EXHIBIT 3.1
[Conformed as Executed]
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AMENDED AND RESTATED OPERATING AGREEMENT
OF
BH/RE, L.L.C.
DATED AS OF MARCH 26, 2004
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TABLE OF CONTENTS
PAGE
I. DEFINED TERMS............................................................... 1
1.01. Defined Terms....................................................... 1
1.02. Other Defined Terms................................................. 1
II. ORGANIZATION................................................................ 1
2.01. Name and Principal Place of Business................................ 1
2.02. Term................................................................ 2
2.03. Registered Agent and Registered Office.............................. 2
2.04. Purpose............................................................. 2
III. MEMBERSHIP INTERESTS; MEMBERS............................................... 4
3.01. Classes of Interests................................................ 4
3.02. Admission of Members................................................ 4
3.03. Limitation on Liability............................................. 4
IV. CAPITAL..................................................................... 5
4.01. Initial Capital Contributions....................................... 5
4.02. Additional Capital Contributions.................................... 5
4.03. Capital Accounts.................................................... 6
V. INTERESTS IN THE COMPANY.................................................... 7
5.01. Percentage Interests................................................ 7
5.02. Ownership........................................................... 7
5.03. Waiver of Partition and Bankruptcy Filing........................... 7
VI. ALLOCATIONS AND DISTRIBUTIONS............................................... 8
6.01. Allocations......................................................... 8
6.02. Special Allocations and Compliance with Section 704(b).............. 8
6.03. Distributions of Net Cash Flow...................................... 9
6.04. Intentionally Omitted............................................... 9
6.05. Distributions in Liquidation........................................ 9
6.06. Tax Matters......................................................... 9
6.07. Section 704(c)...................................................... 10
6.08. Withholding......................................................... 10
VII. MANAGEMENT.................................................................. 11
(i)
TABLE OF CONTENTS
(continued)
PAGE
7.01. Management.......................................................... 11
7.02. Officers............................................................ 12
7.03. Duties and Conflicts................................................ 14
7.04. Expenses; Advances.................................................. 15
7.05. Affiliate Transactions.............................................. 16
VIII. BOOKS AND RECORDS........................................................... 16
8.01. Books and Records................................................... 16
8.02. Accounting and Fiscal Year.......................................... 16
8.03. Reports............................................................. 16
8.04. The Company Accountant.............................................. 17
8.05. Reserves............................................................ 17
IX. TRANSFER OF INTERESTS....................................................... 17
9.01. General............................................................. 17
9.02. Restrictions on Transfer of Equity Interests........................ 17
9.03. Restrictions on Transfer of Voting Interests........................ 22
9.04. Gaming Laws......................................................... 22
9.05. Additional Provisions Applicable to Transfers of Interests.......... 22
9.06. Further Restriction on Transfer of Interests........................ 23
9.07. Section 754 Election................................................ 23
9.08. Issuance of Additional Interests.................................... 23
9.09. Expiration of Certain Transfer Restrictions......................... 23
X. EXCULPATION AND INDEMNIFICATION............................................. 23
10.01. Exculpation......................................................... 24
10.02. Indemnification..................................................... 24
XI. DISSOLUTION AND TERMINATION................................................. 25
11.01. Dissolution......................................................... 25
11.02. Termination......................................................... 26
11.03. Liquidating Member.................................................. 27
XII. GAMING MATTERS.............................................................. 27
12.01. Licensing........................................................... 27
(ii)
TABLE OF CONTENTS
(continued)
PAGE
12.02. Gaming Problem...................................................... 28
XIII. MISCELLANEOUS............................................................... 28
13.01. Representations, Warranties and Covenants of the Members............ 28
13.02. Further Assurances.................................................. 30
13.03. Notices............................................................. 30
13.04. Governing Law....................................................... 31
13.05. Attorney Fees....................................................... 31
13.06. Captions............................................................ 31
13.07. Pronouns............................................................ 31
13.08. Successors and Assigns.............................................. 31
13.09. Extension Not a Waiver.............................................. 31
13.10. Creditors and Third Parties not Benefited........................... 31
13.11. Recalculation of Interest........................................... 32
13.12. Severability........................................................ 32
13.13. Entire Agreement.................................................... 32
13.14. Publicity........................................................... 32
13.15. Counterparts........................................................ 32
13.16. Confidentiality..................................................... 32
13.17. Venue............................................................... 34
13.18. Waiver of Jury Trial................................................ 34
13.19. Enforceability of Power of Attorney................................. 34
13.20. Amendments.......................................................... 34
(iii)
AMENDED AND RESTATED OPERATING AGREEMENT
OF
BH/RE, L.L.C.
This AMENDED AND RESTATED OPERATING AGREEMENT of BH/RE, L.L.C. is made
and entered into as of March 26, 2004, by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an
individual whose business address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇, an individual whose business address
is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇"), OCS Consultants,
Inc, a Florida corporation ("OCS"), and BH Casino and Hospitality LLC, a
Delaware limited liability company ("Bay Harbour").
WHEREAS, the Company was formed as a limited liability company on March
11, 2003, pursuant to Chapter 86 of the NRS by filing articles of organization
of the Company (the "Articles of Organization") in the Office of the Secretary
of State of the State of Nevada;
WHEREAS, the Company is governed by an Operating Agreement between OCS
and Bay Harbour, dated April 3, 2003 (the "Existing Operating Agreement");
WHEREAS, the parties hereto wish to amend and restate the Existing
Operating Agreement in its entirety, as set forth in this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINED TERMS
1.01. DEFINED TERMS. As used in this Agreement, capitalized terms used
in this Agreement will have the meanings set forth on Appendix A to this
Agreement, and by this reference Appendix A is incorporated herein as fully as
if the provisions thereof had been included in the body of this Agreement in
their entirety.
1.02. OTHER DEFINED TERMS. As used in this Agreement, unless otherwise
specified, (a) all references to Sections, Articles or Exhibits are to Sections,
Articles or Exhibits of this Agreement, (b) each accounting term has the meaning
assigned to it in accordance with GAAP, (c) the terms "include" and "including"
shall be construed as if followed by the phrase "without limitation", (d) the
term "third parties" means a Person that is not a party to this Agreement and is
independent from and unrelated to any party to this Agreement and is not an
Affiliate of any party to this Agreement, and (e) all capitalized terms used in
this Agreement which are not defined in Appendix A shall have the meanings set
forth elsewhere in this Agreement. The use of any term defined in this Agreement
in uncapitalized form indicates that the word has its usual, normal and general
meaning.
II. ORGANIZATION
2.01. NAME AND PRINCIPAL PLACE OF BUSINESS.
(a) NAME. The name of the Company is set forth on the cover page to
this Agreement. The Managers may change the name of the Company or adopt such
trade or fictitious names for use by the Company as the Managers may from time
to time determine
without the approval of the Members. All business of the Company shall be
conducted under such name, and title to all assets of the Company shall be held
in such name. In the event the Managers change the name of the Company or adopt
any other name for use by the Company, the Company shall promptly file or record
with the proper offices in each jurisdiction and political subdivision in which
the Company is conducting business such amendments or certificates, applications
or other documents as are required or permitted by any applicable limited
liability company, assumed or fictitious name statutes, or similar statutes or
laws in effect in each such jurisdiction or political subdivision thereof.
(b) PRINCIPAL PLACE OF BUSINESS. The principal place of business and
office of the Company shall be located at such place as the Managers may from
time to time designate (in each case, all the Members shall be provided with
notice of the location of the principal place of business and office of the
Company and any change thereof).
(c) RECORDS OFFICE. The Company shall continuously maintain in the
State of Nevada a Records Office. As of the date hereof, the Records Office is
currently the office of the registered agent identified in Section 2.03. The
Records Office may be changed to another location within the State of Nevada as
the Managers may, from time to time, determine.
2.02. TERM. The term of the Company shall be perpetual.
2.03. REGISTERED AGENT AND REGISTERED OFFICE. The name of the Company's
registered agent for service of process is The Corporation Trust Company of
Nevada, and the address of the Company's registered agent and the address of the
Company's registered office in the State of Nevada is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇. Such agent and such office may be changed from time to time
by the Managers. Any Person authorized by the Managers is hereby authorized, for
the purposes of authorizing or qualifying the Company to do business in any
state, territory, or dependency of the United States in which it is necessary or
expedient for the Company to transact business, to do any and all acts and
things necessary to obtain from such state, territory or dependency any such
authorization or qualification, including any filing or recording deemed
necessary by such Person authorized by the Managers.
2.04. PURPOSE.
(a) GENERAL. The principal purposes and business of the Company
are (and the Members acknowledge and agree that each of the following is a part
of the ordinary business of the Company):
(i) to invest in EquityCo, L.L.C., a Nevada limited
liability company ("EquityCo") and to own, manage and otherwise deal
with the Company's interest in EquityCo;
(ii) to manage and otherwise deal with the Company's
indirect interest in MezzCo, L.L.C., a Nevada limited liability company
("MezzCo");
(iii) to manage and otherwise deal with the Company's
indirect interest in OpBiz, L.L.C., a Nevada limited liability company
("OpBiz") that will operate, manage and conduct gaming in gaming
facilities on or within premises presently known as "The
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Aladdin Hotel & Casino," located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇;
(iv) to make capital contributions and/or loans to
EquityCo to enable EquityCo to make capital contributions and/or loans
to MezzCo to enable MezzCo to make capital contributions and/or loans
to OpBiz to enable OpBiz to carry out the transactions, and perform its
obligations under, the agreements described in Sections 2.04(b)(ii)
below and to otherwise operate its business; and
(v) to conduct all activities reasonably necessary or
desirable to accomplish the foregoing purposes, and to do anything
necessary or incidental to any of the foregoing.
(b) SUBSIDIARIES. It is contemplated that the Subsidiaries will
engage in the following transactions:
(i) MezzCo will borrow or otherwise obtain $50 million
(or such greater or lesser amount as may be authorized from time to
time by EquityCo) of financing and invest in OpBiz;
(ii) OpBiz will (A) acquire substantially all of the
assets and assume certain liabilities of Aladdin Gaming, L.L.C.
("Aladdin Gaming") in a sale under Section 363 of the Bankruptcy Code
and an assumption and assignment of executory contracts under Section
365 of the Bankruptcy Code pursuant to Aladdin Gaming's revised first
amended plan of reorganization, confirmed by the Bankruptcy Court on
August 29, 2003, and on the terms and conditions of the Purchase
Agreement (or such other terms as may be agreed from time to time by
OpBiz) and in connection therewith, cause OpBiz to enter into the
Credit Agreement, (B) renovate the Aladdin Hotel and Casino (the
"Property") into a Planet Hollywood-themed hotel/casino presently
expected to be named the "Planet Hollywood Resort and Casino" (the
"Renovation"), (C) operate the casino, (D) enter into the Hotel
Management Agreement, (E) enter into the Planet Hollywood License
Agreement, and (F) change or replace any of the arrangements described
in clauses (B) through (E) from time to time as approved by EquityCo;
(iii) directly or indirectly develop, own an economic
interest in, or operate a vacation resort ownership project,
condominium, hotel, condominium/hotel, or other facility on vacant land
acquired from Aladdin Gaming; and
(iv) to conduct all activities reasonably necessary or
desirable to accomplish the foregoing purposes, and to do anything
necessary or incidental to any of the foregoing.
The Company shall not engage in any other business or activity without the
unanimous approval of the Voting Members.
(c) COOPERATION. Subject to the other terms and conditions of this
Agreement and without intending to compromise any party's other rights, duties
and obligations, each of the Members agrees to cooperate in the activities of
the Company, including the execution and
3
delivery of documents approved by the Managers which are necessary or required
in connection with any such activity, including any review and/or approval
process described in Article XII or by any other governmental bodies having
jurisdiction over the Company, any of the Subsidiaries or the Property.
III. MEMBERSHIP INTERESTS; MEMBERS
3.01. CLASSES OF INTERESTS. The Interests are divided into two classes,
Equity Interests and Voting Interests. Equity Interests will not have any right
to vote on matters submitted to a vote of the Members, other than any matters
for which approval of Equity Members is required under Chapter 86 of the NRS.
The Company has issued 50% of the Voting Interests to ▇▇▇▇ and 50% of the Voting
Interests to ▇▇▇▇▇▇▇▇▇▇. Any vote of the Voting Members owning or holding Voting
Interests originally issued to ▇▇▇▇ shall be cast by the ▇▇▇▇ Manager and any
vote of the Voting Members owning or holding Voting Interests originally issued
to ▇▇▇▇▇▇▇▇▇▇ shall be cast by the ▇▇▇▇▇▇▇▇▇▇ Manager; provided that this
sentence shall not apply to the designation or removal of Managers contemplated
by Section 7.01(c). Any Person owning or holding a Voting Interest originally
issued to ▇▇▇▇ shall be deemed to have appointed the ▇▇▇▇ Manager as
attorney-in-fact and proxy for the purpose of casting such vote and any Person
owning or holding a Voting Interest originally issued to ▇▇▇▇▇▇▇▇▇▇ shall be
deemed to have appointed the ▇▇▇▇▇▇▇▇▇▇ Manager as attorney-in-fact and proxy
for the purpose of casting such votes.
3.02. ADMISSION OF MEMBERS. Each of OCS and Bay Harbour is hereby
admitted as an Equity Member of the Company and shall be shown as such on the
books and records of the Company. Each of ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ are hereby
admitted as Voting Members of the Company and shall be shown as such on the
books and records of the Company.
3.03. LIMITATION ON LIABILITY.
(a) GENERAL. Except as otherwise expressly provided in Chapter 86
of the NRS, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability solely by reason of being a Member of the
Company. Except as otherwise expressly provided in Chapter 86 of the NRS or as
provided in Sections 10.02(b) and 13.01(c) hereof, the liability of each Member
shall be limited to the amount of Capital Contributions made by such Member in
accordance with the provisions of this Agreement. Further, except as otherwise
expressly provided herein to the contrary, no Manager, officer or employee of
the Company, general or limited partner of any Member, shareholder, member or
other holder of an equity interest in any Member, or any officer, director or
employee of any of the foregoing or any of their Affiliates shall be obligated
personally for any debt, obligation or other liability of the Company solely by
reason of being a Manager, officer or employee of the Company, general or
limited partner of any Member, shareholder, member or other holder of an equity
interest in any Member, or any officer, director, or employee of any of the
foregoing or any of their Affiliates. Further, failure of the Company to observe
any corporate or other formalities or requirements relating to the exercise of
its powers or the management of its business or affairs under this Agreement or
Chapter 86 of the NRS shall not be grounds for any Member, any Manager, officer
or employee of the Company, any
4
general or limited partner of any Member, any shareholder, member or other
holder of an equity interest in any Member, or any officer, director or employee
of any of the foregoing or any of their Affiliates to be held liable or
obligated for any debt, obligation or other liability of the Company.
(b) CAPITAL LIMITS. Except as expressly provided in this
Agreement, no Member shall be required to contribute any capital, nor shall any
Member be required to loan any funds to the Company. Voting Members will not
have Capital Accounts. A negative or deficit balance in any Equity Member's
Capital Account shall not be deemed to be an asset of the Company and no Equity
Member with a negative or deficit balance in its Capital Account shall have any
obligation to the Company, any other Member, or any third party or creditor to
restore any negative or deficit balance in its Capital Account (upon liquidation
or dissolution of the Company or otherwise), except to the extent expressly
provided for in this Agreement. Other than as set forth in Section 10.02(b)
hereof, no Member shall be liable for the return of the Capital Contributions or
the Capital Account of any other Member, it being expressly understood and
agreed that such return shall be made solely from the assets of the Company and
only in accordance with the provisions of this Agreement. No Member shall be
entitled to withdraw or receive a return of any portion of its Capital
Contributions or Capital Account, to receive interest on its Capital
Contributions or Capital Account or to receive any distributions from the
Company, except as expressly provided for in this Agreement or under applicable
law. No Member shall be entitled to demand or receive property other than cash
in return for its Capital Contributions to the Company, its Capital Account, or
its Interests in the Company. For purposes of this Section 3.03, the term
"Capital Account" shall be deemed to also include the capital account of any
Equity Member for financial or book purposes or as set forth in Chapter 86 of
the NRS or under common law.
(c) SURVIVAL. The provisions of this Section 3.03 will survive the
termination or expiration of this Agreement and the dissolution, liquidation and
winding up of the Company.
IV. CAPITAL
4.01. INITIAL CAPITAL CONTRIBUTIONS. As of the date of this Agreement,
each Equity Member (or an Affiliate of such Equity Member) has advanced $4.25
million to the Company (in the amounts and on the dates indicated on Schedule 1)
in the form of demand loans bearing interest from the date of such advance at
the rate of 1.52% per annum (which equals the "blended annual rate" for calendar
year 2003 as determined by the Internal Revenue Service under Section 7872(e)(2)
of the Code). Simultaneously with the Closing, such advance, together with
accrued interest will be deemed contributions to the capital of the Company by
the applicable Equity Member. Such capital contributions are referred to in this
Agreement as the "Initial Capital Contribution" of the Equity Member.
4.02. ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) TRANSACTION FEES. On the Closing Date, each Equity Member
shall make a Capital Contribution equal to 50% of the total amount of
Transaction Fees. The amount of Transaction Fees paid by the Equity Members or
their Affiliates through February 29, 2004 is shown on Schedule 2. An Equity
Member may elect to include all or a portion of the amount of
5
Transaction Fees that it has paid in its Capital Contribution under this Section
4.02(a), provided, that the maximum amount of such in-kind contribution cannot
exceed 50% of the total amount of Transaction Fees. Any cash that is contributed
shall be used to pay outstanding unpaid Transaction Fees and, as contemplated by
Section 7.04(a), to make certain reimbursement payments.
(b) OTHER CAPITAL CONTRIBUTIONS. If at any time or from time to
time the Managers unanimously determine that funds in excess of the Capital
Contributions made or required to be made under Sections 4.01 and 4.02(a) are
necessary or desirable to meet the obligations or needs of the Company or any
Subsidiary, the Managers may request that the Equity Members make additional
Capital Contributions. Any additional Capital Contributions will only be made by
an Equity Member if that Equity Member agrees to do so and, if so agreed, shall
be made by the agreeing Equity Members on a pro rata basis according to their
Percentage Interests (unless such Equity Members agree otherwise). Any such
request shall be in writing, shall state the aggregate amount of the funds
requested and each Equity Member's share thereof, shall include a brief
description of the proposed use of such Capital Contributions, and shall
designate a date by which the Company must receive funds in respect of such
Capital Contribution. Voting Members and Managers have no obligation, and are
not required, to make Capital Contributions.
(c) MANNER OF FUNDING. Any Capital Contribution made pursuant to
Sections 4.02(a) and (b) shall be made by wire transfer of funds to a Company
account designated by the Managers on or before a date designated by the
Managers in such notice.
4.03. CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
will be maintained for each Equity Member in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv). Consistent therewith, the Capital Account of each
Equity Member will be determined and adjusted as follows:
(a) Each Equity Member's Capital Account will be credited
with:
(i) any contributions of cash made by such
Equity Member to the capital of the Company plus the fair
market value of any property contributed by such Equity Member
to the capital of the Company (net of any liabilities to which
such property is subject or which are assumed by the Company
in connection with such contribution);
(ii) the Equity Member's distributive share of
Net Profit, Profit and items thereof allocated to such Equity
Member hereunder; and
(iii) any other increases required by Treasury
Regulation Section 1.704-1(b)(2)(iv).
(b) Each Equity Member's Capital Account will be debited
with:
(i) any distributions of cash made from the
Company to such Equity Member plus the fair market value of
any property distributed in kind to such Equity Member (net of
any liabilities to which such property is subject or which are
assumed by such Equity Member in connection with such
distribution);
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(ii) the Equity Member's distributive share of
Net Loss, Loss and items thereof allocated to such Member
hereunder; and
(iii) any other decreases required by Treasury
Regulation Section 1.704-1(b)(2)(iv).
(c) Code Section 752(c) and any other applicable provisions of the
Code and Regulations shall be taken into account in determining the amount of
any liability for purposes of subparagraphs (a) and (b) above.
(d) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. If the Managers shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company or any Equity Members in connection
with such contribution or distribution), are computed in order to comply with
such Regulations, the Managers may make such modification provided that it is
not likely to have a material effect on the amounts distributed to any person
pursuant to Section 11.02 hereof upon the dissolution of the Company. The
Managers also shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Treasury Regulation Section 1.704-1(b).
(e) If any Equity Interest is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital Account of
the transferor Equity Member to the extent such Capital Account related to the
transferred Equity Interest.
V. INTERESTS IN THE COMPANY
5.01. PERCENTAGE INTERESTS. With regard to each Equity Member
separately, the Percentage Interest of such Equity Member will be calculated as
set forth in the definition of "Percentage Interest" in Appendix A attached
hereto.
5.02. OWNERSHIP. No Member will have any interest in any specific
assets of the Company. Interests in the Company are personal property.
5.03. WAIVER OF PARTITION AND BANKRUPTCY FILING. Except as otherwise
expressly provided for in this Agreement, each of the Members hereby irrevocably
waives any right or power that such Member might have:
(a) to cause the Company or any of its assets to be
partitioned;
(b) to cause the appointment of a receiver for all or any
portion of the assets of the Company;
(c) to compel any sale of all or any portion of the
assets of the Company pursuant to any applicable law;
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(d) to file a complaint, or to institute any proceeding
at law or in equity, to cause the termination, dissolution or
liquidation of the Company; or
(e) to file any case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law with respect to the Company.
Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 5.03, and without such waivers no
Member would have entered into this Agreement.
VI. ALLOCATIONS AND DISTRIBUTIONS
6.01. ALLOCATIONS. For each taxable year of the Company or part
thereof, Net Profit or Net Loss shall be allocated to the Equity Members (after
all allocations pursuant to Section 6.02 hereof have been made) in such a manner
so as to cause the Partially Adjusted Capital Accounts of the Equity Members to
stand in proportion to their respective Percentage Interests.
6.02. SPECIAL ALLOCATIONS AND COMPLIANCE WITH SECTION 704(B). The
following special allocations shall, except as otherwise provided, be made in
the following order:
(a) notwithstanding anything to the contrary contained in
this Article VI, if there is a net decrease in Company Minimum Gain or
in any Member Minimum Gain during any taxable year or other period,
prior to any other allocation pursuant hereto, such Equity Member shall
be specially allocated items of Company Profit for such year (and, if
necessary, subsequent years) in an amount and manner required by
Treasury Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The items to
be so allocated shall be determined in accordance with Treasury
Regulation Section 1.704-2.
(b) Nonrecourse Deductions for any taxable year or other
period shall be allocated (as nearly as possible) under Treasury
Regulation Section 1.704-2 to the Equity Members, pro rata in
proportion to their respective Percentage Interests at the time of such
allocation.
(c) any Member Nonrecourse Deductions for any taxable
year or other period shall be allocated to the Member that made or
guaranteed or is otherwise liable with respect to the loan to which
such Member Nonrecourse Deductions are attributable in accordance with
the principles set forth in Treasury Regulation Section 1.704-2(i).
(d) any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a
negative balance in his or its Capital Account shall be allocated items
of Profit sufficient to eliminate such increase or negative balance
caused thereby, as quickly as possible, to the extent required by such
Treasury Regulation.
(e) no allocation of loss or deduction shall be made to
any Member if, as a result of such allocation, such Member would have
an Adjusted Capital Account Deficit. Any such disallowed allocation
shall be made to the Members entitled to receive such
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allocation under Treasury Regulation Section 1.704 in proportion to
their respective Percentage Interests.
6.03. DISTRIBUTIONS OF NET CASH FLOW. Except as otherwise provided in
Sections 6.05 below, the Company shall make distributions of Net Cash Flow (to
the extent and if available) to the Equity Members in accordance with their
respective Percentage Interests. Notwithstanding the foregoing the Managers may
unanimously decide to cause the Company to reserve or reinvest some or all of
the available Net Cash Flow for any purpose; provided, however, that the
Managers shall use their reasonable best efforts to cause the Company to
distribute cash annually in an amount equal to at least 40% of the Net Profit of
the Company for such annual period.
6.04. INTENTIONALLY OMITTED
6.05. DISTRIBUTIONS IN LIQUIDATION. Upon the dissolution and winding-up
of the Company, the proceeds of sale and other assets of the Company
distributable to the Equity Members under Section 11.02(c)(iii) shall be
distributed not later than the latest time specified for such distributions
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) to the Equity
Members in proportion to and in accordance with their respective positive
Capital Account balances (after adjustment to reflect the allocations pursuant
to Section 6.01 and Section 6.02 hereof). With the approval of the Managers, a
pro rata portion of the distributions that would otherwise be made to the Equity
Members under the preceding sentence may be distributed by the Company to a
trust established by the Managers (for the benefit of the Equity Members) for
the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company arising out of or in connection with the dissolution and winding-up
of the Company. The assets of any trust established under this Section 6.05 will
be distributed to the Equity Members (from time to time by the trustee of the
trust upon approval by the Managers) in the same proportions as the amount
distributed to the trust by the Company would otherwise have been distributed to
the Equity Members under this Agreement.
6.06. TAX MATTERS. The Members intend for the Company to be treated as
a partnership for federal income tax purposes and for EquityCo, MezzCo and OpBiz
to be treated either as partnerships or entities that are to be disregarded as
separate from their owners for U.S. federal income tax purposes. No Member shall
take any action contrary to the preceding sentence. ▇▇▇▇▇▇▇▇▇▇ shall be the "Tax
Matters Partner" under Section 6231 of the Code and shall have all authority of
a "Tax Matters Partner" under the Code. Subject to the foregoing, the ▇▇▇▇▇▇▇▇▇▇
Manager has the right and power and is authorized to make all applicable
elections, determinations and other decisions under the Code and applicable
Treasury Regulations, and under any tax code or act of a foreign jurisdiction
which is applicable to the Company or any similar election to be made by the
Company in respect of any Subsidiary, including the deductibility of a
particular item of expense and the positions to be taken on the Company's or any
Subsidiary's tax return, provided, that the "Tax Matters Partner" shall not make
any election that favors one Equity Member over another Equity Member without
the consent of the Equity Member that is being disadvantaged. The Managers may
designate a different Manager or Voting Member (who shall be a natural Person)
as the "Tax Matters Partner" from time to time.
9
6.07. SECTION 704(C). In accordance with Section 704(c) of the Code and
the applicable Treasury Regulations thereunder, income, gain, loss, deduction
and tax depreciation with respect to any property contributed to the capital of
the Company, or with respect to any property which has a Book Basis different
than its adjusted tax basis, shall, solely for federal income tax purposes, be
allocated among the Equity Members so as to take into account any variation
between the adjusted tax basis of such property to the Company and the Book
Basis of such property in accordance with Section 704(c) of the Code or Treasury
Regulations Section 1.704-1(b)(4), as applicable.
6.08. WITHHOLDING.
(a) AUTHORIZED WITHHOLDING. Each Member authorizes the Company to
withhold from or pay on behalf of or with respect to the Member any amount of
federal, state, local, or foreign taxes that the Managers determine the Company
may be required to withhold or pay to any Governmental Authority with respect to
any amount distributable or allocable to the Member pursuant to this Agreement.
Except as otherwise provided in this Agreement to the contrary, any amount
withheld from any distribution otherwise payable to a Member will be deemed to
have been distributed to the Member for purposes of this Agreement and paid by
such Member to the relevant taxing authority. Any amount paid on behalf of or
with respect to a Member other than amounts withheld from distributions
otherwise payable to a Member shall constitute a loan by the Company to the
Member, which loan shall be due within 15 days after repayment is demanded of
the Member in question by either Manager. Any amounts payable by a Member
hereunder shall bear interest at 18% per annum, such interest to accrue from the
date such amount is due (i.e., 15 days after demand by the Managers) until such
amount is paid in full. If there is an amount of withholding for federal, state,
local or foreign taxes required to be paid by the Company to any Governmental
Authority as a result of an allocation to a Member hereunder (the "Subject
Member") and the Company does not have sufficient cash available to make any
such payment, then the Subject Member shall, within 10 days of demand from the
Managers, pay to the Company any amount of such payment required to be paid to
the Governmental Authority. Any such payment to the Company by the Subject
Member shall not constitute a Capital Contribution.
(b) INDEMNIFICATION. None of the Company, any Subsidiary, any
Member or any Manager, any general or limited partner of any Member, any
shareholder or other holder of an equity interest of any Member, or any officer,
director or employee of any of the foregoing or any of their Affiliates (each an
"Indemnified Party"), shall be liable for any U.S. federal, state, local or
foreign taxes with respect to, on account of, or on behalf of any other Member's
interest in the Company or any Subsidiary or in any way attributable to such
other Member, such other Member's status, or the status of any direct or
indirect partner, shareholder or other beneficial owner of such other Member or
any of its Affiliates. Each Member (the "Indemnifying Party") agrees to
indemnify and hold harmless the Indemnified Parties from and against any U.S.
federal, state, local or foreign taxes that any Indemnified Party may be
required to withhold or pay to any Governmental Authority on account of, on
behalf of, or with respect to such Indemnifying Party's interest in the Company
or any Subsidiary or in any way attributable to such Indemnifying Party, such
Indemnifying Party's status or the status of any direct or indirect partner,
shareholder or other beneficial owner of such Indemnifying Party or any of its
or their Affiliates. The amount of any indemnification shall not constitute a
Capital Contribution.
10
VII. MANAGEMENT
7.01. MANAGEMENT.
(a) MANAGERS. Except as otherwise expressly provided in this
Agreement, the business and affairs of the Company shall be vested in and
controlled by managers, acting unanimously (the "Managers"). The Managers shall
have responsibility for establishing the policies and operating procedures with
respect to the business and affairs of the Company and for making all decisions
as to all matters which the Company has authority to perform. All decisions made
with respect to the management and control of the Company and approved by the
Managers (except for such decisions which by the express terms of this Agreement
require the approval of all the Members or any class of Members) shall be
binding on the Company and all Members. No Member has the authority to bind the
Company. No Manager shall have any obligation to make loans or Capital
Contributions to the Company.
(b) PROFESSIONAL ADVISORS. The Managers may, or may direct any
officer to, on behalf of the Company, employ, engage or retain any Persons
(including any Affiliate of any Member) to act as brokers, accountants,
attorneys, engineers, investment bankers or in such other capacities as the
Managers may determine are necessary or desirable in connection with the
Company's or any Subsidiary's business, and the Members and the Managers shall
be entitled to rely in good faith upon the recommendations, reports and advice
given them by any such Persons in the course of their professional engagement.
(c) NUMBER AND APPOINTMENT. There shall be two Managers who shall
be appointed by the Voting Members. Subject to applicable Gaming Laws,
▇▇▇▇▇▇▇▇▇▇ (or any Person or Persons to whom ▇▇▇▇▇▇▇▇▇▇ directly or indirectly
Transfers a majority of his Voting Interest in accordance with this Agreement)
shall have the right to appoint one Manager (the "▇▇▇▇▇▇▇▇▇▇ Manager"), and ▇▇▇▇
(or any Person or Persons to whom ▇▇▇▇ directly or indirectly Transfers a
majority of his Voting Interest in accordance with this Agreement) shall have
the right to appoint one Manager (the "▇▇▇▇ Manager"); provided, that the
▇▇▇▇▇▇▇▇▇▇ Manager must be reasonably acceptable to ▇▇▇▇ and the ▇▇▇▇ Manager
must be reasonably acceptable to ▇▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇▇▇ shall be the initial
▇▇▇▇▇▇▇▇▇▇ Manager and ▇▇▇▇ shall be the initial ▇▇▇▇ Manager. Each appointing
Voting Member may, by written notice to the others, remove any Manager appointed
by such Voting Member and appoint a substitute therefor; provided, such removal
and appointment does not and is not reasonably expected to cause a Gaming
Problem. Additionally, if any Manager is found to be an Unsuitable Person, the
applicable Voting Member shall immediately remove such Person as a Manager, and
such Person shall automatically cease to be a Manager.
(d) UNANIMOUS DECISIONS. The Managers will not have any authority
to authorize or approve or take any action with regard to any matter unless the
same has been approved by each Manager.
(e) MEETINGS. Regular meetings of the Managers may be held at such
times and places as shall be designated from time to time by resolution of the
Managers. Special meetings of the Managers may be called by or at the request of
any Manager. The person or persons
11
authorized to call the special meeting of the Managers may fix any reasonable
place within the continental United States as the place for holding the special
meeting of the Managers.
(f) NOTICE OF MEETINGS. Notice of any meeting of the Managers
shall be given no fewer than five Business Days and no more than 20 Business
Days prior to the date of the meeting. Notices shall be delivered in the manner
set forth in Section 13.03 hereof. The attendance of a Manager at a meeting of
the Managers shall constitute a waiver of notice of such meeting, except where
the Manager attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not properly called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Managers need be specified in the notice or
waiver of notice of such meeting.
(g) ACTION BY WRITTEN CONSENT. Any action required to be taken at
a meeting of the Managers or any other action which may be taken at a meeting of
the Managers may be taken without a meeting through a written consent setting
forth the actions so taken, signed by each Manager. Any such consent shall have
the same effect as a unanimous vote of the Managers at a properly called and
constituted meeting of the Managers.
(h) CONFERENCE TELEPHONE MEETINGS. The Managers may participate in
and act at all meetings of the Managers through the use of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such meetings
shall constitute attendance in person at the meeting of the Person or Persons so
participating.
(i) NO REMUNERATION. Except as otherwise approved by the Voting
Members, no Manager shall be entitled to receive any salary or any remuneration
or expense reimbursement from the Company for his services as a Manager. No
Member nor any member, partner, shareholder, officer, director, employee, agent
or representative of any Member shall receive any salary or other remuneration
for its services rendered pursuant to this Agreement.
7.02. OFFICERS.
(a) APPOINTMENT. Subject to applicable Gaming Law, the Managers
shall appoint a Chief Executive Officer, a Chief Financial Officer, and a
Controller, and may appoint a treasurer, a secretary, and such other officers of
the Company as they see fit, each of whom shall have authority and perform such
duties as are set forth in this Agreement and as the Managers may from time to
time specify. Each officer shall hold office until he or she shall resign or die
or shall be removed or otherwise disqualified to serve. If any Person appointed
to serve as an officer is found to have a Gaming Problem or be an Unsuitable
Person, the Managers shall immediately remove such Person as an officer and such
Person shall automatically cease to be an officer. A Manager may hold any
office, and one Person may hold more than one office.
(b) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the chief executive officer of the Company. The Chief Executive Officer shall
generally and actively manage the business of the Company, shall see that all
orders and resolutions of the Managers are carried into effect, and shall
perform all duties as may from time to time be assigned by the
12
Managers. The Chief Executive Officer shall be the "principal executive officer"
of the Company for purposes of the Securities Act and the Exchange Act.
(c) PRESIDENT. The Managers may designate the Chief Executive
Officer as the President of the Company or appoint a separate Person as
President. The Company need not have a President if a Chief Executive Officer
has been appointed and continues to hold such office. If appointed separately
the President will perform such duties and possess such powers as are assigned
from time to time by the Chief Executive Officer or the Managers.
(d) CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
oversee the Company's financial affairs (including preparation of the Company's
financial statement) and perform such other duties and possess such powers as
may be assigned from time to time by the Chief Executive Officer or the
Managers. The Chief Financial Officer shall be the "principal financial officer"
of the Company for purposes of the Securities Act and the Exchange Act.
(e) CONTROLLER. The Controller shall oversee the internal
accounting and audit functions of the Company and shall perform such duties and
possess such powers as from time to time may be assigned by the Chief Financial
Officer, the Chief Executive Officer or the Managers. The Controller shall be
the "principal accounting officer" of the Company for purposes of the Securities
Act and the Exchange Act.
(f) VICE PRESIDENTS. The Company may have one or more vice
presidents, and any vice president may be designated as an "executive" or
"senior" vice president. The vice presidents, if any, shall perform such duties
and possess such powers as from time to time may be assigned to them by the
Managers or the Chief Executive Officer.
(g) SECRETARY. The Secretary shall perform such duties and shall
have such powers as may from time to time be assigned by the Managers or the
Chief Executive Officer. In addition, the secretary shall perform such duties
and have such powers as are incident to the office of secretary including,
without limitation, the duty and power to give notice of all meetings of Members
and Managers, the preparation and maintenance of minutes of meetings of Members
and Managers and other records and information required to be kept by the
Company and for authenticating records of the Company, and to be custodian of
the Company records.
(h) TREASURER. The Treasurer shall perform such duties and shall
have such powers as may from time to time be assigned by the Managers or the
Chief Executive Officer. In addition, the Treasurer shall perform such duties
and have such powers as are incident to the office of treasurer including,
without limitation, the duty and power to keep and be responsible for all funds
and securities of the Company, to deposit funds of the Company depositories
selected in accordance with this Agreement, to disburse such funds as directed
by the Managers subject to the terms and conditions of this Agreement, making
proper accounts thereof and to render as required by the Managers statements of
all these transactions taken as Treasurer.
(i) ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, if any, shall perform such duties as shall
be assigned to them by the Secretary or the Treasurer, respectively, or by the
Chief Executive Officer or the Managers. In the absence, inability or refusal to
act of the Secretary or the Treasurer, respectively, the assistant
13
secretaries or assistant treasurers, respectively, in the order designated by
the Managers, or in the absence of any designation, then in the order of their
election or appointment, shall perform the duties and exercise the powers of the
Secretary or Treasurer, as the case may be.
(j) REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the Managers at any regular or special meeting, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Any officer may resign at any time upon written notice to the
Company.
(k) VACANCIES. A vacancy in the office of any officer, whether as
a result of death, resignation, removal, disqualification or any other cause,
may be filled by the Managers at any regular or special meeting.
(l) COMPENSATION. Officers and other employees of the Company
shall receive such compensation as shall be determined by the Managers, adopted
in advance or after the rendering of the services, or by employment contracts
approved by the Managers. Election or appointment of any officer or any other
employee shall not of itself create contract rights or any rights to
compensation hereunder.
7.03. DUTIES AND CONFLICTS.
(a) GENERAL. The Managers shall devote such time to the Company's
business as they deem to be necessary or desirable in connection with their
respective duties and responsibilities hereunder.
(b) CONFLICTS AND COMPETITION. Each of the Members recognizes that
each of the Managers and the other Members and their respective members,
partners, shareholders, officers, directors, employees, agents, representatives
and Affiliates, have or may have in the future other business interests,
activities and investments, some of which may be in conflict or competition with
the business of the Company and/or one or more of the Subsidiaries and that each
of the Managers and the other Members and their respective members, partners,
shareholders, officers and directors, employees, agents, representatives and
Affiliates are entitled to carry on such other business interests, activities
and investments. Except as otherwise agreed to in writing by such Member or such
Member's partners, shareholders, officers and directors, employees, agents,
representatives and Affiliates, (i) each of the Managers and the Members and
their respective partners, shareholders, officers and directors, employees,
agents, representatives and Affiliates may engage in or possess an interest in
any other business or venture of any kind, independently or with others, (ii)
each of the Managers and the Members and their respective partners,
shareholders, officers and directors, employees, agents, representatives and
Affiliates may engage in any such activities, whether or not in competition with
the Company or any Subsidiary without any obligation to offer any interest in
such activities to the Company or to the other Members, and (iii) to the maximum
extent permitted by applicable law, each Member hereby waives any claim or cause
of action against the Managers or the other Members or any of their respective
Affiliates, agents and representatives for any breach of any fiduciary duty to
such Member or the Company by such Person, including as may result from a
conflict of interest between the Company and such Person. Each Member
acknowledges and agrees that in the event of any such conflict of interest, each
such Person may, in the absence of bad faith, act in its
14
own best interest or the best interest of such Manager, Member, Affiliate, agent
or representative. The Managers shall not be obligated to recommend or take any
action as Managers that prefers the interests of the Company or the Members over
the interests of the Managers or their respective Affiliates, agents or
representatives and the Company and the Members hereby waive the fiduciary duty,
if any, to the Company and the Members, including in the event of any such
conflict of interest. Neither the Company nor the other Members nor their
respective partners, shareholders, officers and directors, employees, agents,
representatives and Affiliates will have any right, by virtue of this Agreement,
in or to such activities, or the income or profits derived therefrom, and the
pursuit of such activities, even if competitive with the business of the Company
or any Subsidiary, will not be deemed wrongful or improper.
(c) Whenever in this Agreement the Managers are permitted or
required to take any action or to make a decision in their "sole discretion" or
"discretion," or under a grant of similar authority or latitude, the Managers
shall be entitled to consider such interests and factors as they deem
appropriate, provided that the Managers shall act in good faith.
(d) Whenever in this Agreement the Managers are permitted or
required to take any action or to make a decision in "good faith" or under
another express standard, the Managers shall act under such express standard
and, to the extent permitted by applicable law, shall not be subject to any
other or different standards imposed by this Agreement and, notwithstanding
anything contained herein to the contrary, so long as the Managers act in good
faith, the resolution, action or terms so made, taken or provided by the
Managers shall not constitute a breach of this Agreement or impose liability
upon the Managers or any of their Affiliates, agents or representatives.
7.04. EXPENSES; ADVANCES. (a) Except as otherwise provided in this
Agreement or in any of the agreements described in and approved in accordance
with the terms of this Agreement and except for any costs to be borne by any
third party under any agreement with the Company, the Company shall be
responsible for paying, and shall pay, all direct costs and expenses related to
the organization, operation or liquidation of the Company. If any such costs and
expenses are or have been paid by any Member or any Affiliate of a Member, such
Member shall be entitled to be reimbursed for such payment so long as such
payment is reasonably necessary for Company organization, business or
operations, such Member provides the Company with appropriate documentation
evidencing such costs or expenses, and the Managers approve such payment.
(b) If OpBiz receives the ▇▇▇▇▇▇▇ Money Deposit (as defined in the
Purchase Agreement), the Company will cause (directly or indirectly) OpBiz to
distribute such amount to MezzCo and will cause (directly or indirectly) MezzCo
to distribute such amount to EquityCo and will cause EquityCo to distribute such
amount to its members as provided in the EquityCo Operating Agreement. The
Company shall pay any amounts received by it in respect of the ▇▇▇▇▇▇▇ Money
Deposit to the Equity Members (or their Affiliates) pro rata in proportion to
the respective amounts advanced (plus accrued interest thereon) by the Equity
Members or their Affiliates to fund the ▇▇▇▇▇▇▇ Money Deposit.
15
7.05. AFFILIATE TRANSACTIONS. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with an Affiliate of any
Member unless the material terms of the transaction, including any payments,
fees, commissions, reimbursements or other forms of consideration paid or
payable to such Member, are disclosed in writing to and approved by the
Managers.
VIII. BOOKS AND RECORDS
8.01. BOOKS AND RECORDS. The Company shall maintain, or cause to be
maintained, in a manner customary and consistent with good accounting
principles, practices and procedures, a comprehensive system of office records,
books and accounts in which shall be entered fully and accurately each and every
financial transaction with respect to the operations of the Company and
ownership and operation of any property. Without limiting the foregoing, the
Company shall maintain a current list of the full name and last known business
address of each Member in alphabetical order, a copy of the filed Articles of
Organization and all amendments thereto, together with executed copies of any
powers of attorney pursuant to which any document has been executed, and a copy
of this Agreement and all amendments thereto. Bills, receipts and vouchers shall
be maintained on file by the Company. The Company shall maintain said books and
accounts in a safe manner and separate from any records not having to do
directly with the Company or any property of the Company. Such books and records
of account shall be prepared and maintained at the principal place of business
of the Company or such other place or places as may from time to time be
determined by the Managers. Each Member or its duly authorized representative
shall have the right to inspect, examine and copy such books and records of
account at the Company's office during reasonable business hours. A reasonable
charge for copying books and records may be charged by the Company.
8.02. ACCOUNTING AND FISCAL YEAR. The books of the Company shall be
kept on the accrual basis in accordance with United States generally accepted
accounting principles, practices and procedures ("GAAP") and on a tax basis and
the Company shall report its operations for tax purposes on the accrual method.
The fiscal year and U.S. tax year of the Company shall end on December 31 of
each year, unless a different tax year shall be required by the Code or
established by the Managers.
8.03. REPORTS.
(a) GENERAL. The Company will furnish to each Member copies of all
reports required to be furnished to any lender of the Company or any Subsidiary
and any reports furnished to EquityCo, MezzCo, OpBiz, or the Company under the
Hotel Management Agreement.
(b) TAX REPORTS. The Company will furnish or use its reasonable
best efforts to cause to be furnished to each Member, or its tax advisors, not
later than March 15 after the end of each fiscal year of the Company, sufficient
information on the consolidated profit and loss of the Company that will enable
the tax advisors of each Member to prepare all required tax and other reports
needed to meet such Member's own reporting requirements. All schedules of book
income shall be prepared on a GAAP basis. Promptly after the end of each fiscal
year, if requested by any Member, the Company will use its reasonable best
efforts to cause the
16
Company Accountant to prepare and deliver to each Member a report setting forth
in sufficient detail all such additional information and data with respect to
business transactions effected by or involving the Company during the fiscal
year as will enable the Company and each Member to timely prepare its U.S.
federal, state and local income tax returns in accordance with applicable laws,
rules and regulations.
(c) TAX RETURNS. The Company will use its reasonable best efforts
to cause the Company Accountant to prepare all U.S. and non-U.S. federal, state
and local tax returns required of the Company with respect to each calendar year
and to submit those returns to the Members for their approval not later than
March 1st of the year following such calendar year, and if requested, the
Company shall make such changes as are reasonably requested. After such returns
have been approved by the Managers, the Company shall file the tax returns. If
the Managers shall not have approved any such tax return prior to the date
required for the filing thereof (including any extensions granted), the Company
will timely obtain an extension of such date to the extent such an extension is
available.
(d) OTHER. The Company shall prepare or use its reasonable best
efforts to cause to be prepared such additional financial reports, statements
and other information as the Managers may determine are appropriate. All
decisions as to accounting principles shall be made by the Managers subject to
the provisions of this Agreement.
8.04. THE COMPANY ACCOUNTANT. The Company shall retain as the regular
accountant and auditor for the Company (the "Company Accountant") any
nationally-recognized U.S. accounting firm approved by the Managers.
8.05. RESERVES. The Managers may, in their discretion and subject to
such conditions as they shall determine, establish reasonable reserves for such
purposes and requirements as they may deem appropriate.
IX. TRANSFER OF INTERESTS
9.01. GENERAL. (a) No Member may Transfer any of its Interests except
as expressly permitted, contemplated or required by this Agreement, including
Section 9.04.
(b) Each Member hereby acknowledges the reasonableness of the
restriction on the Transfer of Interests imposed by this Agreement in view of
the Company's business purposes and the relationship of the Members.
Accordingly, the restrictions on Transfer set forth herein shall be specifically
enforceable.
9.02. RESTRICTIONS ON TRANSFER OF EQUITY INTERESTS.
(a) RIGHT OF FIRST OFFER/REFUSAL.
(i) Subject to Sections 9.04, 9.05 and 9.06, any Equity
Member (the "Seller") may Transfer any of its Equity Interests (the
"Offered Interests"), provided that (x) the Seller complies with this
Section 9.02(a) and Section 9.02(b), (y) the Transfer is permitted by
and made in compliance with Section 9.02(c) or (z) the Transfer is
permitted by and made in compliance with Section 9.02(e). With respect
to any such
17
Transfer, other than a Transfer permitted by and made in compliance
with Section 9.02(c) or 9.02(e), the Seller, prior to soliciting,
pursuing or accepting any offer from any Person, shall send a written
notice (the "ROFO Notice") to the other Equity Members offering such
other Equity Members the right to purchase the Offered Interests. The
ROFO Notice shall set forth, at a minimum, the amount of Offered
Interests and a minimum price at which the Seller is willing to sell
the Offered Interests. The date that the ROFO Notice is first sent to
the other Equity Members by the Seller is the "Notice Date." For a
period of 10 days following the Notice Date (the "ROFO Period"), each
other Equity Member may purchase a percentage (the "Applicable
Percentage") of the Offered Interests equal to such Equity Member's pro
rata portion of the Percentage Interests of all Equity Members other
than the Seller. If the other Equity Members do not purchase the
Offered Interests within the ROFO Period, the Equity Members that have
agreed to purchase Offered Interests may within 5 days of the end of
the ROFO Period (the "Clean-up Period"), purchase any or all unsold
Offered Interests on a pro rata basis in proportion to the Percentage
Interests of Equity Interests owned by them. If any Offered Interests
remain unsold thereafter, the Seller may, for a period of 90 days from
the end of the Clean-up Period (the "Permitted Sale Period"), solicit
and pursue offers for any unsold Offered Interests, but only if such
offers are at or above the stated offer price in the ROFO Notice.
(ii) Any Equity Member who, having followed the procedure
in Section 9.02(a)(i), shall subsequently receive a bona fide offer
from any Person (the "Offeror") for the purchase (or other receipt of a
Transfer) during the Permitted Sale Period of all or any portion of the
Offered Interests shall, prior to accepting such offer, provide written
notice (the "ROFR Notice") thereof to each other Equity Member, which
notice shall set forth the terms and conditions of the offer so
received, including the purchase price and the identity of the Offeror.
If any portion of the purchase price offered by the Offeror consists of
consideration other than cash or a promissory note, the ROFR Notice
shall include a good faith estimate of the fair market value of such
non-cash consideration, prepared by the Equity Member that received the
offer from the Offeror. If any of the other Equity Members disagrees
with the estimate of the fair market value of such non-cash
consideration, such Equity Member shall deliver a notice to the Company
and the other Equity Members to that effect within 10 days of receipt
of the ROFR Notice, and the Company shall thereafter retain an
independent appraiser who will determine such fair market value. The
independent appraiser shall be selected by the Managers. If the
Managers cannot agree on an appraiser, each Manager shall select an
appraiser and the two appraisers together shall select a third, which
appraiser shall determine the fair market value of such non-cash
consideration and which determination shall be binding on the Equity
Members. In any event the appraisal shall be completed within 10 days
of the date on which the notice disputing the fair market value of the
non-cash consideration was delivered to the Company and the non-selling
Equity Members. Following the delivery of the ROFR Notice to the other
Equity Members, each other Equity Member may purchase its Applicable
Percentage of the Offered Interests during the 15 days following the
date on which the ROFR Notice was first sent, on the terms set forth in
the ROFR Notice. To the extent an Equity Member shall fail to purchase
its Applicable Percentage of the Offered Interests prior to the
expiration of such 15-day period, the Seller shall notify the Equity
Members that have agreed to purchase Equity
18
Interests ("Accepting Members") pursuant to this Section 9.02(a)(ii) of
that fact and the Accepting Members shall have 5 Business Days to agree
to purchase such Equity Interests. Any such purchases shall be made on
a pro rata basis in proportion to the Percentage Interests of the
Accepting Members (and the foregoing procedure shall be repeated in
respect of any Equity Interests not purchased until all Accepting
Members have had an opportunity to purchase any remaining Equity
Interests). This Section 9.02(a)(ii) shall not apply to any Transfer
permitted by and made in compliance with Sections 9.02(c) or 9.02(e).
(iii) Subject to Sections 9.01, 9.02(b), 9.04, 9.05 and
9.06, if all or any of the Offered Interests shall remain unsold after
completion of the procedures set forth in Sections 9.02(a)(i) and (ii),
the Seller may sell such remaining Offered Interests to the Offeror
within six months of the completion of such procedures on the terms set
forth in the ROFR Notice.
(iv) To the extent any of the Offered Interests are not
sold in accordance with the foregoing procedures, the Equity Members
shall continue to have a right of first offer/refusal under Section
9.02(a) with respect to any proposed offer or Transfer of Equity
Interests to any Person which is subsequently proposed by such Seller.
(v) The closing of a purchase by an Equity Member under
this Section 9.02(a) shall occur as soon as practicable following the
completion of the applicable waiting period and the receipt of all
approvals required by the Gaming Laws. At such closing the Seller and
the relevant Equity Members shall execute an assignment and assumption
agreement and any other instruments and documents as may be reasonably
required to effectuate the Transfer of such Equity Interests, subject
to the terms and conditions of this Agreement. Any Transfer of Equity
Interests to any Person which does not comply with the provisions of
this Section 9.02(a), other than a Transfer of Equity Interests
expressly permitted by and made in compliance with Section 9.02(c) or
9.02(e) shall be null and void and of no effect whatsoever.
(b) TAG-ALONG RIGHTS.
(i) Subject to the other provisions of this Article IX,
if any Equity Member (the "Selling Equity Member") proposes to Transfer
any of its Equity Interest (a "Tag-Along Sale"), other than in a
Transfer permitted by and made in compliance with Section 9.02(c) or
9.02(e), the other Equity Members ("Tag-Along Equity Members") may
require the Selling Equity Member to sell or otherwise Transfer in such
Tag-Along Sale an amount of such Tag-Along Equity Member's Equity
Interest (and the Selling Equity Member will, to the extent necessary,
reduce the amount of the Selling Equity Member's Equity Interest
subject to the Tag-Along Sale by a corresponding amount) equal to the
product of (x) the Percentage Interest of such Selling Equity Member to
be Transferred pursuant to the Tag-Along Sale and (y) the Percentage
Interest of the applicable Tag-Along Equity Member, for the same
consideration and otherwise on the same terms and conditions upon which
the Selling Equity Member proposes to Transfer its Equity Interest. The
consideration received in connection with such Tag-Along Sale shall be
allocated among the Equity Members in the ratio that each Equity
Member's
19
transferred Percentage Interest bears to the total Percentage Interest
Transferred by all Equity Members, provided that if consideration from
a Tag-Along Sale is received and allocated at any time before the
Company makes the allocations required by Section 6.01, such
consideration shall be allocated among the Equity Members as if the
allocations required by Section 6.01 had been made immediately prior to
the completion of the Tag-Along Sale.
(ii) In connection with any proposed Tag-Along Sale, the
Selling Equity Member shall deliver a written notice to the Tag-Along
Equity Members (x) setting forth the terms of any Tag-Along Sale and
(y) offering each Tag-Along Equity Member the right (the "Tag-Along
Right") to have such Tag-Along Equity Member's Equity Interest included
in such Tag-Along Sale in accordance with Section 9.02(b)(i), together
with all documents required to be executed by such Tag-Along Equity
Member in order to include the Tag-Along Equity Member's Equity
Interest in such Tag-Along Sale. If a Tag-Along Equity Member exercises
its Tag-Along Rights in connection with any Tag-Along Sale, such
Tag-Along Equity Member shall execute and deliver to the Selling Equity
Member, within 10 days from and including the date of the Selling
Equity Member's notice, the documents previously furnished to the
Tag-Along Equity Member for execution in connection with the Tag-Along
Sale. Delivery by the Tag-Along Equity Member of such documents shall
constitute an irrevocable exercise by the Tag-Along Equity Member of
its Tag-Along Rights with respect to the Tag-Along Sale.
(iii) The Selling Equity Member shall have 180 days from
the date of its notice referred to in Section 9.02(b)(ii) to consummate
any Tag-Along Sale and, promptly after such consummation, shall notify
the Tag-Along Equity Member to that effect, shall furnish evidence of
such Tag-Along Sale (including the date and the time of the Tag-Along
Sale) and of the terms thereof as the Tag-Along Equity Member may
reasonably request and shall promptly (and in any event within 15 days
following the consummation of such Tag-Along Sale) cause to be remitted
to the Tag-Along Equity Member the proceeds attributable to the sale of
the Tag-Along Equity Member's Interest. If such Tag-Along Sale is not
completed within such time period, then all of the restrictions on sale
or other disposition contained herein with respect to the Interests
shall again be in effect.
(iv) Notwithstanding anything in this Section 9.02(b) to
the contrary, no Member will have any liability to any other Member if
any sale of Equity Interests pursuant to this Section 9.02(b) is not
consummated for whatever reason other than a failure to comply with the
foregoing provisions. It is understood that the Selling Equity Member,
in its sole discretion, shall determine whether to effect a Sale to any
third party pursuant to this Section 9.02(b).
(c) TRANSFERS TO PERMITTED TRANSFEREES. Subject to Sections 9.04,
9.05 and 9.06, an Equity Member may Transfer its Equity Interests, or any part
thereof, at any time to a Permitted Transferee, and shall not be required to
comply with the procedures set forth in Sections 9.02(a) and (b) in respect of
such Transfers. In the case of a Transfer to a Person described in clauses (a),
(b) or (e) of the definition of Permitted Transferee, the provisions of this
Section 9.03(c) will only apply for so long as such transferee qualifies as a
Permitted Transferee
20
thereunder, and the transferring Equity Member will be prohibited from engaging
in any transaction or series of transactions without the prior written consent
of the other Equity Members if, after giving effect to such transaction(s), any
Equity Interests would no longer be held or owned by a Permitted Transferee.
(d) TRANSFER OF OWNERSHIP INTERESTS IN MEMBERS. The provisions of
Sections 9.02(a) and (b) shall not apply to any Transfer or issuance of any
ownership interest (an "Upstream Ownership Interest") in an Upstream Owner;
provided, that no Upstream Ownership Interest shall be Transferred or issued
until all approvals required by the Gaming Laws are obtained; and provided,
further, that any Transfer of Upstream Ownership Interests that results in
either initial Voting Member (or if Voting Interests have been Transferred
pursuant to this Agreement, any successor to an initial Voting Member) no longer
owning and controlling, directly or indirectly, a majority of the voting power
of such Upstream Owner, or having the ability to appoint or elect at least a
majority of the board of directors or other managing body of such Upstream
Owner, shall be prohibited without the prior written consent of the other
initial Voting Member.
(e) INVOLUNTARY TRANSFERS. Nothing in this Section 9.02 shall
restrict the Transfer of Equity Interests to the heirs at law or the
testamentary beneficiaries of an Equity Member who is a natural Person upon his
death, to the guardian of an Equity Member (in his capacity as such) who is a
natural Person and has become incapacitated, or to the former spouse of an
Equity Member who is a natural Person upon his divorce, provided, that the
provisions of Sections 9.04, 9.05 and 9.06 shall be applicable to any such
Transfer.
(f) SUBSEQUENT TRANSFERS OF EQUITY INTERESTS. The provisions of
this Section 9.02 shall apply to subsequent Transfers of Equity Interests
acquired by any Person who acquires ownership of any Equity Interests in
compliance with the provisions of this Section 9.02.
9.03. RESTRICTIONS ON TRANSFER OF VOTING INTERESTS. (a) Voting
Interests may not be Transferred other than (i) with the consent of each
non-transferring Voting Member (which shall not be unreasonably withheld,
delayed or conditioned), (ii) in connection with the Transfer of Equity
Interests by an Equity Member that is an Affiliate of a Voting Member, provided
that the percentage of the Voting Interest Transferred does not exceed the
percentage of the Equity Interests being Transferred, (iii) to the heirs at law
or the testamentary beneficiaries of a Voting Member upon his death, (iv) to the
guardian of a Voting Member (in his capacity as such) who has become
incapacitated, (v) to the former spouse of a Voting Member upon his divorce,
(vi) upon the occurrence of a Gaming Problem with respect to a Voting Member,
and (vii) to a Permitted Transferee. If a Voting Member proposes to Transfer
Voting Interests under clause (ii) above in connection with a sale of less than
all of its Equity Interests, or under clause (iv) above, such transferee shall
vote the transferred Voting Interests in the same manner as the transferring
Voting Member. If those Voting Members do not vote their Voting Interests as
required by the preceding sentence, the transferee's Voting Interests will be
disregarded in connection with the matter subject to such vote. A Transfer of
Voting Interests pursuant to clause (vi) above shall be made according to
Section 12.02(b)(i) below. Any Transfer of Voting Interests permitted under this
Section 9.03(a) shall be made only in compliance with the provisions of Sections
9.04, 9.05 and 9.06.
21
(b) Notwithstanding any provision of Section 9.03(a) to the
contrary, any proposed transferee of Voting Interests shall (i) either (A) have
already obtained all required licenses and approvals under the Nevada Act or (B)
be reasonably likely to be able to obtain any such licenses prior to the
effectiveness of such Transfer, and (ii) be reasonably acceptable to the
non-transferring Voting Member(s).
(c) SUBSEQUENT TRANSFERS OF VOTING INTERESTS. The provisions of
this Section 9.03 shall apply to subsequent Transfers of Voting Interests
acquired by any Person who acquires ownership of any Voting Interests in
compliance with the provisions of this Section 9.03.
9.04. GAMING LAWS. Notwithstanding any other provision of this
Agreement, no Interests or other ownership interest in the Company, and no
Upstream Ownership Interest, shall be issued or Transferred in any manner
whatsoever except in compliance with, and upon receipt of all approvals required
by, the applicable provisions of the Gaming Laws.
9.05. ADDITIONAL PROVISIONS APPLICABLE TO TRANSFERS OF INTERESTS.
Notwithstanding anything to the contrary contained in this Agreement, no
transferee of all or any portion of any Interest shall be admitted as a Member
unless (a) such Interest is transferred in compliance with the applicable
provisions of this Agreement, (b) the transferor shall have provided each of the
other Members with written notice of any Transfer of any Interest (with
sufficient details to give effect to the provisions of this Agreement, including
the Percentage Interest or the percentage of the Voting Interest transferred),
(c) such Transfer, other than a Transfer effected in accordance with Section
9.02(a), (b), (c) or (e), clause (i) through (vii) of Section 9.03, Section 9.09
or Section 12.02(b)(ii), shall have been approved in writing by the requisite
Members (which consent may be withheld in their sole and absolute discretion),
and (d) such transferee shall have executed and delivered to the Company such
instruments as the Managers reasonably deem necessary or desirable to effectuate
the admission of such transferee as a Member and to confirm the agreement of
such transferee to be bound by all of the terms, provisions and obligations of
this Agreement with respect to such Interest. At the request of the Company,
each such transferee shall also cause to be delivered to the Company, at the
transferee's sole cost and expense, a favorable opinion of legal counsel
reasonably acceptable to the Company, to the effect that (i) such transferee has
the legal right, power and capacity to own the Interest proposed to be
transferred, (ii) such Transfer does not violate any provision of any loan
agreement of the Company or any of its Subsidiaries or any mortgage, deed of
trust or other security instrument encumbering all or any portion of the
Property, and (iii) such Transfer does not violate any U.S. federal or state
securities laws and will not cause the Company to become subject to the
Investment Company Act of 1940, as amended or cause the Company to be taxable as
a corporation under the Code. As promptly as practicable after the admission of
any Person as a Member, the books and records of the Company shall be changed to
reflect such admission. All reasonable costs and expenses incurred by the
Company in connection with any Transfer of any Interest and, if applicable, the
admission of any transferee as a Member shall be paid by such transferee.
9.06. FURTHER RESTRICTION ON TRANSFER OF INTERESTS. In addition to
the other restrictions set forth in this Agreement, no Member may in any way
Transfer all or any part of such Member's Interests, if (i) such Transfer would
cause a default or event of default under any borrowing agreement or arrangement
of the Company or any Subsidiary, or (ii) such Transfer would violate any U.S.
federal or state securities laws or would cause the Company to become
22
subject to the Investment Company Act of 1940, as amended, or (iii) such
Transfer could cause the Company to be taxable as a corporation under the Code.
9.07. SECTION 754 ELECTION. In the event of a Transfer of all or
part of the Interest of a Member, at the request of the transferee or if in the
best interests of the Company (as determined by the Managers), the Company shall
elect pursuant to Section 754 of the Code to adjust the basis of any property of
the Company as provided by Sections 734 and 743 of the Code, and any cost of
such election and cost of administering or accounting for such election shall be
at the sole cost and expense of the requesting transferee.
9.08. ISSUANCE OF ADDITIONAL INTERESTS. Subject to the unanimous
consent of the Managers and the provisions of Section 9.04, the Company is
authorized, in its sole discretion, to issue, for any Company purpose, at any
time or from time to time, additional Interests to the Members or to other
Persons for such consideration and on such terms and conditions as established
by the Managers and as otherwise set forth herein. The Managers are authorized
and directed to take all actions that they deem necessary or appropriate in
connection with each issuance of Interests pursuant to this Section 9.08 and to
amend this Agreement in any manner that it deems necessary or appropriate for
each such issuance, to admit additional Members in connection therewith and
specify the relative rights, powers and duties of the holders of the Interests
so issued.
9.09. EXPIRATION OF CERTAIN TRANSFER RESTRICTIONS. The provisions of
Sections 9.02(a), (b) and (d) shall expire upon the earlier of (x) the date that
the indebtedness of OpBiz under the Credit Agreement is paid in full, (y) the
initial sale by the Company of any of its equity securities to the public
pursuant to an effective registration statement under the Securities Act (other
than pursuant to a registration statement on Form S-4 or S-8 or any similar or
successor form) in a firmly underwritten offering by (or managed by) a
nationally recognized investment bank, or (z) the seventh anniversary of the
Closing Date.
X. EXCULPATION AND INDEMNIFICATION
10.01. EXCULPATION. No Member, Manager, officer or employee of the
Company, general or limited partner of any Member, shareholder or member or
other holder of an interest of any Member or officer, director or employee of
any of the foregoing or any of their Affiliates, shall be liable to the Company
or to any other Member for monetary damages for any losses, claims, damages or
liabilities arising from any act or omission performed or omitted by it and
arising out of or in connection with this Agreement or the Company's business or
affairs, including any action or omission constituting a breach of any fiduciary
duty; provided, however, such act or omission was taken in good faith, was
reasonably believed to be in, or not opposed to, the best interests of the
Company and was within the scope of authority granted to such Person, and was
not attributable in whole or in part to such Member's or Person's fraud,
intentional misconduct or knowing violation of law. No general or limited
partner of any Member, shareholder, member or other holder of an equity interest
in such Member or officer, director or employee of any of the foregoing or any
of their Affiliates shall be personally liable for the performance of any such
Member's obligations under this Agreement, but the foregoing shall not relieve
any partner or member of any Member from its obligations to such Member.
23
10.02. INDEMNIFICATION. (a) The Company shall, to the full extent
permitted by applicable law, indemnify, defend and hold harmless any Member, any
Manager and any officer or employee of the Company (and any of their respective
officers, directors, managers, employees and agents) who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he, she or it is or was a Member, Manager, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a manager, member, employee or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise,
including any Subsidiary (collectively, the "Indemnitee"), from and against
expenses (including attorneys' fees and expenses), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such Person in connection
with such claim, action, suit or proceeding if such Person acted in good faith
and in a manner such Person reasonably believed to be in, or not opposed to, the
best interests of the Company, and, with respect to any criminal sanction or
proceeding, had no reasonable cause to believe that his, her or its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person did not act in good
faith and in a manner which he, she or it reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his, her or its
conduct was unlawful. Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall be ultimately
determined by a court of competent jurisdiction from which no further appeal may
be taken or the time for appeal has lapsed that such Person is not entitled to
be indemnified by the Company pursuant to the terms and conditions of this
Section 10.02. If for any reason (other than the fraud, intentional misconduct
or knowing violation of law by such Indemnitee) the foregoing indemnification is
unavailable to such Indemnitee, or insufficient to hold it harmless, then the
Company shall contribute to the amount paid or payable by such Indemnitee as a
result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and such Indemnitee on the other hand or, if such allocation is not
permitted by applicable law, to reflect not only the relative benefits referred
to above but also any other relevant equitable considerations. Any indemnity
under this Section 10.02 shall be paid solely out of and to the extent of
Company assets and shall not be a personal obligation of any Member. Unless
indemnification is ordered by a court of competent jurisdiction, the
determination whether an Indemnitee met the standard set forth in this Section
10.02 shall be made by the Managers.
(b) The Company and the Voting Members shall be indemnified and
held harmless by each Equity Member from and against any and all claims,
demands, liabilities, costs, damages, expenses (including attorney's fees and
expenses) and causes of action of any nature whatsoever that do not arise out of
(i) any act performed by or on behalf of any such Voting Member or its
designated Manager which is not performed in good faith or is not reasonably
believed by such Voting Member or its designated Manager to be in, or not
opposed to, the best interest of the Company and within the scope of authority
conferred upon such Voting Member or its designated Manager under this
Agreement, (ii) the fraud, intentional misconduct or knowing violation of law of
such Voting Member or its designated Manager, or (iii) the breach
24
by the Company of any of its representations and warranties made under any
purchase, loan or other agreement entered into by the Company, which breach was
the result of information or matters relating to such Voting Member.
(c) The Managers may purchase and maintain insurance or make other
financial arrangements on behalf of any current or former Member, Manager,
officer of the Company or any other employee or agent of the Company who was
serving at the request of the Company as a manager, member, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or other enterprise for any liability asserted against him or it and
liability and expenses incurred by him or it in his or its capacity as manager,
member, employee or agent, or arising out of his or it status as such, whether
or not the Company has the authority to indemnify him or it against such
liability and expenses.
(d) The provisions of this Section 10.02 shall survive the
dissolution of the Company.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the obligations of the Company or any Member under this Section 10.02
to an Indemnitee shall inure to the benefit of such Indemnitee, its Affiliates
and their respective members, directors, officers, employees, agents and
Affiliates and any successors, assigns, heirs and personal representatives of
such Persons.
XI. DISSOLUTION AND TERMINATION
11.01. DISSOLUTION. The Company shall be dissolved and its business
wound up upon the earliest to occur of any of the following events:
(a) the sale, condemnation or other disposition of all or
substantially all of the assets of the Company and the receipt of all
cash consideration therefor;
(b) the entry of a decree of judicial dissolution
pursuant to Section 86.495 of the NRS;
(c) the written determination of the Voting Members to
terminate the Company; or
(d) the termination of the Purchase Agreement before the
Closing Date.
Without limitation on, but subject to, the other provisions hereof, (a) the
assignment of all or any part of a Member's Interest permitted hereunder will
not cause the Company to be dissolved or its affairs to be wound up and (b) the
death, retirement, resignation, expulsion, bankruptcy, dissolution or
disassociation of a Member or any other event affecting a Member will not
terminate the status of the Person as a Member or cause the Company to be
dissolved or its affairs to be wound up. Except as otherwise specifically
provided in this Agreement, each Member agrees that, without the consent of the
other Members, no Member may withdraw from or cause a voluntary dissolution of
the Company. In the event any Member withdraws from or causes a voluntary
dissolution of the Company in contravention of this Agreement, such withdrawal
or the causing of a voluntary dissolution shall not affect such Member's
liability for obligations of or to the Company.
25
11.02. TERMINATION. In all cases of dissolution of the Company, the
business of the Company shall be wound up and the Company terminated as promptly
as practicable thereafter, and each of the following shall be accomplished:
(a) the Liquidating Member shall cause to be prepared a
statement setting forth the assets and liabilities of the Company as of
the date of dissolution, a copy of which statement shall be furnished
to all of the Members;
(b) the Company's assets shall be liquidated by the
Liquidating Member as promptly as possible, but in an orderly and
businesslike and commercially reasonable manner and subject to any
liquidating plan approved by the Managers. The Liquidating Member may
cause the property of the Company to be distributed in kind only with
the consent of the Equity Members; and
(c) subject to NRS 86.521 the proceeds of sale and all
other assets of the Company shall be applied and distributed as follows
and in the following order of priority:
(i) to the payment of (A) the debts and
liabilities of the Company, including debts and liabilities to
any Member and (B) the expenses of liquidation;
(ii) to the setting up of any reserves which the
Liquidating Member and the Managers shall determine to be
reasonably necessary for contingent, unliquidated or
unforeseen liabilities or obligations of the Company or any
Member arising out of or in connection with the Company. Such
reserves may, in the discretion of the Liquidating Member, be
paid over to a national bank or national title company
selected by it and authorized to conduct business as an escrow
agent to be held by such bank or title company as escrow agent
for the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above, and at the
expiration of such period as the Liquidating Member may
reasonably deem advisable, distributing any remaining balance
as provided in Section 11.02(c)(iii); provided, however, that,
to the extent that it shall have been necessary, by reason of
applicable law or regulation, to create any reserves prior to
any and all payments which would otherwise have been made
under Section 11.02(c)(i) and, by reason thereof a payment
under Section 11.02(c)(i) has not been made, then any balance
remaining shall first be paid pursuant to Section 11.02(c)(i);
and
(iii) the balance, if any, to the Equity Members
in accordance with Section 6.05 hereof.
11.03. LIQUIDATING MEMBER. The Liquidating Member is hereby
irrevocably appointed as the true and lawful attorney in the name, place and
stead of each of the Members, such appointment being coupled with an interest,
to make, execute, sign, acknowledge and file with respect to the Company all
papers which shall be necessary or desirable to effect the dissolution and
termination of the Company in accordance with the provisions of this Article XI.
Notwithstanding the foregoing, each Member, upon the request of the Liquidating
Member or
26
the Managers, shall promptly execute, acknowledge and deliver all such
documents, certificates and other instruments as the Liquidating Member or the
Managers shall reasonably request to effectuate the proper dissolution and
termination of the Company, including the winding up of the business of the
Company.
XII. GAMING MATTERS
12.01. LICENSING.
(a) At such time as the Company holds a Gaming License or is the
holder of an interest or units in an entity that holds a Gaming License, the
Members and each holder of any Interest and their Related Parties will be
subject to the provisions of the Gaming Laws and to the licensing and regulatory
control of the Nevada Gaming Authorities. Each Member and each holder of any
Interest acknowledges that, in order for the Company to carry on its business,
each Member, each holder of an Interest and their respective Related Parties may
be required to subject personal history and financial information to, and be
found suitable by, the Nevada Gaming Authorities or gaming authorities of other
jurisdictions. Each Member and each holder of any Interest shall, and shall
cause its respective Related Parties to, (i) promptly submit such personal
history and financial history, (ii) cooperate in any investigation and (iii)
diligently seek a finding of suitability.
(b) Each Member (other than the initial Voting Members) and each
holder of any Interest shall be responsible for paying or causing to be paid all
of its and its respective Related Parties' costs and expenses in connection with
obtaining, attempting to obtain or retaining a license in accordance with this
Article XII.
(c) In addition, the Company anticipates that in due course the
Company will register the Voting Interests pursuant to Section 12(g) of the
Exchange Act. From and after such registration under the Exchange Act (i) any
Person who acquires more than 5% of the Voting Interests shall promptly report
the acquisition to the Nevada Commission in a filing prepared in accordance with
applicable law and (ii) beneficial owners of more than 10% of the Voting
Interests must apply to the Nevada Commission for a finding of suitability
within 30 days after the Chairman of the Nevada State Gaming Control Board mails
written notice requiring such filing. Notwithstanding the foregoing, any member
who (x) acquired more than 10%, but not more than 15%, of the Voting Interests,
(y) holds such Voting Interests for investment purposes only, and (z) qualifies
as an "Institutional Investor" as such term is defined in the Gaming Laws, may
apply to the Nevada Commission for a waiver of such finding of suitability, and
need not apply for such finding of suitability if such waiver is granted.
12.02. GAMING PROBLEM. In the event the Managers shall determine, in
good faith, based upon verifiable information and specific provisions of the
applicable Gaming Laws or upon specific information received from the Nevada
Gaming Authorities, that a Gaming Problem exists, then the Company shall provide
written notice to the applicable Member requesting that such Member provide for
the elimination of the Gaming Problem. To the extent permitted by the Nevada
Gaming Authorities, the Members, the Managers and the Company shall use their
commercially reasonable efforts to assist in the elimination of such Gaming
Problem, including facilitating the transfer of Interests (whether to another
Member or another Person). If, despite
27
such efforts, the Member is unable to eliminate the Gaming Problem within any
time period provided under the Gaming Laws or otherwise specified by the Nevada
Gaming Authorities:
(a) (i) if the Gaming Problem is caused by a director, officer or
manager of such Member or an Affiliate of such Member, such Member shall
terminate, or cause its Affiliate to terminate, its relationship with such
Person and (ii) if the Gaming Problem is caused by a shareholder, partner, or
member of such Member or an Affiliate of such Member, such Member shall either
purchase such Person's ownership or other interest in such Member or require
such Person to transfer its ownership or other interest to a Person (if any)
that would eliminate the Gaming Problem or cause its Affiliate to do so; or
(b) after providing the applicable Member with 90 days (or such
other time period specified by the Nevada Gaming Authorities) to eliminate such
Gaming Problem (i) if the Gaming Problem relates to a Voting Member or an
Affiliate of such Voting Member, such Voting Member shall withdraw from the
Company and, upon such withdrawal, the Voting Interest owned by such Member
shall be reallocated to the remaining Voting Members, pro rata according to
their proportionate share of the remaining Voting Interests, and the rights of
such Member as a Voting Member shall cease, or (ii) if the Gaming Problem
relates to an Equity Member or an Affiliate of such Equity Member, the Company
shall redeem or have another Equity Member or other Persons who, if required,
shall have been found suitable and shall have obtained all required licenses
under the Gaming Laws, purchase all of the Equity Interests held or owned by
such Equity Member, and each Affiliate of such Equity Member. Any redemption or
sale of Equity Interests under this Section 12.02(b) shall be at a price equal
to the amount the holder of the Equity Interest would be entitled to receive
under Section 6.03 if the Company sold all of its assets at the then current
fair market value as determined by an independent appraiser appointed by the
Managers, and all debts and obligations of the Company were paid or provided for
and the Company were dissolved and all the proceeds of the Company were
distributed pursuant to Section 6.03 (the "Deemed Liquidation Amount"). If the
Managers cannot agree on an appraiser, they shall each select an appraiser, and
the two appraisers together shall select a third appraiser, which third
appraiser shall determine the fair market value of the assets of the Company and
which determination shall be binding upon the Equity Members. Subject to the
applicable provisions of the Gaming Laws, the foregoing right of redemption or
sale shall be exercised upon 20 days' prior written notice to the applicable
Equity Member. On and after the date set forth in such notice as the date of
redemption or sale, all rights of such Equity Member as an Equity Member of the
Company shall cease and terminate.
(c) If the Company redeems the Equity Interests of a Member as a
result of a Gaming Problem, the Company may pay the redemption price (as
determined pursuant to Section 12.02(b)) in the form of cash, a promissory note
or a combination of both. A promissory note issued as consideration for the
redemption of Equity Interests pursuant to this Section 12.02 shall:
(i) be unsecured and subordinated to all other
indebtedness of the Company;
(ii) mature no more than eighteen months after the
anniversary of its date of issue;
28
(iii) be subject to mandatory prepayment in connection with
a sale of all or substantially all of the assets of the Company or its
Subsidiaries or the issuance of additional Equity Interests by the
Company;
(iv) bear interest at a fixed rate equal to the
then-current yield on a one-year United States treasury ▇▇▇▇ maturing
on the date nearest the maturity date of such promissory note;
(v) pay interest only upon maturity or an earlier
prepayment; and
(vi) be payable by the Company in whole or in part at any
time prior to maturity without penalty or premium.
The principal amount of such promissory note shall also be subject to periodic
decrease (but not increase) from time to time if and to the extent the Deemed
Liquidation Amount falls below the outstanding principal amount of such
promissory note. If the Company makes such a determination it will provide the
holder of the promissory note with a notice to that effect and such holder will
have ten (10) Business Days to object to the Company's calculation of the Deemed
Liquidation Amount. If the holder fails to object to the calculation, the
calculation shall be deemed final, though it may be modified by a subsequent
determination by the Company that the Deemed Liquidation Amount has again
decreased. If the Company and the holder of the promissory note cannot agree on
the calculation of the Deemed Liquidation Amount, the Company shall engage an
appraiser reasonably acceptable to the holder of the promissory note to conduct
an appraisal of the fair market value of the Company's assets. If the parties
cannot agree on an appraiser, they shall each select an appraiser, and the two
appraisers together shall select a third appraiser, which third appraiser shall
determine the fair market value of the Company's assets and which determination
shall be binding upon the Company and the holder of the promissory note. The
costs of any appraisal under this Section 12.02(c) shall be borne equally by the
Company and the holder of the promissory note.
XIII. MISCELLANEOUS
13.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MEMBERS. (a)
Each Member represents and warrants to the other Members as follows:
(i) if such Member is not a natural Person, such Member
represents and warrants that it is duly organized, validly existing and
in good standing under the laws of its jurisdiction of formation with
all requisite entity power and authority to enter into this Agreement
and to perform its obligations hereunder;
(ii) this Agreement constitutes the legal, valid and
binding obligation of the Member enforceable in accordance with its
terms;
(iii) if such Member is not a natural Person, such Member
represents and warrants that all limited liability company, corporate
or partnership action on the part of the Member necessary for the
authorization, execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly
taken;
29
(iv) if such Member is a natural Person, such Member
represents and warrants that he has the legal capacity to enter into
this Agreement and to perform his obligations hereunder;
(v) the execution and delivery of this Agreement by the
Member, and the consummation of the transactions contemplated hereby,
does not conflict with or contravene the provisions of the
organizational documents of such Member (if such Member is not a
natural Person) or any agreement or instrument by which it or its
properties are bound or any law, rule, regulation, order or decree to
which it or its properties are subject;
(vi) the Member has not retained any broker, finder or
other commission or fee agent, and no such Person has acted on its
behalf in connection with the acquisition of any Property or the
execution and delivery of this Agreement;
(viii) each Member understands that (A) an investment in the
Company involves a substantial and high degree of risk and does hereby
represent that it has a net worth sufficient to bear the economic risk
of its investment in the Company, (B) no federal or state agency has
passed on the offer and sale of any Interests in the Company, (C) it
must bear the economic risk of an investment in the Company for an
indefinite period of time, because the Interests have not been
registered for sale under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, cannot be sold or otherwise
transferred other than in one or more transactions registered under the
Securities Act or exempt from such registration under the Securities
Act, nor can Interests be sold or otherwise transferred unless
registered under applicable state securities or blue sky laws or
pursuant to an exemption from such registration, and because there is
no established market for the Interests and no public market will
develop; and
(viii) each Member represents and warrants that it is an
"accredited investor" as defined in Regulation D of the Securities Act.
(b) The ▇▇▇▇ Manager and the ▇▇▇▇▇▇▇▇▇▇ Manager shall each have
the right to designate 50% of the managers (or one manager having 50% of BH/RE's
voting rights) that BH/RE appoints under the EquityCo Operating Agreement (the
"Designated EquityCo Managers"). The ▇▇▇▇ Manager and the ▇▇▇▇▇▇▇▇▇▇ Manager, if
they are Voting Members, shall use their best efforts to cause their Designated
EquityCo Managers to vote together on all matters on which the EquityCo Managers
act.
(c) Each Member agrees to indemnify and hold harmless the Company
and each other Member and their officers, directors, shareholders, partners,
members, employees, successors and assigns from and against any and all loss,
damage, liability or expense (including reasonable out of pocket costs and
attorneys' fees) which they may incur by reason, or in connection with, any
breach of the foregoing representations and warranties by such Member and all
such representations and warranties shall survive the execution and delivery of
this Agreement and the death, termination and dissolution of any Member and/or
the Company (nothing herein shall constitute a waiver or extension of any
applicable statute of limitations).
30
13.02. FURTHER ASSURANCES. Each Member agrees to execute,
acknowledge, deliver, file, record and publish such further instruments and
documents, and do all such other acts and things as may be required by law, or
as may be required to carry out the intent and purposes of this Agreement;
provided the same does not subject any Member to additional liability and the
same is consistent with and does not vary the terms and conditions of this
Agreement without the consent of the affected Member.
13.03. NOTICES. All notices, demands, consents, approvals, requests
or other communications which any of the parties to this Agreement may desire or
be required to give hereunder (collectively, "Notices") shall be in writing and
shall be given by personal delivery, facsimile transmission or a nationally
recognized overnight courier service, fees prepaid, addressed as follows:
If to ▇▇▇▇▇▇▇▇▇▇ or Bay Harbour: c/o Bay Harbour Management LC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to ▇▇▇▇ or OCS: OCS Consultants, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Any Member may designate another addressee (and/or change its address) for
Notice hereunder by a Notice given pursuant to this Section 13.03. A Notice sent
in compliance with the provisions of this Section 13.03 shall be deemed given on
the date of receipt, except that if delivery is refused, such notice shall be
given on the date delivery is first attempted.
13.04. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada applicable to
agreements made and to be performed wholly within that State, without regard to
choice of law principles.
13.05. ATTORNEY FEES. If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof, reasonable attorney's fees and costs as fixed by
the court shall be included in such judgment.
13.06. CAPTIONS. All titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference and in no way
define, limit, extend, or describe the scope of this Agreement or the intent of
any provision in this Agreement.
13.07. PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, and neuter, singular and plural, as
the identity of the party or parties may require.
31
13.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the parties hereto and, except as otherwise provided herein, their respective
executors, administrators, legal representatives, heirs, successors and assigns.
13.09. EXTENSION NOT A WAIVER. No delay or omission in the exercise
of any power, remedy or right herein provided or otherwise available to a Member
or the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgence
granted to a Member hereunder shall not otherwise alter or affect any power,
remedy or right of any other Member or of the Company, or the obligations of the
Member to whom such extension or indulgence is granted.
13.10. CREDITORS AND THIRD PARTIES NOT BENEFITED. Nothing contained
in this Agreement is intended or shall be deemed to benefit any third party or
creditor of the Company or any Member, and no third party or creditor of the
Company shall be entitled to require the Company or the Members to solicit or
accept any additional capital contribution for the Company or to enforce any
right which the Company or any Member may have against any Member under this
Agreement or otherwise.
13.11. RECALCULATION OF INTEREST. If any applicable law is ever
judicially interpreted so as to deem any distribution, contribution, payment or
other amount received by any Member or the Company under this Agreement as
interest and so as to render any such amount in excess of the maximum rate or
amount of interest permitted by applicable law, then it is the express intent of
the Members and the Company that all amounts in excess of the highest lawful
rate or amount theretofore collected be credited against any other
distributions, contributions, payments or other amounts to be paid by the
recipient of the excess amount or refunded to the appropriate Person, and the
provisions of this Agreement shall immediately be deemed reformed, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the payment of the fullest amount otherwise
required hereunder. All sums paid or agreed to be paid that are judicially
determined to be interest shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the term of such obligation
so that the rate or amount of interest on account of such obligation does not
exceed the maximum rate or amount of interest permitted, under applicable law.
13.12. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and other application thereof shall
not in any way be affected or impaired thereby; provided, however, the
limitation of liability and exculpation provisions of this Agreement are an
integral part hereof.
13.13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and all prior
agreements relative hereto which are not contained or referred to herein are
terminated. Amendments, variations, modifications or changes herein may be made
effective and binding upon the Members by, and only by, the setting forth of
same in a document duly executed by each Member, and any alleged amendment,
32
variation, modification or change herein which is not so documented shall not be
effective as to any Member.
13.14. PUBLICITY. The parties agree that no Member shall issue any
press release or otherwise publicize or disclose the terms of this Agreement or
the proposed terms of any acquisition of any Property, without the consent of
each of the other Members, except as such disclosure may be made in the course
of normal reporting practices by any Member to its members, shareholders or
partners.
13.15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute but one and the same agreement.
13.16. CONFIDENTIALITY.
(a) The terms of this Agreement and the Subsidiary Operating
Agreements, the identity of any person with whom the Company or any Subsidiary
may be holding discussions with respect to any investment, acquisition,
disposition or other transaction, and all other business, financial or other
information relating directly to the conduct of the business and affairs of the
Company or the relative or absolute rights or interests of any of the Members
(collectively, the "Confidential Information") that has not been publicly
disclosed pursuant to authorization by the Managers is confidential and
proprietary information of the Company, the disclosure of which would cause
irreparable harm to the Company and the Members. Accordingly, except as
permitted pursuant to Section 13.14 hereof, each Member represents that it has
not and agrees that it will not and will direct its shareholders, partners,
directors, officers, agents, advisors and Affiliates not to, disclose to any
Person any Confidential Information or confirm any statement made by third
Persons regarding Confidential Information until the Company has publicly
disclosed the Confidential Information pursuant to authorization by the Managers
and has notified each Member that it has done so; provided, however, that any
Member (or its Affiliates) may disclose such Confidential Information (i) if
required by law or rule of any stock exchange (it being specifically understood
and agreed that anything set forth in a registration statement or any other
document filed pursuant to law will be deemed required by law and provided that
before making any disclosure of confidential information required by law or rule
of any stock exchange, the disclosing Member will notify the other Members and
provide them with a copy of the proposed disclosure and an opportunity to
comment thereon before the disclosure is made), (ii) in connection with the
offer to purchase or Transfer any Interests or any Transfer of Interests or sale
of any property of the Company permitted hereunder, (iii) in connection with any
offer to purchase or Transfer any Interest or the Transfer of any interest of
the direct or indirect beneficial owners of any Members permitted hereunder,
(iv) reasonably necessary in connection with any other transaction authorized
pursuant to the terms of this Agreement, (v) to its directors, officers and
employees, including the directors, officers and employees of any partner,
member, shareholder, trustee or other beneficial owner of any Member and who is
informed of the obligations under this Section 13.16, (vi) to its accountants,
attorneys or other advisors who have a need to know such Confidential
Information in connection with the Member's ownership of its Interest and who
are informed of the obligations under this Section 13.16, (vii) in connection
with required or routine reporting to its potential or current investors,
members, partners and
33
lenders or other financial or capital sources, or (viii) reasonably necessary
for it to perform any of its duties or obligations hereunder.
(b) Subject to the provisions of Section 13.16(a), each Member
agrees not to disclose any Confidential Information to any Person (other than a
Person agreeing to maintain all Confidential Information in strict confidence or
a judge, magistrate or referee in any action, suit or proceeding relating to or
arising out of this Agreement or otherwise), and to keep confidential all
documents (including, without limitation, responses to discovery requests)
containing any Confidential Information. Each Member hereby consents in advance
to any motion for any protective order brought by any other Member represented
as being intended by the movant to implement the purposes of this Section 13.16
provided that, if a Member receives a request to disclose any Confidential
Information under the terms of a valid and effective order issued by a court or
governmental agency and the order was not sought by or on behalf of or consented
to by such Member, then such Member may disclose the Confidential Information to
the extent required if the Member as promptly as practicable (i) notifies each
of the other Members of the existence, terms and circumstances of the order,
(ii) consults in good faith with each of the other Members on the advisability
of taking legally available steps to resist or to narrow the order, and (iii) if
disclosure of the Confidential Information is required, exercises its best
efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to the portion of the disclosed
Confidential Information that any other Member designates. The cost (including,
without limitation, attorneys' fees and expenses) of obtaining a protective
order covering Confidential Information designated by such other Member will be
borne by the Company.
(c) The covenants contained in this Section 13.16 will survive the
Transfer of the Interest of any Member and the termination of the Company.
13.17. VENUE. Each of the Members consents to the jurisdiction of any
state or federal court sitting in the State of Nevada for any action arising out
of matters related to this Agreement. Each of the Members waives the right to
commence an action in connection with this Agreement in any court outside of the
State of Nevada. Each of the Members agrees that service of process on it in the
manner set forth in Section 13.03 hereof shall be deemed effective service of
process on such Member.
13.18. WAIVER OF JURY TRIAL. EACH OF THE MEMBERS HEREBY WAIVES TRIAL
BY JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.
13.19. ENFORCEABILITY OF POWER OF ATTORNEY. In the event it is
subsequently determined that any power of attorney provision in this Agreement
is unenforceable, the parties hereto agree to execute, acknowledge, deliver,
file, record and publish such other instruments and documents (including
separate powers of attorney), and do all such other acts and things as may be
required by law, or as may be required to carry out the intent and purposes of
such power of attorney provisions.
13.20. AMENDMENTS. Subject to the provisions of Sections 2.01(a) and
9.08, this Agreement may be amended with the unanimous approval of the Voting
Members at the time of
34
such amendment; provided that, except as permitted by Section 9.08, no amendment
that has the effect of altering or changing the powers, preferences or special
rights of any Member so as to affect that Member adversely will be binding on
such Member unless that Member consents to such amendment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the introductory paragraph hereof.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇ CASINO AND HOSPITALITY LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Sole Manager
OCS CONSULTANTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
APPENDIX A
DEFINED TERMS
As used in this Agreement, the following terms (including the singular
and plural thereof) have the meanings set forth below:
"ACCEPTING MEMBERS" has the meaning set forth in Section 9.02(a)(ii)
hereof.
"ADDITIONAL CAPITAL CONTRIBUTION" means, with respect to any Equity
Member, any amount contributed to the capital of the Company by such Equity
Member pursuant to Section 4.02.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member
for any taxable year or other period, the deficit balance, if any, in such
Member's Capital Account as of the end of such year or other period, after
giving effect to the following adjustments:
(a) credit to such Capital Account any amounts that such
Member is obligated to restore or is deemed obligated to restore as
described in the penultimate sentence of Treasury Regulation Section
1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"AFFILIATE" means, with respect to any Person, (a) any other Person
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with such Person, (b) any other Person
owning or controlling 10% or more of the outstanding voting interests of such
Person, (c) any officer, director, general partner, managing member or trustee
of such Person, or (d) any other Person which is an officer, director, general
partner, managing member, trustee or holder of 10% or more of the voting
interests of any other Person described in clauses (a) through (c) of this
definition. As used in this definition, the term "control", "controlling",
"controlled by" or "under common control with" means the possession, directly or
indirectly, through one or more intermediaries, of the power to direct or cause
the direction of the management and policies of a Person, whether through voting
securities, by contract or otherwise.
"AGREEMENT" means this Amended and Restated Operating Agreement of
BH/RE, L.L.C., including exhibits, schedules or addenda attached hereto, as
amended and in effect from time to time pursuant to the terms of this Agreement.
"ALADDIN GAMING" has the meaning set forth in Section 2.04(b) hereof.
"APPLICABLE PERCENTAGE" has the meaning set forth in the Section
9.02(a).
"ARTICLES OF ORGANIZATION" has the meaning set forth in the first
Recital to this Agreement.
"BANKRUPTCY CODE" means title 11 of the United States Code (as now in
effect or hereafter amended).
"BAY HARBOUR" has the meaning set forth in the introductory paragraph
of this Agreement.
"BOOK BASIS" means, with respect to any asset of the Company, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Book Basis of any asset contributed by a
Member to the Company shall be the gross fair market value of such
asset, as determined by the Managers;
(b) the Book Basis of all Company assets shall be
adjusted to equal their respective gross fair market values (taking
Code Section 7701(g) into account), as determined by the Managers as of
the following times: (i) the acquisition of an additional interest in
the Company by any new or existing Member in exchange for more than a
de minimis Capital Contribution; (ii) the distribution by the Company
to a Member of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (iii) the liquidation
of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses
(i) and (ii) of this paragraph shall be made only if the Managers
reasonably determine that such adjustment is necessary to reflect the
relative economic interests of the Members in the Company;
(c) the Book Basis of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset
on the date of distribution as determined by the Managers; and
(d) the Book Basis of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), provided, however, that Book Basis shall not be
adjusted pursuant to this subparagraph (d) to the extent that an
adjustment pursuant to subparagraph (b) is required in connection with
a transaction that would otherwise result in an adjustment pursuant to
this subparagraph (d).
If the Book Basis of an asset has been determined or adjusted pursuant
to subparagraphs (a), (b) or (d), such Book Basis shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
"BUSINESS DAYS" means any day during a calendar year which is not a
Saturday, Sunday or a day on which banks are required or permitted to be closed
in the State of New York.
"CAPITAL ACCOUNT" means the separate account maintained for each Member
under Section 4.03 hereof.
A-2
"CAPITAL CONTRIBUTION" means, with respect to any Member, any Initial
Capital Contribution or Additional Capital Contribution made by such Member to
the Company pursuant to this Agreement.
"CHIEF EXECUTIVE OFFICER" means the chief executive officer of the
Company appointed pursuant to Section 7.02(b) hereof.
"CHIEF FINANCIAL OFFICER" means the chief financial officer of the
Company appointed pursuant to Section 7.02(b) hereof.
"CLEAN-UP PERIOD" has the meaning set forth in Section 9.02(a) hereof.
"CLOSING DATE" means the "Closing Date" under the Purchase Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended. Any
reference herein to any specific Section or Sections of the Code shall be deemed
to include a reference to any corresponding provision of future laws.
"COMPANY" means the limited liability company formed pursuant to the
Articles of Organization and operated pursuant to the terms of this Agreement.
"COMPANY ACCOUNTANT" has the meaning set forth in Section 8.04 hereof.
"COMPANY MINIMUM GAIN" means "partnership minimum gain" as defined in
Treasury Regulation Section 1.704-2(d).
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section
13.16(a) hereof.
"CONTROLLER" means the comptroller of the Company appointed pursuant to
Section 7.02(e) hereof.
"CREDIT AGREEMENT" means an Amended and Restated Credit Agreement by
and among OpBiz, the lenders party thereto and BNY Asset Solutions LLC as
Administrative and Collateral Agent.
"DEEMED LIQUIDATION AMOUNT" has the meaning set forth in Section
12.02(b) hereof.
"DEPRECIATION" means, for each taxable year of the Company, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such taxable year, except that if the
Book Basis of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such taxable year, Depreciation shall be an amount
which bears the same ratio to such beginning Book Basis as the federal income
tax depreciation, amortization, or other cost recovery deduction for such
taxable year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such taxable year is zero, Depreciation shall be determined with
reference to such beginning Book Basis using any reasonable method selected by
the Managers.
A-3
"DESIGNATED EQUITYCO MANAGER" has the meaning set forth in Section
13.01(b) hereof.
"▇▇▇▇" has the meaning set forth in the introductory paragraph.
"▇▇▇▇ MANAGER" has the meaning set forth in Section 7.01(c).
"EQUITYCO" has the meaning set forth in the Section 2.04(a).
"EQUITY INTEREST" means an Interest in the Company that entitles the
owner thereof to (i) receive allocations of Net Profit and Net Loss, (ii)
distributions of Net Cash Flow and (iii) the other rights and benefits of a
Member, other than the rights and benefits specifically reserved for the Voting
Members.
"EQUITYCO OPERATING AGREEMENT" means the Amended and Restated Operating
Agreement of EquityCo, dated as of April 22, 2003.
"EQUITY MEMBER" means any Member that owns an Equity Interest.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING OPERATING AGREEMENT" has the meaning set forth in the
introductory paragraph.
"EXPENSES" means, for any period, the sum of the total gross
expenditures of the Company during such period, including (a) all cash operating
expenses (including, without limitation, all fees, commissions, expenses and
allowances paid or reimbursed to any Member or any of its Affiliates pursuant to
agreements to operate or manage the Property or otherwise as permitted
hereunder), (b) all debt service payments, (c) all expenditures which are
treated as capital expenditures (as distinguished from expense deductions) under
generally accepted accounting principles, (d) all taxes, fees or charges, or
similar assessments or levies, including real estate taxes, personal property
taxes, sales taxes and non-U.S. income, capital gain or similar taxes or
withholding, (e) all deposits of Revenues to the Company's reserve accounts, (f)
all costs and expenditures related to any acquisition, sale, disposition,
financing, refinancing or securitization of any Property, and (g) all cash
contributions, loans or advances made directly or indirectly to any Subsidiary;
provided, however, that Expenses shall not include (I) any payment or
expenditure to the extent (A) the sources of funds used for such payment or
expenditure are not included in Revenues or (B) such payment or expenditure is
paid out of any Company reserve account, or (ii) any expenditure properly
attributable to the liquidation of the Company.
"GAAP" has the meaning set forth in Section 8.02 hereof.
"GAMING LAWS" means those laws pursuant to which any Nevada Gaming
Authority possesses regulatory, licensing or permit authority over gaming within
any jurisdiction and, within the State of Nevada, specifically, the Nevada
Gaming Control Act, as codified in NRS Chapter 463, and the regulations of the
Nevada Commission promulgated thereunder, and the ▇▇▇▇▇ County Code.
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"GAMING LICENSES" shall mean all licenses, permits, approvals,
authorizations, registrations, findings of suitability, authorizations,
franchises, waivers, exemptions and entitlements issued by any Nevada Gaming
Authority necessary for or relating to the conduct of activities under the
Gaming Laws.
"GAMING PROBLEM" means circumstances such that any Member, any
Affiliate of any Member or any Related Party of any Member or of any Affiliate
of any Related Party, prior to being found an Unsuitable Person, may preclude or
materially delay, impede or impair the ability of the Company or any Subsidiary
to obtain or retain any Gaming License of the Company or any Subsidiary, or such
as may result in the imposition of materially burdensome terms and conditions on
any such license or under which such Member, Affiliate or Related Party has
withdrawn an application to be found suitable by or for a Gaming License from
any Nevada Gaming Authority.
"GOVERNMENTAL AUTHORITIES" means any federal, state, local or municipal
government, court, administrative agency or commission or other governmental or
regulatory authority or agency including any foreign government or authority and
the Nevada Gaming Authorities.
"HOTEL MANAGEMENT AGREEMENT" means the Management Contract for Planet
Hollywood Hotel and Casino, a Sheraton Hotel, between Sheraton Operating
Corporation and OpBiz, dated April 23, 2003, as amended from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.10(b)
hereof.
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.10(b)
hereof.
"INDEMNITEE" has the meaning set forth in Section 10.02(a) hereof.
"INITIAL CAPITAL CONTRIBUTION" means, with respect to any Member, any
amount contributed to the capital of the Company by such Member pursuant to
Section 4.01 hereof.
"INTEREST" means, with respect to any Member at any time, the interest
of such Member in the Company at such time, including the right of such Member
to any and all of the benefits to which such Member may be entitled as provided
in this Agreement, together with the obligations of such Member to comply with
all of the terms and provisions of this Agreement. The term "Interest" shall
include Voting Interests and Equity Interests.
"LIQUIDATING MEMBER" means a Voting Member designated as such by the
Voting Members.
"LOANS" means any loans by the Company to one or more Subsidiaries to
acquire, own, hold, manage, operate, lease and sell the Property.
"LOSS" means, for each taxable year or other period, an amount equal to
the Company's items of taxable deduction and loss for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items of
loss or deduction required to be stated separately under Section 703(a)(1) of
the Code), with the following adjustments:
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(a) any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Loss, will be
considered an item of Loss;
(b) Loss resulting from any disposition of property of
the Company with respect to which gain or loss is recognized for
federal income tax purposes will be computed by reference to the Book
Basis of such property, notwithstanding that the adjusted tax basis of
such property may differ from its Book Basis;
(c) in lieu of Depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there will be taken into account Depreciation for the taxable
year or other period;
(d) any items of deduction and loss specially allocated
pursuant to Section 6.07 hereof shall not be considered in determining
Loss; and
(e) any decrease to the Book Basis of Company assets as a
result of any adjustment to the Book Basis of Company assets pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an
item of Loss.
"MAJORITY-IN-INTEREST" means, as to the class or group of Members
referred to, required or to be determined, such of those Members of that class
or group having more than 50% of the Interests of the Members of that class or
group.
"MANAGERS" has the meaning set forth in Section 7.01(a) hereof.
"MEMBER" means each Person that executes a counterpart to this
Agreement and each Person who may subsequently become a Member.
"MEMBER MINIMUM GAIN" means the Company's "partner nonrecourse debt
minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2).
"MEMBER NONRECOURSE DEDUCTIONS" means "partner nonrecourse deductions"
as defined in Treasury Regulation Section 1.704-2(1)(2).
"MEZZANINE LOAN AGREEMENT" means the agreement pursuant to which one or
more investors (other than the Company) lends or contributes funds to MezzCo.
"MEZZCO" has the meaning set forth in Section 2.04(a) hereof.
"NET CASH FLOW" means, for any period, the excess of (a) Revenues for
such period over (b) Expenses for such period.
"NET LOSS" means, for any period, the excess of items of Loss over
items of Profit, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 6.02.
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"NET PROFIT" means, for any period, the excess of items of Profit over
items of Loss, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 6.02.
"NEVADA COMMISSION" means the Nevada Gaming Commission.
"NEVADA GAMING AUTHORITIES" means state, local and other governmental,
regulatory and administrative authorities, agencies, boards and officials of the
State of Nevada responsible for or involved in the regulation of gaming
activities in any jurisdiction and within the State of Nevada, specifically, the
Nevada Commission, the Nevada State Gaming Control Board, and the ▇▇▇▇▇ County
Liquor and Gaming Licensing Board.
"NONRECOURSE DEDUCTION" has the meaning set forth in Treasury
Regulation Section 1.704-2.
"NOTICE" has the meaning set forth in Section 13.03 hereof.
"NOTICE DATE" has the meaning set forth in Section 9.02(a) hereof.
"NRS" means the Nevada Revised Statutes, as amended from time to time.
"OCS" has the meaning set forth in the introductory paragraph.
"OFFERED INTEREST" has the meaning set forth in Section 9.02(a) hereof.
"OFFEROR" has the meaning set forth in Section 9.02(a) hereof.
"OPBIZ" has the meaning set forth in Section 2.04(a) hereof.
"PARTIALLY ADJUSTED CAPITAL ACCOUNT" means, with respect to any Equity
Member for any taxable year or other period of the Company, the Capital Account
balance of such Member at the beginning of such year or period, adjusted for all
contributions and distributions during such year or period and all special
allocations pursuant to Section 6.02 with respect to such year or period but
before giving effect to any allocations of Net Profit and Net Loss (or items
hereof) pursuant to Section 6.01.
"PERCENTAGE INTEREST" means, with respect to any Equity Member, a
fraction, the numerator of which is the aggregate amount of the Capital
Contributions made or deemed to have been made by such Equity Member and the
denominator of which is the aggregate amount of the Capital Contributions made
or deemed to have been made by all of the Equity Members as of the date of
determination (in each case subject to adjustment as provided in this
Agreement). If an Equity Member Transfers all or any portion of its Equity
Interest to another Person in accordance with the terms of this Agreement, upon
such Person's being admitted as an Equity Member, such Person shall be deemed to
have made a Capital Contribution in an amount equal to the product of the
Transferred Percentage Interest and the aggregate amount of Capital
Contributions made or deemed to have been made by all of the Equity Members and
there shall be a corresponding decrease in the amount of Capital Contributions
deemed to have been made by the Transferring Equity Member.
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"PERMITTED TRANSFEREE" means, with respect to a particular Member, a
Person that is (a) an Affiliate of the Member which is approved by the other
Members in writing, such approval not to be unreasonably withheld or delayed,
(b) a wholly owned subsidiary of the Member, (c) another Member, (d) any other
Person approved in writing by all the other Members, or (e) a Qualified Trust.
"PERSON" means any individual, partnership, corporation, limited
liability company, trust or other entity.
"PLANET HOLLYWOOD LICENSE AGREEMENT" means the Planet Hollywood Hotel &
Casino Loaning Agreement, dated as of May 7, 2003, by and among planet Hollywood
International, Inc., Planet Hollywood (Region IV), Inc., Planet Hollywood
Memorabilia, Inc. and OpBiz, as amended from time to time.
"PRESIDENT" means the president of the Company appointed pursuant to
Section 7.02(c) hereof.
"PROFIT" means, for each taxable year or other period, an amount equal
to the Company's taxable income and gain for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items of
income and gain required to be stated separately under Section 703(a)(1) of the
Code), with the following adjustments:
(a) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profit or
Loss will be added to taxable income or loss;
(b) gain resulting from any disposition of property of
the Company with respect to which gain or loss is recognized for
federal income tax purposes will be computed by reference to the Book
Basis of such property, notwithstanding that the adjusted tax basis of
such property may differ from its Book Basis;
(c) any items specially allocated pursuant to Section
6.07 shall not be considered in determining Profit; and
(d) any increase to the Book Basis of Company assets as a
result of any adjustment to the Book Basis of Company assets pursuant
to Treasury Regulation Section 1.704.1(b)(2)(iv)(f) shall constitute an
item of Profit.
"PROPERTY" means the Aladdin Hotel and Casino.
"PURCHASE AGREEMENT" means the Purchase and Sale Agreement, dated as of
April 23, 2003, between Aladdin Gaming and OpBiz.
"QUALIFIED TRUST" means a trust that (a) is for the benefit of a Member
or his or her spouse or any of his or her lineal descendants or the spouse of
any of his or her lineal descendants, and (b) has a trustee that is reasonably
acceptable to the other Voting Members.
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"RECORDS OFFICE" means an office of the Company in the State of Nevada,
which may but need not be a place of its business, at which it shall keep all
records identified in NRS Section 86.241, except that none of the lists required
to be maintained pursuant to NRS Section 86.241 need be maintained in
alphabetical order, nor shall the Company be required to maintain at its Records
Office copies of powers of attorney except those relating to the execution of
the Articles of Organization and this Agreement.
"RELATED PARTY" means, in respect of a Member, its Affiliates, and such
Member's and its Affiliates' respective shareholders, partners, members,
directors, managers, officers, trustees and beneficiaries.
"RENOVATION" has the meaning set forth in Section 2.04(b) hereof.
"REVENUES" means, for any period, the sum of the total gross revenues
received by the Company during such period, including all receipts of the
Company from (a) distributions from any Subsidiary, (b) proceeds from Capital
Contributions or the sale or other disposition of all or any portion of the
Property, or any interest therein, including an interest in any Subsidiary, (c)
rent, additional rent and percentage rent paid to the Company (including for
parking facilities), (d) concessions, (e) rent or business interruption
insurance, if any, (f) funds made available to the extent such funds are
withdrawn from the Company's reserve accounts and deposited into the Company's
operating accounts, (g) proceeds from the financing, refinancing or
securitization of any interest in the Property or any Subsidiary, (h) the
payment of principal and interest on the Loans, and (i) all other revenues and
receipts realized by the Company. Notwithstanding the foregoing, Revenues does
not include proceeds incident to the liquidation of the Company.
"ROFO NOTICE" has the meaning set forth in Section 9.02(a) hereof.
"ROFO PERIOD" has the meaning set forth in Section 9.02(a) hereof.
"SECURITIES ACT" has the meaning set forth in Section 13.01(a) hereof.
"SELLER" has the meaning set forth in Section 9.02(a) hereof.
"SELLING EQUITY MEMBER" has the meaning set forth in Section 9.02(b)
hereof.
"STARWOOD" means Starwood Nevada Holdings, L.L.C. or any successor or
assign that is a member of EquityCo.
"SUBSIDIARY" means EquityCo, MezzCo, OpBiz or any other direct or
indirect subsidiary of the Company.
"SUBSIDIARY OPERATING AGREEMENT" means the organizational documents and
operating agreements governing any Subsidiary.
"TAG-ALONG EQUITY MEMBERS" has the meaning set forth in Section 9.02(b)
hereof.
"TAG-ALONG RIGHT" has the meaning set forth in Section 9.02(b) hereof.
A-9
"TAG-ALONG SALE" has the meaning set forth in Section 9.02(b) hereof.
"▇▇▇▇▇▇▇▇▇▇" has the meaning set forth in the introductory paragraph.
"▇▇▇▇▇▇▇▇▇▇ MANAGER" has the meaning set forth in Section 7.01(c).
"TRANSACTION FEES" means the fees and expenses incurred by the Company
and its Subsidiaries in connection with the formation of the Company, the other
transactions described in Section 2.04(b), and the filing and effectiveness of
the Company's registration statement described in Section 12.01(c).
"TRANSFER" means the sale, assignment, exchange, or other transfer for
consideration, pledge, hypothecation or grant of a security interest, or any
gift, bequest, or other transfer for no consideration (whether or not by
operation of law).
"TREASURY REGULATION" or "REGULATION" means, with respect to any
referenced provision, such provision of the regulations of the United States
Department of the Treasury or any successor provision.
"UPSTREAM OWNER" means any holder of an Equity Interest or any entity
that directly or indirectly owns an equity interest in a holder of Equity
Interests.
"UPSTREAM OWNERSHIP INTEREST" has the meaning set forth in the Section
9.02(d).
"UNSUITABLE PERSON" means any Person who is (i) denied a Gaming License
by any Gaming Authority or (ii) determined by a Gaming Authority to be
unsuitable to own or control an Interest in the Company or to be associated or
affiliated with a Person engaged in gaming activities in any jurisdiction.
"VOTING INTEREST" means an Interest in the Company that entitles the
holder thereof to (i) appoint and replace the Managers and (ii) vote on all
matters properly put before the Members.
"VOTING MEMBER" means each Member that owns a Voting Interest. Voting
Members shall be "noneconomic members" under Section 86.293 of the NRS.
[END OF APPENDIX A]
A-10
SCHEDULE 1
Equity Member or Affiliate Amount Date
-------------------------- ------ ----
BH Casino and Hospitality LLC $2,500,000 ▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇ ▇▇▇▇▇▇ and Hospitality LLC $1,750,000 June 23, 2003
OCS Consultants, Inc. $2,500,000 April 23, 2003
OCS Consultants, Inc. $1,750,000 June 23, 2003
SCHEDULE 2
Amount
Transaction Fees Advanced by: (through 2/29/2004)
---------------------------- -------------------
BH Casino and Hospitality LLC $3,711,677
OCS Consultants, Inc. or
Affiliates $1,349,248
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EXHIBIT 3.1
AMENDMENT TO AMENDED AND RESTATED OPERATING AGREEMENT
OF
BH/RE, L.L.C.
This AMENDMENT TO AMENDED AND RESTATED OPERATING AGREEMENT (the
"Amendment"), of BH/RE, L.L.C. (the "Company") is made and entered into as of
August 9, 2004, by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an individual whose business
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇, an individual whose business address is ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇"), OCS Consultants, Inc, a
Florida corporation ("OCS"), BH Casino and Hospitality, Inc., a Delaware
corporation formerly known as BH Casino and Hospitality LLC, a Delaware limited
liability company ("BHCH I"), and BH Casino and Hospitality II, LLC, a Delaware
limited liability company ("BHCH II").
WHEREAS, the Company was formed as a limited liability company on March
11, 2003, pursuant to Chapter 86 of the NRS by filing articles of organization
of the Company (the "Articles of Organization") in the Office of the Secretary
of State of the State of Nevada;
WHEREAS, the Company is governed by an Amended and Restated Operating
Agreement by and among ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇, OCS and BHCH I, dated March 26, 2004
(the "Operating Agreement");
WHEREAS, simultaneously with the execution and delivery of this Amendment
BHCH II is subscribing for up to $13,000,000 of the Company's Equity Interests
and, upon payment of such subscription and execution of this Amendment, BHCH II
will become an Equity Member of the Company;
WHEREAS, in connection with the admission of BHCH II as an Equity Member
of the Company the parties hereto wish to amend the Operating Agreement, as set
forth in this Amendment.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The Operating Agreement is hereby amended so that all references to "Bay
Harbour" will now be references to "BHCH I."
2. Section 3.01 of the Operating Agreement is hereby amended to read as
follows:
"3.01. CLASSES OF INTERESTS.
(a) VOTING AND EQUITY INTERESTS; VOTING RIGHTS. The Interests are
divided into two classes, Equity Interests and Voting Interests. Equity
Interests will not have any right to vote on matters submitted to a vote
of the Members (including but not limited to a sale of all or
substantially all of the assets of the Company or any of the matters set
forth in Section 92A.150 of the NRS), other than any matters for which
approval of Equity Members is required under Chapter 86 of the NRS. The
Company has issued 50% of the Voting Interests to ▇▇▇▇ and 50% of the
Voting Interests to ▇▇▇▇▇▇▇▇▇▇. Any vote
of the Voting Members owning or holding Voting Interests originally issued
to ▇▇▇▇ shall be cast by the ▇▇▇▇ Manager and any vote of the Voting
Members owning or holding Voting Interests originally issued to ▇▇▇▇▇▇▇▇▇▇
shall be cast by the ▇▇▇▇▇▇▇▇▇▇ Manager; provided that this sentence shall
not apply to the designation or removal of Managers contemplated by
Section 7.01(c). Any Person owning or holding a Voting Interest originally
issued to ▇▇▇▇ shall be deemed to have appointed the ▇▇▇▇ Manager as
attorney-in-fact and proxy for the purpose of casting such vote and any
Person owning or holding a Voting Interest originally issued to ▇▇▇▇▇▇▇▇▇▇
shall be deemed to have appointed the ▇▇▇▇▇▇▇▇▇▇ Manager as
attorney-in-fact and proxy for the purpose of casting such votes.
(b) NO DISSENTERS' RIGHTS. Unless otherwise provided in a plan or
agreement of merger or exchange, no Member shall have any rights of a
dissenting member under Sections 300 to 500 of Chapter 92A of the NRS in
connection with any plan of merger or exchange to which the Company is a
constituent entity."
3. Article III of the Operating Agreement is hereby amended by adding a new
Section 3.04 as follows:
"3.04. EXPRESS WAIVER OF RIGHTS. Each Equity Member hereby expressly
waives any and all approval rights, dissenters' rights, or similar rights
or privileges it may have with respect to the operation or conduct of the
business of the Company, the sale of all or substantially all of the
assets of the Company, or any merger, share exchange, conversion or
similar transaction in which the Company may be a party."
4. Section 4.01 of the Operating Agreement is hereby amended to read as
follows:
"4.01 INITIAL CAPITAL CONTRIBUTIONS. Each of BHCH I and OCS (or an
Affiliate of such Equity Member) has heretofore advanced $4.25 million to
the Company (in the amounts and on the dates indicated on Schedule 1) in
the form of demand loans bearing interest from the date of such advance at
the rate of 1.52% per annum (which equals the "blended annual rate" for
calendar year 2003 as determined by the Internal Revenue Service under
Section 7872(e)(2) of the Code) and BHCH II has made (or will make, prior
to the Closing Date) cash capital contributions of up to $13,000,000.
Simultaneously with the Closing Date, the advances made by BHCH I and OCS,
together with accrued interest, will be deemed contributions to the
capital of the Company by BHCH I and OCS, respectively (and included in
the deemed capital contribution for each of BHCH I and OCS described in
clause (ii) below). For purposes of establishing the capital accounts of
each Equity Member under Section 4.03, each Equity Member will be deemed
to have made a Capital Contribution to the Company as follows:
(i) for BHCH II, an amount equal to its cash contributions; and
(ii) for each of BHCH I and OCS, an amount equal to 50% of the
dollar amount obtained by dividing the amount of cash contributed to the
Company by BHCH II by the Percentage Interest obtained by BHCH II in
respect of its cash contribution.
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The foregoing deemed and actual capital contributions of each of
BHCH II, BHCH I and OCS are referred to in this Agreement as the "Initial
Capital Contribution" of the Equity Members."
5. Section 4.02 of the Operating Agreement is hereby amended to read as
follows:
"4.02 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) [INTENTIONALLY OMITTED.]
(b) OTHER CAPITAL CONTRIBUTIONS. If at any time or from time to time
the Managers unanimously determine that funds in excess of the Capital
Contributions made or required to be made under Section 4.01 are necessary
or desirable to meet the obligations or needs of the Company or any
Subsidiary, the Managers may request that the Equity Members make
additional Capital Contributions. Any additional Capital Contributions
will only be made by an Equity Member if that Equity Member agrees to do
so and, if so agreed, shall be made by the agreeing Equity Members on a
pro rata basis according to their Percentage Interests (unless such Equity
Members agree otherwise). Any such request shall be in writing, shall
state the aggregate amount of the funds requested and each Equity Member's
share thereof, shall include a brief description of the proposed use of
such Capital Contributions, and shall designate a date by which the
Company must receive funds in respect of such Capital Contribution. Voting
Members and Managers have no obligation, and are not required, to make
Capital Contributions.
(c) MANNER OF FUNDING. Any Capital Contribution made pursuant to
Section 4.02(b) shall be made by wire transfer of funds to a Company
account designated by the Managers on or before a date designated by the
Managers in such notice."
6. Clause (a) of Section 4.03 of the Operating Agreement is hereby amended to
read as follows:
"(a) Each Equity Member's Capital Account will be credited with:
(i) such Equity Member's Initial Capital Contribution;
(ii) any other contributions of cash made by such Equity Member to
the capital of the Company plus the fair market value of any property
contributed by such Equity Member to the capital of the Company (net of
any liabilities to which such property is subject or which are assumed by
the Company in connection with such contribution);
(iii) the Equity Member's distributive share of Net Profit, Profit
and items thereof allocated to such Equity Member hereunder; and
(iv) any other increases required by Treasury Regulation Section
1.704-1(b)(2)(iv)."
3
7. The Operating Agreement is hereby amended by adding a new Section 4.04 as
follows:
"4.04 RETURN OF CAPITAL CONTRIBUTIONS IF NO CLOSING DATE. If the
Purchase Agreement is terminated prior to the Closing Date, the Company
shall return to BHCH II its Initial Cash Contribution and any other cash
capital contributions made by BHCH II and, notwithstanding anything in
this Agreement to the contrary (including the provisions of Article VI),
any remaining distributions will be made to the Equity Members (other than
BHCH II) in proportion to their respective Capital Contributions."
8. The Operating Agreement is hereby amended by adding a new Section 5.04 as
follows:
"5.04 PRE-EMPTIVE RIGHTS.
(a) The Company hereby grants to each Equity Member the right (the
"Pre-emptive Right") to purchase, on a pro rata basis, additional Equity
Interests that the Company may, from time to time, propose to sell and
issue for its own account. Such pro rata share of an Equity Member shall
be determined according to such Equity Member's Percentage Interest on the
date of such proposed issuance.
(b) In the event that the Company proposes to undertake an issuance
of additional Equity Interests, it shall give each Equity Member written
notice of its intention, describing the principal terms of additional
Equity Interests proposed to be sold, the price, and the general terms
upon which the Company proposes to issue the same. Each Equity Member
shall have 10 days after receipt of such notice to agree to purchase up to
its pro rata share (calculated as provided in clause (a) of this Section
5.04) of such additional Equity Interests at the price and upon the terms
specified in the notice by giving written notice to the Company and
stating therein the quantity of additional Equity Interests to be
purchased.
(c) Each Equity Member that has elected to purchase its full
allotment of additional Equity Interests pursuant to clause (b) above
(each, an "Electing Member") shall have a right of over-allotment. If any
Equity Member fails to exercise its right to purchase its total pro rata
share of additional Equity Interests under clause (b) above, the Company
shall deliver to each Electing Member a written notice as to the amount of
additional Equity Interests with respect to which each such non-purchasing
Equity Member has failed to exercise its right under clause (b) above.
Each Electing Member may purchase its pro rata portion (determined by
reference to the Percentage Interests of all Electing Members) of such
additional Equity Interests within 5 days after the date that the Company
provides such written notice. Each such Electing Member that may purchase
such additional Equity Interests on an over-allotment basis in accordance
with this clause (c) may elect to purchase all (but not less than all) of
such Electing Member's pro rata portion of such additional Interests.
(d) In the event that the Equity Members fail to exercise in full or
in part their Pre-emptive Rights within the 10-day period specified above,
the Company shall have 180 days (or longer if required by the Nevada
Gaming Authorities) thereafter to sell (or enter into an agreement
pursuant to which the sale of additional Equity Interests covered
4
thereby shall be closed, if at all, within 60 days (or longer if required
by the Nevada Gaming Authorities) after the date of said agreement) the
additional Equity Interests with respect to which the Pre-emptive Rights
of the Equity Members were not exercised, at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company's
notice. In the event the Company has not sold the additional Equity
Interests within such 180-day (or longer) period (or sold and issued
additional Equity Interests in accordance with the foregoing within 60
days (or longer if required by the Nevada Gaming Authorities) after the
date of such agreement), the Company shall not thereafter issue or sell
any additional Equity Interests without first offering such additional
Equity Interests to the Equity Members in the manner provided above."
9. The Operating Agreement is hereby amended to add a Section 5.05 to read as
follows:
"5.05 ANTI-DILUTION ADJUSTMENT. If warrants to purchase an indirect
4% membership interest in OpBiz are granted by MezzCo pursuant to the
Development/Entertainment Side Letter (the "4% Warrant Grant"), then
contemporaneously with such 4% Warrant Grant, the Company will cause the
Percentage Interest of BHCH II to be adjusted so that BHCH II's indirect
economic interest in OpBiz is not reduced by the 4% Warrant Grant. Any
adjustment made under this Section 5.05 shall be effected by reducing
Equity Interests (pro rata according to their respective ownership of
Percentage Interests at the time such adjustment is being made) of each
Equity Member other than BHCH II. The Managers are hereby authorized to
amend Exhibit A to this Agreement to reflect any adjustment required to be
made under this Section 5.05. If the warrant relating to the 4% Warrant
Grant terminates without exercise, the Managers shall equitably and
reasonably readjust the Percentage Interests of the Equity Members as if
the 4% Warranty Grant had never occurred."
10. Section 6.03 of the Operating Agreement is hereby amended to read as
follows:
"6.03 DISTRIBUTIONS OF NET CASH FLOW. Except as otherwise provided
in Sections 6.04 and 6.05 below, the Company shall make distributions of
Net Cash Flow (to the extent and if available) to the Equity Members in
accordance with their respective Percentage Interests. Notwithstanding the
foregoing and subject to Section 6.04, the Managers may unanimously decide
to cause the Company to reserve or reinvest some or all of the available
Net Cash Flow for any purpose."
11. Section 6.04 of the Operating Agreement is hereby amended to read as
follows:
"6.04 TAX LIABILITY DISTRIBUTIONS. Notwithstanding Section 6.03, for
each quarter of the Taxable Year (other than during a Winding Up Year)
("Tax Quarter"), the Company shall, to the extent it has cash available
therefor, make a cash distribution, no later than 10 days after the end of
each Tax Quarter (a "Tax Liability Distribution"), to each Member (to the
extent of cash available for distribution) in amounts intended to enable
the Members to discharge their "Tax Liability." For this purpose, the Tax
Liability of a Member shall equal the product of (a) the sum of the net
income and net gain, as determined for federal income tax purposes,
reasonably expected by the Board of Managers to be allocable to such
Member as a result of the allocations under Article VI
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for such Tax Quarter, and (b) the maximum combined United States and New
York tax rate applicable to individuals or corporations (whichever is
higher) on ordinary income and capital gain, and taking into account the
deductibility of state and local income taxes for United States federal
income tax purposes and the character of the income in question and the
holding period of any asset sold. Any Tax Liability Distributions shall be
made to a Member only if and to the extent the distributions made to such
Member pursuant to Section 6.03 for the Tax Quarter are less than the Tax
Liability of such Member for the Tax Quarter, and any Tax Distributions
made to a Member shall reduce the amount of the next distribution(s) that
such Member would or will otherwise receive pursuant to Section 6.03. The
Company shall make adjusting distributions in subsequent Tax Quarters
pursuant to this Section 6.04 to a Member that received a Tax Liability
Distribution(s) in previous Tax Quarter(s) than was less than such
Member's Tax Liability in such Tax Quarter(s)."
12. Section 9.03(a) of the Operating Agreement is hereby amended by deleting
the reference to "clause (iv)" in the second sentence thereof and
replacing it with a reference to "clause (v)."
13. Section 9.08 of the Operating Agreement is hereby amended to read as
follows:
"9.08 ISSUANCE OF ADDITIONAL INTERESTS. Subject to the unanimous
consent of the Managers and the provisions of Sections 5.04 and 9.04, the
Company is authorized, in its sole discretion, to issue, for any Company
purpose, at any time or from time to time, additional Interests to the
Members or to other Persons for such consideration and on such terms and
conditions as established by the Managers and as otherwise set forth
herein. The Managers are authorized and directed to take all actions that
they deem necessary or appropriate in connection with each issuance of
Interests pursuant to this Section 9.08, to amend Exhibit A to reflect the
Percentage Interests of the Equity Members after giving effect to the
issuance of any Equity Interests, and to amend this Agreement in any
manner that they deem necessary or appropriate for each such issuance, to
admit additional Members in connection therewith and specify the relative
rights, powers and duties of the holders of the Interests so issued."
14. Section 13.03 of the Operating Agreement is hereby amended to read as
follows:
"13.03 NOTICES. All notices, demands, consents, approvals, requests
or other communications which any of the parties to this Agreement may
desire or be required to give hereunder (collectively, "Notices") shall be
in writing and shall be given by personal delivery, facsimile transmission
or a nationally recognized overnight courier service, fees prepaid,
addressed as follows:
If to ▇▇▇▇▇▇▇▇▇▇, Bay Harbour
or BHCH II: c/o Bay Harbour Management LC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
6
If to ▇▇▇▇ or OCS: OCS Consultants, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Any Member may designate another addressee (and/or change its
address) for Notice hereunder by a Notice given pursuant to this Section
13.03. A Notice sent in compliance with the provisions of this Section
13.03 shall be deemed given on the date of receipt, except that if
delivery is refused, such notice shall be given on the date delivery is
first attempted."
15. Appendix A of the Operating Agreement is hereby amended to include or
revise the following definitions (in alphabetical order):
""4% WARRANT GRANT" has the meaning set forth in Section 5.05 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Member, any Initial
Capital Contribution or any other capital contribution made by such Member to
the Company pursuant to Section 4.02(b) of this Agreement or otherwise.
"DEVELOPMENT/ENTERTAINMENT SIDE LETTER" means that certain letter
agreement, dated June 30, 2004 by and among MezzCo and certain proposed
purchasers of the Senior Subordinated Notes.
"ELECTING MEMBER" has the meaning set forth in Section 5.04(c) hereof.
"PERCENTAGE INTEREST" means, (x) with regards to the Initial Capital
Contributions, (i) for BHCH II a percentage amount equal to the product of 18.5%
times a fraction, the numerator of which is the amount of cash capital
contributions made by BHCH II and the denominator of which is $13,000,000 and
(ii) for each of BHCH I and OCS a percentage amount equal to 50% of the
difference between 100% and the Percentage Interest of BHCH II calculated in
clause (i) above, and (y) from and after the time any Capital Contributions
(other than the Initial Capital Contributions) are made, shall be as shown on
Exhibit A to this Agreement (as amended from time to time); provided, that the
Percentage Interests of the Equity Members shall be subject to further
adjustment (without the need to amend Exhibit A) as provided in Section 5.05.
Additionally, if an Equity Member Transfers all or any portion of its Equity
Interest to another Person in accordance with the terms of this Agreement, upon
such Person's being admitted as an Equity Member, such Person shall be deemed to
have made a Capital Contribution in an amount equal to the product of the
Transferred Percentage Interest and the aggregate of the Capital Accounts of the
Equity Members and there shall be a corresponding decrease in the Capital
Account of the Transferring Equity Member.
"PRE-EMPTIVE RIGHT" has the meaning set forth in Section 5.04(a) hereof.
"SENIOR SUBORDINATED NOTES" means $87,000,000 principal amount of Senior
Subordinated Notes to be sold pursuant to a securities purchase agreement dated
as of August 9, 2004 by and among MezzCo and the purchasers named therein.
7
"TAX LIABILITY DISTRIBUTION" has the meaning set forth in Section 6.04
hereof.
"TAX QUARTER" has the meaning set forth in Section 6.04 hereof.
"TAXABLE YEAR" means the taxable year of the Company for federal income
tax purposes.
"WINDING UP YEAR" means the Taxable Year of the Company in which any of
the events specified in Section 11.01 occur or any other event which causes the
Company to be subject to Section 11.02 and each succeeding Taxable Year;
provided, however, if such disposition or liquidation occurs before the date on
which the federal tax return of the Company must be filed for the previous tax
year (without regard to extensions), the Winding Up Year shall, at the election
BH/RE, also include the immediately prior Taxable Year of the Company."
16. Schedule 2 of the Operating Agreement is hereby amended to read as
follows:
"INTENTIONALLY OMITTED"
17. The Operating Agreement is hereby amended to add a new Exhibit A in the
form attached to this Amendment.
18. This Amendment shall be governed by and construed in accordance with the
laws of the State of Nevada applicable to agreements made and to be
performed wholly within that State, without regard to choice of law
principles.
19. This Amendment may be executed in multiple counterparts, each of which
shall be an original but all of which together shall constitute but one
and the same instrument. Execution of this Amendment by each party hereto
shall constitute the consent of such party to this amendment under
applicable Nevada law.
20. Except as expressly amended hereby, the provisions of the Operating
Agreement are hereby ratified and confirmed and shall remain in full force
and effect in accordance with their respective terms.
21. From and after the date that this Amendment is executed and delivered by
all parties hereto, references to the Operating Agreement shall be deemed
to mean the Operating Agreement as amended hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth in the introductory paragraph hereof.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇ CASINO AND HOSPITALITY, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
OCS CONSULTANTS, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
By its execution hereof, BH Casino and Hospitality II, LLC hereby
joins the Company as an Equity Member and agrees to be bound by the terms and
conditions of the Agreement.
BH CASINO AND HOSPITALITY II, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Sole Manager