NOTE SALE AND PURCHASE AGREEMENT

NOTE SALE AND PURCHASE AGREEMENT

THIS NOTE SALE AND PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of the 9th day of December, 2015, by and between LAKES JAMUL DEVELOPMENT, LLC, a Minnesota limited liability company (“Seller”), and San Diego Gaming Ventures, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

A.    Borrower (as defined below), Seller and Penn National Gaming, Inc., a Pennsylvania corporation (“Senior Lender”) entered into a Subordination and Intercreditor Agreement dated as of August 29, 2012 (as amended by that certain Amendment No. 1 to Subordination and Intercreditor Agreement dated as of April 24, 2014, the “Intercreditor Agreement”), by which payment of indebtedness (and liens securing such indebtedness) of the Jamul Indian Village (f.k.a., Jamul Indian Village of California), a federally recognized Indian tribe (“Borrower”), to Seller (the “Loans”) have been subordinated to the payment of indebtedness (and liens securing such indebtedness) of Borrower to Senior Lender, as more fully described in the Intercreditor Agreement.

B.     Pursuant to the Intercreditor Agreement, Borrower and Seller entered into a Modification Agreement dated as of April 24, 2014 (the “Modification Agreement”), pursuant to which the parties provided for the modification of the terms of the Loans to be consistent in certain respects with the provisions of the Intercreditor Agreement, the issuance of a new promissory note to replace the existing promissory notes evidencing the Loans, and the continued effectiveness of the Amended Operative Documents (as defined therein).

C.     In connection with the execution and delivery of the Modification Agreement, Borrower executed and delivered to Seller that certain Consolidated Restated Promissory Note of the Borrower dated as of April 24, 2014, to be effective as of August 29, 2012 (the “Note”), to evidence the Loans.

D.    The payment and performance of the Note are secured by certain of the Amended Operative Documents, including the Collateral Documents, and are otherwise subject to the Amended Operative Documents (each as defined in the Modification Agreement).

E.     Buyer desires to purchase and Seller desires to sell all of the indebtedness evidenced by the Note, as secured by the Collateral Documents and as otherwise subject to the Amended Operative Documents and the Intercreditor Agreement, such purchase and sale to be effective as of the Effective Date.

AGREEMENT

IN CONSIDERATION of the foregoing premises and the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.     Purchase and Sale.

a.     Subject to the terms and conditions of this Agreement, Seller shall sell, assign, and transfer to Buyer, and Buyer shall purchase and accept from Seller, the Purchased Assets (as defined below).

b.     Effective upon receipt by Seller of $24,000,000 in immediately available funds (such amount being referred to herein as the “Purchase Price”) on or before December 31, 2015 (the date of Seller’s receipt of Buyer’s payment of the Purchase Price being herein referred to as the “Effective Date”), Seller will sell, assign and transfer to Buyer, without recourse (except with respect to the representations and warranties of Seller set forth in Section 3 below), and Buyer will purchase and accept from Seller, all of Seller’s right, title, and interests arising out of or related (i) to the Loans, the Note, and the other Amended Operative Documents, (ii) to any benefits under the Loans, the Note or the other Amended Operative Documents arising out of or related to the gaming project currently under construction in Jamul, California (the “Project”), but, for avoidance of doubt, excluding (A) any net operating losses that have been incurred or have otherwise arisen in connection with the Project, (B) any real estate currently owned by Seller or any of its affiliates, and (C) any contractual rights with respect to such real estate (collectively, the “Excluded Assets”), (iii) to the right to enforce the Loans, the Note, and the other Amended Operative Documents, and (iv) to the security interests in the collateral subject to the Collateral Documents (the “Collateral”) (clauses (i) through (iv) above, collectively, the “Purchased Assets”), in each case as of the Effective Date and subject to the terms of the Intercreditor Agreement. Without limiting the generality of the foregoing, Buyer agrees that, with respect to the Loans. the Note and the other Amended Operative Documents, it will be deemed to be bound (and will be so bound), as of and from and after the Effective Date, by the Intercreditor Agreement as the Subordinate Lender (as defined therein) thereunder.

c.     Buyer may extend the date on which the occurrence of the Effective Date is required to occur by this Agreement on a month-by-month basis, from January 1, 2016 until no later than June 30, 2016 (the “Outside Date”); provided that the Purchase Price shall increase to the amount set forth in the chart below, based on the actual date on which the Purchase Price is paid by Buyer and received by Seller and the Effective Date accordingly occurs:

In any event, Buyer’s payment of the Purchase Price shall be due and payable no later than the earlier to occur of (i) within 10 business days after the date on which funding of Refinancing Indebtedness (as defined in the Intercreditor Agreement) or other financing for the construction of or refinancing of existing indebtedness relating to the Project exceeds $400,000,000 in the aggregate, or (ii) the Outside Date.

d.     Notwithstanding anything to the contrary in the Note, the other Amended Operative Documents, or the Intercreditor Agreement, Seller shall not assign, participate, delegate or transfer any of its rights or obligations under the Note, the other Amended Operative Documents, or the Intercreditor Agreement prior to the Outside Date.

e.      BUYER ACKNOWLEDGES, WARRANTS, AND REPRESENTS THAT, EXCEPT WITH RESPECT TO THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN SECTION 3 BELOW, THE SALE OF THE PURCHASED ASSETS SUBJECT TO THE INTERCREDITOR AGREEMENT AS CONTEMPLATED HEREBY SHALL BE MADE ON AN “AS-IS”, “WHERE-IS” AND “WITH ALL FAULTS” BASIS.

f.      In connection therewith, Buyer, contemporaneously with Seller’s receipt of Buyer’s payment of the Purchase Price on the Effective Date, will be deemed to have assumed any and all of Seller’s rights and obligations with respect to the Loans and the Purchased Assets and other obligations of Seller under the Amended Operative Documents and the Intercreditor Agreement arising from and after the Effective Date.

Except as set forth above, Seller makes no warranty or representation about the Loans, the Amended Operative Documents, any other Purchased Assets, or the Intercreditor Agreement. Without limiting the generality of the foregoing, Seller makes no representation or warranty as to the collectability of the Loans, the creditworthiness of Borrower, the adequacy of the Collateral securing the Loans, any financial statements submitted by or for Borrower, or any risk of loss with respect to this transaction.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above-written.

CONSENT

The undersigned, the holder, directly or indirectly, of all outstanding membership interests or other equity interests in or of Seller, solely in such capacity and not as a party to the foregoing Agreement, hereby executes and delivers this Consent solely for the purpose of confirming that it consents to the foregoing Agreement and the transactions contemplated thereby.

GUARANTY

The undersigned, the holder, directly or indirectly, of all outstanding membership interests or other equity interests in or of Buyer, solely in such capacity and not as a party to the foregoing Agreement, in consideration of the significant benefit, direct and indirect, it will derive from and as a result of the consummation of the transaction contemplated by the foregoing Agreement, hereby unconditionally guarantees the prompt payment and performance by Buyer of its obligations under the foregoing Agreement.

ACKNOWLEDGMENT

Borrower hereby acknowledges the dispositions contemplated by the foregoing Agreement. In connection therewith, and effective as of the Effective Date, (i) Borrower confirms that Borrower has no defense to payment of the Loans, and (ii) each of Borrower and Seller confirm that it is not aware of any breach by the other party under or with respect to the Loans, the Note, the other Amended Operating Documents, any other Purchased Assets, or the Intercreditor Agreement.

Each of the undersigned hereby acknowledges that, from and after the Effective Date, Seller shall not have any rights or obligations with regard to the Purchased Assets, Buyer being the sole party entitled to the benefits and burdens thereof after giving effect to the consummation of the transaction contemplated by the foregoing Agreement.

EXHIBIT A

ALLONGE

This ALLONGE is affixed to and made a part of that certain Consolidated Restated Promissory Note dated April 24, 2014 (effective as of August 29, 2012) of Jamul Indian Village (f.k.a., Jamul Indian Village of California), a federally recognized Indian tribe, payable to the order of Lakes Jamul Development, LLC, a Minnesota limited liability company.

PAY TO THE ORDER OF SAN DIEGO GAMING VENTURES, LLC (“BUYER”), WITHOUT RECOURSE, REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED IN THAT CERTAIN NOTE SALE AND PURCHASE AGREEMENT, DATED AS OF [DECEMBER __, 2015], BETWEEN LAKES JAMUL DEVELOPMENT, LLC AND BUYER.

¹ Insert Effective Date.