursed by the
Manager, on a monthly basis, for and on behalf of the Tribe, in accordance with
Section .

 

7.3          Payment of Fees and Tribe Disbursement.  Within twenty-one (21)
days after the end of each calendar month of operations, the Manager shall
calculate and report to the Business Board the Gross Revenues, Operating
Expenses, and Net Revenues for the previous month’s operations and the Fiscal
Year’s operations to date. Such Gross Revenues shall be disbursed from the
Gaming Facility Bank Account(s) on or before the twenty-first (21st) day of each
month after the calendar month in which the Commencement Date falls, to the
extent available to pay the scheduled items to the extent due and payable and
earned in accordance with and within the following framework and agreements:

 

(a)     Operating Expenses (except for the License Fee (or Reduced License Fee
if applicable) and interest payments on debt service including the Subordination
Agreement, Subordinated Debt Instrument and the Loan Agreement);

 

(b)     The Guaranteed Monthly Payment or Increased Guaranteed Monthly Payment,
as applicable;

 

(c)     The Commencement Date Bonus;

 

(d)     The Bonus Payment, if applicable;

 

(e)     The Management Fee and License Fee (or Reduced License Fee if
applicable);

 

(f)     Payments required under the Loan Agreement;

 

(g)     Contributions to the Capital Replacement Reserve Account;

 

(h)     Payments required under the Subordination Agreement and/or the
Subordinated Debt Instrument;

 

 
 

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(i)     Any supplemental payments required under the Loan Agreement; and

 

(j)     The Tribe.

 

 

7.4          Operative Dates.  For purposes of this Article 7, the Gaming
Facility’s “first year of operations” shall begin on the Commencement Date and
continue until the first day of the month following the first anniversary of the
Commencement Date, and each subsequent year of operations shall be the twelve
(12)-month period following the end of the previous twelve (12) months.

 

7.5          Guaranteed Monthly Payment; Increased Guaranteed Monthly Payment;
Commencement Date Bonus; Monthly Disbursements.  During the Term, the Tribe
shall be entitled to receive from the Gaming Facility a guaranteed monthly
payment equal to the Guaranteed Monthly Payment or the Increased Guaranteed
Monthly Payment, as applicable (as determined pursuant to Section ). Further,
upon the Commencement Date, the Tribe shall be entitled to Six Million Dollars
($6,000,000) (“Commencement Date Bonus”), which shall be payable to the Tribe
ratably ($500,000 per month) over the twelve (12)-month period immediately
following the Commencement Date. The payment to the Tribe of the Guaranteed
Monthly Payment, the Increased Guaranteed Monthly Payment, the Commencement Date
Bonus or any Bonus Payment, as applicable, shall have priority over the
Management Fee, the repayment of pre-development, development and construction
costs, and the payment of any monies pursuant to the Loan Agreement, the
Subordination Agreement and the Subordinated Debt Instrument. For purposes of
this Agreement, (a) “Guaranteed Monthly Payment” shall mean Five Hundred
Thousand Dollars ($500,000) per month, and (b) “Increased Guaranteed Monthly
Payment” shall mean One Million Dollars ($1,000,000) per month. For purposes of
this Agreement, any payments due to the Tribe as a Guaranteed Monthly Payment,
Increased Guaranteed Monthly Payment, Commencement Date Bonus and any Bonus
Payment shall be referred to as “Monthly Disbursements.” Any distribution of Net
Revenues received by the Tribe during any month shall be credited toward the
Monthly Disbursements for such month, on a dollar-for-dollar basis. In any month
that the Net Revenues are less than the Monthly Disbursements, the Tribe shall
be entitled to receive from the Manager and the Manager shall pay to the Tribe
an amount equal to the difference between such month’s Net Revenues and the
applicable Monthly Disbursements, with such amount being reimbursed to the
Manager by the Gaming Facility as an Operating Expense in the next month. If
monthly Net Revenues do not exceed the Monthly Disbursements for a consecutive
twelve (12)-month period, the Manager may elect to terminate this Agreement
pursuant to Section Error! Reference source not found.. No Monthly Disbursements
shall be owed for any full months during which Class III Gaming is suspended or
terminated at the Gaming Facility but shall be prorated based on the number of
days that Class III Gaming is conducting during any such month. The obligation
to pay the Monthly Disbursements shall cease upon termination of this Agreement
for any reason.

 

 
 

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7.6          Payment of Net Revenues.   The Manager is authorized to transfer
funds from the Gaming Facility Bank Account(s) to the Manager’s bank accounts
and/or the Tribe’s bank accounts in order to distribute Net Revenues and any
other amounts due under this  . The Net Revenues paid to the Tribe pursuant to
this   shall be payable to the Tribal bank account specified by the Business
Board pursuant to Section Error! Reference source not found..

 

 

Article 8
TRADE NAMES, TRADEMARKS, AND SERVICE MARKS

 

8.1          .

 

8.2          .

 

8.3          License Fee. Pursuant to the terms of the License Agreement, during
each year of the Term (including the First Term Year), Penn National Gaming,
Inc. will be paid by the Gaming Facility an annual license fee equal to the
License Fee (as defined below), unless Section  otherwise provides that such
annual license fee shall be equal to the Reduced License Fee (as defined below).
Each payment of the License Fee or the Reduced License Fee, as applicable, shall
be paid in full on each anniversary of the Commencement Date. For purposes of
this Agreement, (a) “Reduced License Fee” means, with respect to any period of
determination, one and one-half percent (1.5%) of the Gross Revenues
corresponding to such period, and (b) “License Fee” means, with respect to any
period of determination, two percent (2%) of the Gross Revenues corresponding to
such period.