EXHIBIT 3.1
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COMPOSITE AMENDED
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PREMIER ENTERTAINMENT BILOXI LLC,
A DELAWARE LIMITED LIABILITY COMPANY
EFFECTIVE AS OF JANUARY 23, 2004
AS AMENDED THROUGH MAY 16, 2006
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS|..............................................2
Section 1.1. Definitions...............................................2
ARTICLE 2 ORGANIZATION OF COMPANY|.................................14
Section 2.1. Organization.............................................14
Section 2.2. Name of the Company......................................14
Section 2.3. Registered Agent and Office..............................14
Section 2.4. Principal Place of Business..............................15
Section 2.5. Permitted Businesses.....................................15
Section 2.6. Casino Approvals for Development of Project..............15
Section 2.7. Certificate Evidencing Membership Interest Ownership;
Pledge Thereof...........................................15
ARTICLE 3 MANAGEMENT OF THE COMPANY................................16
Section 3.1. Manager..................................................16
Section 3.2. Number, Tenure and Qualifications........................16
Section 3.3. Certain Powers of the Manager............................16
Section 3.4. Board of Managers Approval...............................18
Section 3.5. Duty of Care; Liability for Certain Acts.................20
Section 3.6. Resignation and Removal of Manager and Board
of Managers..............................................21
Section 3.7. Vacancies................................................21
Section 3.8. Compensation of General Manager/Operator.................21
Section 3.9. Transactions with the Company; Compensation..............21
Section 3.10. Certain Required Approvals...............................22
Section 3.11. Actions by Class B Common Units..........................22
ARTICLE 4 MEMBERS; MEETINGS & DUTIES...............................23
Section 4.1. Members..................................................23
Section 4.2. Meetings.................................................23
Section 4.3. Notice of Meetings.......................................23
Section 4.4. Meeting of All Members...................................23
Section 4.5. Record Date..............................................23
Section 4.6. Quorum...................................................24
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TABLE OF CONTENTS
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PAGE
Section 4.7. Manner Of Acting.........................................24
Section 4.8. Action by Members Without a Meeting......................25
Section 4.9. Waiver of Notice.........................................25
Section 4.10. Telephone Meetings of the Members........................25
Section 4.11. Liability of Members to Third Parties....................25
Section 4.12. Liability of a Member to the Company.....................25
Section 4.13. Conflicts of Interest....................................25
Section 4.14. Establishment of Class C Common Units....................26
ARTICLE 5 INDEMNIFICATION..........................................27
Section 5.1. Indemnification of Members and Managers..................27
Section 5.2. Indemnification in Actions by the Company................28
Section 5.3. Indemnification With Respect to Certain Claims
Notwithstanding Lack of Success on Other Claims..........28
Section 5.4. Determination of Meeting Applicable Standard.............28
Section 5.5. Payment of Expenses in Advance of Disposition of
Action...................................................28
Section 5.6. Non-Exclusivity of Article...............................29
Section 5.7. Insurance................................................29
ARTICLE 6 CONTRIBUTIONS AND CAPITAL ACCOUNTS.......................29
Section 6.1. Capital Contributions....................................29
Section 6.2. Preemptive Rights........................................29
Section 6.3. No Rights To Return Of Capital Contributions Or To
Withdraw.................................................30
Section 6.4. Capital Accounts.........................................30
Section 6.5. Sale or Exchange of Interest.............................31
Section 6.6. Compliance with Section 704(b) of the Code...............31
ARTICLE 7 ALLOCATIONS..............................................31
Section 7.1. Book Allocations.........................................31
Section 7.2. [Intentionally Deleted]..................................32
Section 7.3. Company Minimum Gain Chargeback..........................32
Section 7.4. Member Nonrecourse Deductions............................32
Section 7.5. Member Minimum Gain Chargeback...........................32
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 7.6. Qualified Income Offset..................................33
Section 7.7. Tax Allocations..........................................33
ARTICLE 8 DISTRIBUTIONS............................................33
Section 8.1. Regular Distributions of Net Cash Flow...................33
Section 8.2. Tax Distributions........................................34
Section 8.3. Limitations on Distributions.............................34
Section 8.4. Extraordinary Distribution Preferences in Connection
with Organization and Capitalization of the
Company..................................................34
ARTICLE 9 FISCAL MATTERS...........................................35
Section 9.1. Fiscal Year..............................................35
Section 9.2. Books and Records........................................35
Section 9.3. Reports to Members.......................................35
Section 9.4. Tax Matters Partner......................................36
Section 9.5. Auditors.................................................36
Section 9.6. Section 754 Election.....................................36
Section 9.7. Standardized Reporting Requirements......................37
ARTICLE 10 DISPOSITION OF MEMBERSHIP AND ECONOMIC INTERESTS.........37
Section 10.1. Limitations with Respect to Assignees....................37
Section 10.2. Transfer Upon Consent, Etc...............................37
Section 10.3. Right of First Refusal; Permitted Sales..................38
Section 10.4. Transfer Upon Dissociation of a Member...................39
Section 10.5. Purchase Price...........................................39
Section 10.6. Certain Specifically Permitted Transfers.................41
Section 10.7. Restrictions on Transfers of Units of a Member...........41
Section 10.8. Tag-Along Rights.........................................42
Section 10.9. Required Participation In Certain Transactions
(Drag-Along).............................................43
Section 10.10. Effects of Disposition of Economic Interest..............44
ARTICLE 11 REGISTRATION RIGHTS......................................45
Section 11.1. Registration Rights......................................45
ARTICLE 12 ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS............45
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TABLE OF CONTENTS
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Section 12.1. Rights of Assignees......................................45
Section 12.2. Admission of Substitute Members..........................45
Section 12.3. Admission of Additional Members..........................46
Section 12.4. Gaming Commission Suitability............................46
ARTICLE 13 DISSOCIATION, DISSOLUTION AND WINDING UP.................46
Section 13.1. Dissociation.............................................46
Section 13.2. [Intentionally Deleted.].................................48
Section 13.3. Covenant Not to Compete upon Dissociation................48
Section 13.4. Term and Dissolution.....................................48
Section 13.5. Distribution of Assets on Dissolution....................48
Section 13.6. Winding Up and Certificate of Cancellation...............49
Section 13.7. Effect of Dissolution....................................49
ARTICLE 14 MISCELLANEOUS PROVISIONS.................................49
Section 14.1. Entire Agreement.........................................49
Section 14.2. Interpretation...........................................49
Section 14.3. Amendment and Waiver.....................................49
Section 14.4. Governing Law............................................50
Section 14.5. Dispute Resolution; Arbitration..........................50
Section 14.6. Execution of Additional Instruments......................51
Section 14.7. Construction of Terms....................................51
Section 14.8. Captions.................................................51
Section 14.9. Waivers..................................................51
Section 14.10. Rights and Remedies Cumulative...........................51
Section 14.11. Heirs, Successors and Assigns............................52
Section 14.12. Costs and Expenses.......................................52
Section 14.13. Counterparts.............................................52
Section 14.14. Notices..................................................52
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EXHIBITS AND SCHEDULES
Exhibit A......Capital Contributions And Percentage Interests
Exhibit B......Non-Competition Agreement
Exhibit C......Standardized Reporting Requirements
Schedule 1.....Major Decisions
COMPOSITE AMENDED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
PREMIER ENTERTAINMENT BILOXI LLC
This COMPOSITE AMENDED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
(this "Agreement") of Premier Entertainment Biloxi LLC, a Delaware limited
liability company (together with Premier (as defined below) where applicable
herein, the "Company") organized pursuant to the Delaware Limited Liability
Company Act (the "Act"), effective as of the 23 day of January, 2004 (the
"Effective Date"), is entered into by and among the persons and entities
executing this Agreement as Members.
W I T N E S S E T H:
WHEREAS, the Organizing Member, GAR, LLC, a Mississippi limited
liability company ("GAR"), organized Premier Entertainment, LLC, a Mississippi
limited liability company ("Premier"), pursuant to the provisions of the
Mississippi Limited Liability Company Act, as amended from time to time (the
"Mississippi Act") by executing and filing a Certificate of Formation with the
Secretary of State of Mississippi on October 18, 2002;
WHEREAS, GAR organized the Company, pursuant to the provisions of
the Act (as hereinafter defined) by executing and filing a Certificate of
Formation with the Secretary of State (as hereinafter defined) on October 16,
2003;
WHEREAS, Premier merged with and into the Company, with the Company
as the surviving entity in such merger pursuant to the provisions of (i) that
certain Agreement and Plan of Merger dated as of December __, 2003 (the "Merger
Agreement"), by and between Premier and The Company, (ii) That Certain
Certificate Of Merger (the "Certificate Of Merger") filed with the Secretary of
State on December __, 2003 and (iii) the Act and the Mississippi Act;
WHEREAS, Premier and AA Capital Direct Investments Fund, L.P., a
Delaware limited partnership ("AA Capital Direct") entered into that certain
Loan and Security Agreement dated as of May 15, 2003 (as amended by that certain
First Amendment to Loan and Security Agreement dated as of September 19, 2003,
the "Original Loan Agreement");
WHEREAS, AA Capital Direct merged with and into AA Capital Equity
Fund, L.P., a Delaware limited partnership, with AA Capital Equity Fund, L.P., a
Delaware limited partnership as the surviving entity in such merger (together
with its successors and assigns, "AA Capital");
WHEREAS, AA Capital and the Company entered into that certain Second
Amendment to Loan and Security Agreement dated as of December __, 2003 (the
"Second Amendment"), pursuant to which the Company became the borrower under the
Original Loan Agreement, as amended by the Second Amendment (the Original Loan
Agreement, the Second Amendment and any other amendments, modifications,
supplements or restatements of the same, collectively, the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, and the exercise of AA
Capital's rights pursuant to Section 11.1 thereto, AA Capital has become a
member of the Company and owns on the date hereof 45% (on a fully-diluted basis)
of the Membership Interests in the Company (with all of the preferences,
privileges and rights provided herein), representing 100% ownership of the Class
A Preferred Units and 100% ownership of the Class B Common Units;
WHEREAS, GAR owns on the date hereof 55% (on a fully-diluted basis)
of the Membership Interests in the Company, solely represented by its ownership
of 100% of the Class A Common Units; and
WHEREAS, the current Members of the Company wish to enter into this
Agreement to set forth the terms and conditions of their agreements and
understandings and to establish their respective rights and obligations with
respect to the Company.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto (intending to be
legally bound) hereby agree as follows:
ARTICLE 1
DEFINITIONS|
Section 1.1. Definitions. The following terms used in this Agreement shall
have the following meanings unless otherwise expressly provided herein:
"Acceptance Notice" shall have the meaning given in Section 10.9
hereof.
"Act" shall mean the Delaware Limited Liability Company Act, as
amended from time to time, and any successor thereto.
"Additional Capital Contributions" shall have the meaning given in
Section 6.2 hereof.
"Additional Member" shall mean a Member, other than a Substitute
Member, who has acquired a Membership Interest from the Company and has become a
Member in accordance with Section 12.3 hereof after the Effective Date of this
Agreement.
"Adjusted Allocated Taxable Income" shall have the meaning given in
Section 8.2 hereof.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations 1.704-2(g)(1) and
1.704-2(i)(5); and
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(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(B)(2)(II)(D)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
(or any successor thereto) and shall be interpreted consistently therewith.
"Affiliate" shall mean, with respect to any Person, (1) any Person
directly or indirectly controlling, controlled by, or under common control with
such Person, (2) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (3) any member, manager,
officer, director or general partner of such Person, or (4) any Person who is a
member, manager, officer, director, general partner, trustee, or a holder of ten
percent (10%) or more of the voting interests of any Person described in clauses
(i) through (iii) of this sentence. For purposes of this definition, the term
"controls," "is controlled by" or "is under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management policies of a Person or entity, whether through the ownership of
voting securities, by contract or otherwise.
"Applicable Law" shall mean all existing and future applicable laws
(including environment laws), rules, regulations (including proposed, temporary
and final income tax regulations), statutes, treaties, codes, ordinances,
permits, certificates, orders and licenses of and interpretations by, any
Governmental Authority, and applicable judgments, decrees, injunctions, writs,
orders or like action or any court, arbitrator or other administrative, judicial
or quasi-judicial tribunal or agency of competent jurisdiction (including those
pertaining to health, safety or the environment and those pertaining to the
construction, use or occupancy of the Project) and any restrictive covenant or
deed restriction or easement of record affecting any of the real estate owned or
leased by the Company.
"Assignee" shall mean a transferee of an Economic Interest who has
not been admitted as a Substitute Member.
"Board Of Managers" shall mean a board of managers of the Company
that has the rights and powers, and approval rights, specified in this
Agreement.
"Budget" shall mean the project budget and timeline attached to the
Loan Agreement, which sets forth, among other items, the projected costs to
construct and develop the Project, which shall be in form and substance
reasonably satisfactory to the owners of the Class B Common Units in their sole
and absolute determination, or such budget subsequently approved in writing by
the owners of the Class B Common Units.
"Capital Account" shall mean the account maintained with respect to
a Member or Assignee determined in accordance with ARTICLE 6.
"Capital Contribution" shall mean any contribution of Property or
the obligation to contribute Property made by or on behalf of a Member or
Assignee, subject to the rights of the owners of the Class B Common Units and
the Class A Preferred Units to receive the payments provided in Section 8.4.
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"Casino" shall mean the casino that is a component part of the
Project, as depicted in the Plans and Specifications.
"Casino Approvals" shall mean all permits, authorizations, findings
of suitability, background investigations, registrations, consents, approvals,
Preliminary Site Approvals, waivers, exceptions, variances, licenses,
exemptions, publications, filings, notices to and declarations of or with, or
required by, any Governmental Authority, or required by any Applicable Law for
the construction, development, use, occupancy and operation of the Casino,
including without limitation, findings of suitability and Preliminary Site
Approval for the Project.
"Certificate" shall mean the Certificate of Formation of the
Company, as amended from time to time.
"Class A Common Units" means the Class A Common Units of the
Company, which are owned on the date hereof entirely by GAR.
"Class B Common Units" means the Class B Common Units of the Company
having all of the voting preferences and other preferences, privileges and
rights set forth in this Agreement (including, without limitation, pursuant to
Section 3.10, Section 3.11 and Section 10.9), which are owned on the date hereof
entirely by AA Capital and certain of its Affiliates.
"Class A Preferred Units" means the Class A Preferred Units of the
Company, having all of the payment preferences and other preferences, privileges
and rights set forth in this Agreement (including, without limitation, pursuant
to Section 8.4, which are owned on the date hereof entirely by AA Capital and
certain of its Affiliates.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor thereto.
"Company" shall mean Premier Entertainment Biloxi LLC, a Delaware
limited liability company, and any successor limited liability company.
"Company Minimum Gain" shall mean an amount determined by first
computing for each Company Nonrecourse Liability any gain the Company would
realize if it disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Taxable Year, the net increase or decrease in Company
Minimum Gain is determined by comparing the Company Minimum Gain on the last day
of the immediately preceding Taxable Year with the Minimum Gain on the last day
of the current Taxable Year. Notwithstanding any provision to the contrary
contained herein, Company Minimum Gain, and increases and decreases in Company
Minimum Gain, are intended to be computed in accordance with Section 704 of the
Code and the Regulations issued thereunder, as the same may be issued and
interpreted from time to time.
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"Company Nonrecourse Liability" shall mean any debt or obligation of
the Company to the extent that no Member or Related Person bears the economic
risk of loss (as defined in Section 1.752-2 of the Regulations) with respect to
the liability.
"Company Property" and "Company Properties" shall mean and include
any Property owned by the Company, including, without limitation, the Project.
"Contractor Agreement" shall mean the bonded, guaranteed maximum
price construction contract between the general contractor and the Company for
the construction of the Project.
"Depreciation" shall mean, for each Fiscal Year, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
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 Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Manager.
"Development Loan" shall mean the 144A public senior note offering
for the Project obtained by the Company on or prior to the date hereof, with
total note proceeds of approximately $150 million, on terms, provisions and
conditions reasonably acceptable to the owners of the Class A Common Units and
the owners of the Class B Common Units.
"Disposition" ("Dispose") shall mean any sale, assignment, transfer,
exchange, mortgage, pledge, grant, hypothecation or other transfer, absolute or
as security or encumbrance (including dispositions by operation of law) of an
Economic Interest or Percentage Interest in the Company.
"Dissociation" ("Dissociate") shall mean any action or event which
causes a Person to cease to be Member of the Company as described in ARTICLE 13
hereof.
"Dissolution Event" shall mean an event, the occurrence of which
will result in the dissolution of the Company under ARTICLE 13 unless a Super
Majority in Interest and a Super Majority of the Board agree to the contrary.
"Distribution" shall mean a transfer of Property made by the Company
to a Member or an Assignee on account of such Member's or Assignee's Economic
Interest.
"▇▇▇▇▇▇▇ Money" shall mean a non-refundable amount equal to five
percent (5%) of the total consideration offered pursuant to a bona fide written
offer from a Prospective Purchaser, to be paid by the holders of the Class A
Common Units to the holders of the Class B Common Units and/or the Class A
Preferred Units, as applicable, either in cash or immediately available funds to
an account designated by the holders of the Class B Common Units and/or the
Class A Preferred Units, as applicable.
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"Economic Interest" shall mean each Member's or Assignee's rights to
share in the Profits and Losses of the Company, to receive interim and
liquidating Distributions from the Company and to assign such interest all in
accordance with the terms of this Agreement.
"Effective Date" shall mean January __, 2004.
"Fairness Opinion" shall mean a fairness opinion that is obtained
from a reputable appraisal firm or investment banking firm (at the sole cost and
expense of the Company) indicating that the price offered by the applicable
Prospective Purchaser represents a fair market value for the equity or assets
contemplated to be sold at such time.
"Fiscal Year" shall mean, as applicable, (i) the period commencing
on the Effective Date and ending on December 31, 2003, (ii) any subsequent
twelve (12) month period commencing on January 1, and ending on December 31, or
(iii) any portion of the period described in Clause (ii) for which the Company
is required to close its books and allocate Profits, Losses, and other items of
income, gain, loss, or deduction pursuant to ARTICLE 7 of this Agreement.
"Governmental Authority" shall mean the government of the United
States of America, the State of Mississippi, the State of Delaware and every
other State in which the Company does business, if any, and each and every
agency, division, commission, subdivision and instrumentality of the foregoing
(including specifically but without limitation, the Delaware Secretary of State,
the Mississippi Gaming Commission, the Mississippi State Tax Commission, the
Mississippi Department of Marine Resources, and the United States Army Corps of
Engineers), any or all of which have jurisdiction over the Project or any part
thereof except that if reference is made to a single governing authority, such
term shall include only the single government authority specified.
"Gross Asset Value" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the gross fair market value of
such asset, as determined by the contributing Member and the
Manager, provided that the initial Gross Asset Values of the assets
contributed to the Company pursuant to Section 6.1 hereof shall be
as set forth in such Section; provided that, if the contributing
Member is the Manager of the Company or is an Affiliate of the
Manager of the Company, the gross fair market value of such asset
shall be determined by agreement between the contributing Member, on
the one hand, and a Majority of the non-contributing Members on the
other;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
commercially reasonably determined by the Manager, as of the
following times: (a) the acquisition of additional Membership
Interests by any new or existing Member in exchange for more than a
de minimis Capital Contribution; (b) the distribution by the Company
to a Member of more than a de minimis amount of Property as
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consideration for a Membership Interest; and (c) the liquidation of
the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the Manager reasonably
determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Members in the
Company;
(iii) The Gross Asset Value of any Company asset distributed
to any Member shall be adjusted to equal the gross fair market value
of such asset on the date of distribution as determined by the
recipient Member and the Manager, provided that, if the recipient
Member is the Manager of the Company or is an Affiliate of the
Manager of the Company, the gross fair market value of such asset
shall be determined by the recipient Member, on the one hand, and by
a Majority of the other Members on the other; and
(iv) The Gross Asset Values 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 Regulation
Section 1.704-1(b)(2)(iv)(m), and the definition of "Profits" and
"Losses" hereinbelow; provided, however, that Gross Asset Values
shall not be adjusted pursuant to the foregoing clause to the extent
the Manager determines that an adjustment pursuant to subsection
(ii) of this definition of "Gross Asset Value" hereof is necessary
or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subsection (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subsections (i), (ii), or (iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Hard Rock" shall mean Hard Rock Hotel Licensing, Inc., a Florida
corporation, and/or Hard Rock Cafe International (STP), Inc., a New York
corporation, as applicable, together with each of their respective successors
and assigns.
"Hard Rock Lessee" shall mean Hard Rock Cafe International (STP),
Inc., a New York corporation, together with its successors and assigns.
"Hard Rock License Agreements" shall mean, collectively, that
certain License Agreement dated as of May 15, 2003, by and between the Company
and Hard Rock, that certain Lease Agreement (Cafe) by and between the Company
and Hard Rock Lessee, that certain Lease Agreement (Retail Store) by and between
the Company and Hard Rock Lessee, and that certain Memorabilia Lease by and
between the Company and Hard Rock, and any other agreement entered into by the
Company in connection therewith, as the same may be amended or modified in
accordance with the terms and provisions of this Agreement.
"Initial Capital Contribution" shall mean the Capital Contribution
of the Members described in Section 6.1 and set forth on Exhibit A attached
hereto.
"Initial Transfer Amount" shall mean the dollar amount of the
principal indebtedness loaned (together with the amount of any capital
contribution or other amounts, if any, provided) to the Company by the owners of
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the Class A Preferred Units, and any and all costs and expenses (including,
without limitation, reasonable attorneys fees) and any other "Loan Expenses" (as
defined in the Loan Agreement) owing by the Company to the owners of the Class A
Preferred Units and the Class B Common Units pursuant to the Loan Agreement and
in connection with this Agreement and the Loan Documents, in each case
immediately before or concurrently with giving effect to this Agreement.
"Initial 12% Interest Rate Amount" shall mean the amount from time
to time represented by a cumulative twelve percent (12%) per annum return
compounded annually accruing on the Initial Transfer Amount up until such time
as the Initial Transfer Amount equals or exceeds Thirty-Five Million Dollars
($35,000,000) (with such Initial Transfer Amount being reduced as and when
distributions are made to the owner of the Class A Preferred Units as provided
hereunder).
"Initial Units" shall have the meaning given in Section 4.14 hereof.
"IPO" shall have the meaning contained in Section 11.1 hereof.
"Limited Liability Company Operating Agreement" shall mean this
Agreement including all amendments hereto adopted in accordance with Section
14.3 and the Act.
"Loan Agreement" shall have the meaning provided in the Recitals
hereinabove.
"Loan Agreement Closing Date" shall mean May 15, 2003.
"Loan Documents" shall mean any and all agreements, instruments,
certificates and documents, including, without limitation, investment
agreements, security agreements, loan agreements, notes, promissory notes,
guarantees, keep well agreements, landlord waivers, mortgages, deeds of trust,
leasehold mortgages, indenture, registration rights agreement, offering
memorandum, subordination agreements, intercreditor agreements, estoppel
certificates, pledges, pledge agreements, powers of attorney, consents,
assignments, collateral assignments, reimbursement agreements, contracts,
notices, leases, collateral assignments of key man life insurance policies,
financing statements and all other written matter, in each case evidencing,
securing or relating to the Development Loan or the Mezzanine Loan, whether
heretofore, now, or hereafter executed by or on behalf of the Company, any
Affiliate, or any other Person, and delivered to or in favor of either of the
lenders or other Persons party to such "Loan Documents", together with all
agreements and documents referred to therein or contemplated thereby, as each
may be amended, modified or supplemented from time to time.
"Majority In Interest" shall mean, if and to the extent applicable,
that number of Members who in the aggregate hold more than fifty percent (50%)
of the Percentage Interests held by those Members entitled to consent or to vote
upon the applicable action or matter pursuant to the terms of this Agreement.
"Manager" shall mean a Member or other Person designated by the
Members to serve as the Manager of the Company under ARTICLE 3 hereof.
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"Member" shall mean those persons identified on Exhibit A attached
hereto who have executed this Agreement as of the Effective Date (including the
owners of the Class A Common Units, the Class B Common Units, and the Class A
Preferred Units), and those persons identified on Exhibit A pursuant to
amendments made thereto from time to time in accordance with this Agreement.
"Member Minimum Gain" shall mean an amount determined by first
computing for each Member Nonrecourse Liability any gain the Company would
realize if it disposed of the Company Property subject to that liability for no
consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Member Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Taxable Year, the net increase or decrease in Member
Minimum Gain is determined by comparing the Member Minimum Gain on the last day
of the immediately preceding Taxable Year with the Member Minimum Gain on the
last day of the current Taxable Year. Notwithstanding any provision to the
contrary contained herein, Member Minimum Gain and increases and decreases in
Member Minimum Gain are intended to be computed in accordance with Section 704
of the Code and the Regulations issued thereunder, as the same may be issued and
interpreted from time to time.
"Member Nonrecourse Deductions" shall mean the net increase during
the Taxable Year, if any, in Member Minimum Gain, reduced (but not below zero)
by any distribution of proceeds that are attributable to a Member Nonrecourse
Liability and allocable to an increase in such Member Minimum Gain under Section
1.704-2(i) of the Regulations.
"Member Nonrecourse Liability" shall mean any debt or obligation of
the Company to the extent the liability is nonrecourse under state law, and on
which a Member or Related Person bears the economic risk of loss under Section
1.752-2 of the Regulations because, for example, the Member or Related Person is
the creditor or a guarantor.
"Membership Interest" shall mean a Member's entire interest in the
Company including such Member's Economic Interest and the right of the Member to
participate in the management and operation of the business and affairs of the
Company, including, but not limited to, the right to vote on, consent to, or
otherwise participate in any decision, vote or action of or by the Members
granted pursuant to this Agreement and the Act. In the case of an Assignee, the
term "Membership Interest" shall mean only the Assignee's Economic Interest in
the Company.
"Mezzanine Loan" shall mean the mezzanine loan for the Project
obtained by the Company on or prior to the date hereof, on terms, provisions and
conditions reasonably acceptable to the owners of the Class A Common Units and
the Class B Common Units.
"Net Cash Flow" shall mean the gross cash income from the Company's
operations plus cash proceeds, if any, from the sale, refinancing, liquidation
or other disposition of Company Property, reduced by the sum of all current
expenses of the Company, as well as any allowances or reasonable reserves for
Company expenses, debt repayments (including repayment of any permitted loans
made by any Member on terms approved by the Super Majority of the Board),
capital improvements, replacements and contingencies, all as determined by the
9
Manager (and approved in advance by the Super Majority of the Board and as
confirmed by the Company's independent auditors appointed in accordance with
Section 9.5.
"Non-Competition Territory" shall have the meaning given in Section
4.13(c) hereof.
"Notice" shall be in writing and given in accordance with Section
14.14.
"Offsettable Decrease" shall mean any allocation that unexpectedly
causes or increases a deficit in a Member's or Assignee's Capital Account as of
the end of the Taxable Year to which the allocation relates attributable to
depletion allowances under Section 1.704(b)(2)(iv)(k) of the Regulations,
allocations of loss and deductions under Section 704(e)(2) or 706 of the Code or
Section 1.751-1 of the Regulations, or Distributions that, as of the end of the
Taxable Year, are reasonably expected to be made to the extent they exceed the
offsetting increases to such Member's or Assignee's Capital Account that
reasonably are expected to occur during or (prior to) the Taxable Years in which
such Distributions are expected to be made (other than increases pursuant to a
minimum gain chargeback pursuant to Section 7.3 and Section 7.5 hereof).
"Opening" shall have the meaning given in Section 4.14 hereof.
"Organization" shall mean any entity permitted to be a Member of a
limited liability company under the Act. The term "Organization" includes,
without limitation, corporations (both non-profit and other corporations),
partnerships (both limited and general), joint ventures, limited liability
companies, and unincorporated associations, but does not include joint tenancies
and tenancies by the entirety.
"Organizing Member" shall mean GAR, LLC, a Mississippi limited
liability company, which was the sole member of the Company upon its formation.
"Percentage Interest" shall mean the Unitholders' relative interests
on the applicable date of determination in amounts of Net Cash Flow to be
distributed by the Company, stated as percentages set forth on Exhibit A hereto,
but giving effect to Section 8.4; the Unitholders' Percentage Interests are
subject to adjustment pursuant to the provisions of ARTICLE 10 hereof.
"Person" shall include an individual, trust, estate, or any
Organization.
"Plans And Specifications" shall mean with respect to any
improvement on any real estate owned or leased by the Company, the final plans
and specifications for such improvements prepared by the architect and/or
engineers for the Project, and, if applicable, referred to by the appraiser in
the appraisal of the Project required to be submitted to the construction lender
to the Project, as such Plans and Specifications may be hereafter amended,
supplemented or otherwise modified from time to time.
"Preference Amount" shall mean the Initial Transfer Amount, plus the
Initial 12% Interest Rate Amount, plus the Subsequent 17% Interest Rate Amount.
10
"Preliminary Site Approval" shall mean the approval granted by the
Mississippi Gaming Commission pursuant to Mississippi Gaming Commission
Regulation II., A., Section 3(h), as previously approved by the Mississippi
Gaming Commission on July 23, 2003, as same may be amended from time to time for
operation of the Casino.
"Principal Place Of Business" shall mean the principal office of the
Company designated in Section 2.4.
"Profits" and "Losses" shall mean, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year, determined
in accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses pursuant to this definition shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to Subsections (ii) or (iii) of the definition
of "Gross Asset Value" provided above, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value
of the Property disposed of, notwithstanding that the adjusted tax
basis of such Property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year, computed in accordance with the definition of
"Fiscal Year" hereof;
(vi) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations 1.704-1(b)(2)(iv)(m)(4)
to be taken into account in determining Capital Accounts as a result
of a Distribution other than in liquidation of a Member's Interest,
the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
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adjustment decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Notwithstanding any other provision of this Section, any
items which are specially allocated pursuant to Section 7.3 through
Section 7.7 hereof shall not be taken into account in computing
Profits or Losses.
The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Section 7.3 through Section 7.7 hereof
shall be determined by applying rules analogous to those set forth in
subsections (i) through (vi) of this definition, above.
"Project" shall mean a Hard Rock branded hotel, casino, cafe, spa,
parking garage, retail shops, meeting facilities and related facilities on
certain real estate located in Biloxi, ▇▇▇▇▇▇▇▇ County, Mississippi.
"Property" and "Properties" shall mean and include any property
real, personal or mixed, tangible or intangible, including cash money and any
legal or equitable interest in such property, including contractual rights,
privileges and benefits, but excluding services and promises to perform services
in the future.
"Prospective Purchaser" shall mean a Person that is a bona fide
third party (as reasonably determined by AA Capital in good faith) and neither
an Affiliate nor Related Person of a Member.
"Real Property Documents" shall mean any and all agreements,
instruments and documents of the Company (or its predecessor-in-interest,
Premier) relating to real property or any interest of any kind relating thereto,
which include, among other agreements, instruments and documents, the Real
Estate Leases, the Assignment of the MMI/MDC Option and Right of First Refusal
Agreement, the ▇▇▇▇▇▇ Purchase Agreement, the ▇▇▇▇▇▇ Property Option, the Full
House Contract, the ▇'▇▇▇▇▇ Agreement of Purchase and Sale, the Sun Tan
Agreement of Purchase and Sale, and all amendments thereto as of the date
hereof.
"Regulations" shall mean the permanent, temporary, proposed, or
proposed and temporary regulations issued by the Department of the Treasury that
are promulgated under the Code as amended.
"Related Person" shall mean a Person having a relationship to a
Member that is described in Section 1.752-4(b) of the Regulations.
"Repayment Event" shall mean the cumulative distribution to the
owners of the Class A Preferred Units of an amount equal to the Preference
Amount.
"Required Participation Transaction" shall have the meaning given in
Section 10.9 hereof.
"Sale Event" shall mean the sale of the business of the Company to
an unaffiliated third party by a sale of all or substantially all of any
Member's Membership Units, a merger, recapitalization, conversion,
12
reorganization, or consolidation (or similar transaction) of the Company, or a
sale of all or substantially all of the assets of the Company.
"Sale Proceeds" shall have the meaning contained in Section 10.8(g)
hereof.
"Secretary Of State" shall mean the Secretary of State of Delaware.
"Selling Member" shall have the meaning given in Section 10.8
hereof.
"Subsequent 17% Interest Rate Amount" shall mean the amount from
time to time represented by a cumulative seventeen percent (17%) per annum
return compounded annually accruing on the entire Initial Transfer Amount
commencing immediately and automatically at such time and thereafter as the
Initial Transfer Amount equals or exceeds Thirty-Five Million Dollars
($35,000,000) (with such Initial Transfer Amount being reduced as and when
distributions are made to the owner of the Class A Preferred Units as provided
hereunder).
"Substitute Member" shall mean an Assignee who has been admitted as
a Member of the Company in accordance with Section 12.2. Upon becoming a Member
of the Company, such Assignee shall have all the rights of a Member as provided
in Section 12.2 hereof.
"Super Majority In Interest" shall mean that number of Unitholders
who in the aggregate hold more than sixty-seven percent (67%) of the Percentage
Interests held by those Unitholders entitled to consent or to vote upon the
applicable action or matter pursuant to the terms of this Agreement.
"Super Majority Of The Board" shall mean the affirmative vote or
consent of members of the Board of Managers holding at least sixty percent (60%)
of the Voting Power.
"Tag-Along Sale" and "Tag-Along Notice" shall have the meanings
given in Section 10.8 hereof.
"Tax Distributions" shall have the meaning given in Section 8.2
hereof.
"Taxing Jurisdiction" shall mean the taxing jurisdiction of the
Federal Government and of any state, local, or foreign government that collects
tax, interest or penalties, however designated, on any Member's share of the
income or gain attributable to the Company.
"Transfer" shall mean any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer for consideration,
absolute or as security or encumbrance (including dispositions by operation of
law) of an Economic Interest in the Company.
"Unitholder" shall mean a Member or Assignee who is the record owner
of any of the Class A Preferred Units, the Class A Common Units or the Class B
Common Units; provided, Unitholders who are not actual Members do not have
voting rights in connection with any such unit ownership.
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"Voting Power" shall mean the aggregate number of votes held by the
members of the Board of Managers.
ARTICLE 2
ORGANIZATION OF COMPANY
Section 2.1. Organization. On October 18, 2002, the Organizing Member
organized Premier pursuant to the provisions of the Mississippi Act by causing
its authorized representative to execute and file the Certificate of Formation
with the Secretary of State of Mississippi. On October __, 2003, the Organizing
Member organized the Company pursuant to the provisions of the Act by causing
its authorized representative to execute and file the Certificate with the
Secretary of State. On December __, 2003, Premier merged with and into the
Company, with the Company as the surviving entity in such merger pursuant to the
provisions of (i) the Merger Agreement, (ii) the Certificate and (iii) the Act
and the Mississippi Act. On May 15, 2003, Premier (with the written approval of
Organizing Member, which was then the sole Member of Premier), entered into the
Original Loan Agreement. On December __, 2003, the Company (with the written
approval of the Organizing Member, which was then the sole Member of the
Company) and AA Capital amended the Original Loan Agreement pursuant to the
Second Amendment to, among other items, cause the Company to become the
"borrower" under the Loan Agreement. Pursuant to Section 11.1 of the Loan
Agreement, and simultaneously with the execution of this Agreement, AA Capital
in consideration of the principal indebtedness, and the interest accrued
thereon, owing by the Company to AA Capital pursuant to the Loan Agreement, and
with the express approval and consent of the Company and GAR, was issued
forty-five percent (45%), on a fully-diluted basis, of the equity in the Company
(with all of the preferences, privileges and rights provided herein),
representing 100% ownership of the Class A Preferred Units of the Company and
100% ownership of the Class B Common Units of the Company. GAR has contributed
the agreed upon capital to the Company as set forth on Exhibit A hereto,
representing fifty-five percent (55%), on a fully-diluted basis of the equity of
the Company, and representing 100% ownership of the Class A Common Units of the
Company.
Section 2.2. Name of the Company. The name of the Company shall be
"Premier Entertainment Biloxi LLC". The business of the Company shall be
conducted under the name "Hard Rock Hotel & Casino Biloxi" or such other names
as the Manager (upon prior consultation with the Board of Managers) may from
time to time deem advisable.
Section 2.3. Registered Agent and Office. The registered office of the
Company required by the Act to be maintained in the State of Delaware shall be
the office of the initial registered agent named in the Certificate or such
other office (which need not be a place of business of the Company) as the
Manager may from time to time designate in the manner provided by the Act. The
registered agent of the Company in the State of Delaware shall be the initial
registered agent named in the Certificate or such other Persons or Persons as
the Manager may from time to time designate in the manner provided by the Act.
The Manager shall promptly forward to AA Capital copies of any and all notices
and other materials or information furnished to the Manager in its capacity as
registered agent for the Company.
14
Section 2.4. Principal Place of Business. The Principal Place of Business
of the Company shall be located at Biloxi, ▇▇▇▇▇▇▇▇ County, Mississippi. The
Company may locate its principal places of business at any other place or places
as the Manager may from time to time deem advisable, provided that Manager shall
give the Members written notice, and further provided such place or places are
operating locations of the Company.
Section 2.5. Permitted Businesses. The business of the Company shall be:
(a) To hold, lease, improve, sell and/or exchange real property or any
other assets, or otherwise dispose of such assets, or portions thereof; to
develop a licensed commercial gaming and hotel operation in Biloxi, Mississippi
or in such other geographic areas as the Manager (with the consent of the Super
Majority of the Board) may from time to time deem advisable; and to engage in
such other casino gaming and hotel related business or businesses as the Manager
(with the consent of the Super Majority of the Board) may from time to time deem
advisable.
(b) Subject to the limitation imposed by Section 2.5(a) above, to
accomplish any lawful business whatsoever or which shall at any time appear
conducive to or expedient for the protection or benefit of the Company and its
Property.
(c) To exercise all other powers necessary to or reasonably connected
with the Company's business which may be legally exercised by limited liability
companies under the Act or under the laws of any jurisdiction in which the
Company may conduct its business.
(d) To engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
Section 2.6. Casino Approvals for Development of Project. The Members
hereby recognize that the business of the Company in developing a commercial
gaming establishment as part of the Project, will require the licensing of the
Company and one or more of its Members. Each Member, at its sole cost and
expense, hereby agrees to comply with the reasonable requirements of the
Applicable Law in order to obtain Casino Approvals, including without
limitation, reasonably cooperating with any investigations by the applicable
Governmental Authority related to such approvals, and submitting itself and its
respective members, partners and equity owners, as reasonably required, to
investigations regarding their suitability (as shall be determined by the
Mississippi Gaming Commission), and filing applications for licensing and
obtaining findings of suitability with the Mississippi Gaming Commission and
with such other Governmental Authorities as the Manager deems reasonably
necessary for the development and operation of the Project (after consultation
with legal counsel).
Section 2.7. Certificate Evidencing Membership Interest Ownership; Pledge
Thereof. On the date hereof, the Company shall cause certificates to be issued
to the Members to evidence their respective ownership of membership units in the
Company. Each of the Members hereby agree that such membership units (and the
certificates representing such units) may be pledged in favor of the applicable
trustee (on behalf of the noteholders) to secure repayment of the indebtedness
and liabilities evidenced by the Development Loan; provided, if and to the
extent such pledges are foreclosed upon by such trustee or any applicable
secured creditor (in accordance with and in compliance with applicable law and
the applicable pledge documents to which both AA Capital and GAR are
15
signatories), then such trustee or applicable secured creditor shall be a Member
of the Company entitled to all rights of a Substitute Member of the Company
(including, without limitation, the right to participate in the management of
the business and affairs of the Company) and the written approval of any Member
shall not be required as a condition to such foreclosure or to the substitution
of such trustee or applicable secured creditor as a Member. The Company hereby
irrevocably elects that all membership interests in the Company shall be
securities governed by Article 8 of the Uniform Commercial Code as in effect in
(for so long as any amount of the Development Loan remains outstanding and
unpaid) in the State of New York, and each other applicable jurisdiction. For so
long as any amount of the Development Loan remains outstanding and unpaid, each
certificate evidencing membership interests in the Company shall bear the
following legend: "This certificate evidences an interest in Premier
Entertainment Biloxi LLC and shall be a security governed by Article 8 of the
Uniform Commercial Code as in effect in the State of New York and, to the extent
permitted by applicable law, each other applicable jurisdiction." This provision
shall not be amended, and any purported amendment to this provision, shall be
null and void.
ARTICLE 3
MANAGEMENT OF THE COMPANY
Section 3.1. Manager. The management of the business and affairs of the
Company shall be vested in its Manager as more fully set forth in, and subject
to the terms of, this Agreement (subject to the parameters set forth from time
to time by the Board of Managers). Except for situations, decisions, actions or
events in which the approval of the Members, the owners of the Class B Common
Units, or the Board of Managers, as the case may be, is required by this
Agreement or the nonwaivable provisions of Applicable Law, the Manager shall
have full and complete authority, power and discretion to manage and control the
business, affairs and Properties of the Company, to make all decisions regarding
those matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business on the terms and conditions
set forth in this Agreement. The Manager may delegate such general or specific
authority to such other officers, employees or agents of the Company as the
Manager may reasonably consider desirable from time to time (subject to the
oversight of the Board of Managers), and such officers, employees or agents of
the Company may, subject to any restraints or limitations imposed by the
Manager, exercise the authority granted to them.
Section 3.2. Number, Tenure and Qualifications. There shall be one
Manager. The Manager shall, subject to earlier resignation, hold office until
the Manager's successor shall have been elected or designated and qualified in
accordance with this ARTICLE 3. The Manager need not be a resident of the State
of Delaware or a Member of the Company. The initial Manager shall be GAR;
provided, immediately and automatically upon the closing of the Development
Loan, the Manager shall be the President and Chief Operating Officer of the
Company (subject to the other terms and provisions contained in this Agreement).
Section 3.3. Certain Powers of the Manager. Except as otherwise required
pursuant to this Agreement, including, without limitation, the provisions of
Section 3.4 and Section 3.10 hereof, or by nonwaivable provisions of the Act,
the Manager shall have the power and authority, on behalf of the Company:
16
(a) subject to Section 3.4 and Section 3.10 hereof, to acquire Property
from any Person and to hold and own Property in the name of the Company;
(b) subject to Section 3.4, Section 3.10 and Section 4.7(b) hereof, to
conservatively invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial
paper or other investments;
(c) to sell, assign, or transfer the Company's inventory in the ordinary
course of the Company's business;
(d) subject to Section 3.4 and Section 3.10 hereof, to borrow money for
the Company from banks, other lending institutions, any Manager, any Member, or
any Affiliate of any Manager or Member on such terms as the Manager deems
commercially reasonably appropriate (but on a non-recourse basis to any Member,
without such Member's prior written consent), and in connection therewith, to
hypothecate, encumber and grant security interests in the Property of the
Company to secure repayment of the borrowed sums, provided however, that any
Company loan from a Member or Affiliate of a Member shall be in accordance with
and subject to Section 4.13(b). No debt shall be contracted or liability
incurred by or on behalf of the Company except as authorized by the Manager
(with the prior approval of the Super Majority of the Board), or to the extent
permitted under the Act, by agents or employees of the Company expressly
authorized to contract such debt or incur such liability by the Manager (with
the prior approval of the Super Majority of the Board);
(e) subject to Section 3.4 and Section 3.10 hereof, to execute on behalf
of the Company all instruments and documents, including, without limitation,
checks, drafts, notes and other negotiable instruments, mortgages or deeds of
trust, security agreements, financing statements, documents providing for the
acquisition, mortgage or disposition of the Company's Property, assignments,
bills of sale, leases, partnership agreements, limited liability company
agreements of other limited liability companies, and any other instruments or
documents necessary to the business of the Company;
(f) to purchase liability and other insurance to protect the Company's
Property and business;
(g) to employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to reasonably compensate them
from Company funds (with the prior approval of the Super Majority of the Board);
(h) to enter into any and all other agreements on behalf of the Company
with any other Person for any purpose, which individually do not involve more
than Ten Thousand Dollars ($10,000) and in the aggregate during any Fiscal Year
do not involve more than Fifty Thousand Dollars ($50,000) and, in either case,
are capable of being performed in full in less than six months after their
respective date of execution; and
(i) to do and perform any and all other acts as may be necessary or
appropriate to the conduct of the Company's business.
17
(j) Notwithstanding the authority granted by this Section 3.3, all
purchases and sales by the Company, including without limitation, those
transacted with its Members or Manager, shall be documented by invoices and
reflected upon the books of the Company. Unless authorized to do so by this
Agreement or by the Manager (with the Super Majority of the Board), no
attorney-in-fact, employee or other agent of the Company shall have any power or
authority to bind the Company in any way, to pledge its credit or to render it
liable pecuniarily for any purpose. No Member shall have any power or authority
to bind the Company unless the Member has been authorized in a written agreement
delivered to all members by the Manager to act as an agent of the Company in
accordance with the previous sentence. All reasonable actions taken in good
faith by the Manager on behalf of the Company from the date of its formation to
the date of this Agreement are hereby ratified and confirmed by the Members;
provided, however, the owners of the Class A Common Units acknowledge and agree
that the Company shall, upon demand, indemnify the owners of the Class B Common
Units and the Class A Preferred Units (and each of their respective members,
managers, officers, employees, and agents) and hold them each harmless from and
against any and all losses, amounts, liabilities, charges, penalties, interest,
costs, fees, suits, claims, actions and expenses actually incurred by any of
them as a result of any obligations, indebtedness or liabilities of the Company
(including, without limitation, Premier) incurred, attributable to or arising
from the time period of October 18, 2002 through the date hereof that do not
directly relate to the transactions contemplated by the Development Loan, the
Mezzanine Loan, or the 2003 employment agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Section 3.4. Board of Managers Approval. Notwithstanding anything
contained in this Agreement to the contrary (including, without limitation, in
Section 3.3), the management of the Company with respect to certain decisions of
the Company shall lie with the Board of Managers as provided in this Agreement.
The Board of Managers shall consist of seven (7) members, provided that the
number of members of the Board of Managers may be increased or adjusted from
time to time by the affirmative vote of a majority of the members of the Board
of Managers holding at least a majority of the Voting Power. Of the seven (7)
members of the Board of Managers, three (3) shall be appointed by the holders of
the Class A Common Units (the "Class A Common Designees") of GAR, LLC, a
Mississippi limited liability company and sole voting member of the Company
("GAR"), and four (4) shall be appointed by the holders of the Class B Common
Units of GAR, three of whom shall be designated the "Class B Common Designees"
and one of whom shall be designated the "Executive Manager"). For purposes of
voting and taking any action by the Board of Managers, the Executive Manager and
each Class A Common Designee shall be entitled to one (1) vote, and each Class B
Common Designee shall be entitled to two (2) votes. Each member of the Board of
Managers shall serve until his or her successor is designated by the respective
Member(s) of GAR that holds the power of appointment pursuant to this Section
3.4. The Company will reimburse members of the Board of Managers for reasonable
costs and expenses incurred in attending Board of Managers meetings. On and
after the date hereof, the Board of Managers shall determine the timing and
contents of any announcements and disclosures regarding the subject matter
hereof. If any member of the Board of Managers shall for any reason fail to be
licensed as required by the Mississippi Gaming Commission, such member shall
immediately (after expiration of any period in which to appeal such decision
before the Mississippi Gaming Commission) resign or be removed from the Board of
Managers, and such member shall not be entitled to receive or be paid any amount
or payment generated from the Project, and the holders of the Class A Common
18
Units of GAR or the Class B Common Units of GAR, as applicable, shall promptly
designate a replacement member to the Board of Managers.
Notwithstanding anything contained in this Agreement to the contrary
(but subject to Section 3.10 hereof), the Manager may not take any of the
following actions on behalf of the Company without obtaining the prior written
approval of the proportion of Board of Managers members required by Section 4.7
hereof, any other applicable provision of this Agreement, or the nonwaivable
provisions of the Act:
Actions Requiring Board of Managers Approval in the Manner Required
by Section 4.7: subject to Section 3.11 (whereby the owners of the Class B
Common Units are permitted to take certain actions without the consent, vote or
approval of either the owners of the Class A Common Units or the members of the
Board of Managers designated by the owners of the Class A Common Units,
including, without limitation, the items identified in subsections (b), (c),
(f), and (p) immediately below),
(a) admit Assignees as Substitute Members in accordance with Section
12.2 hereof;
(b) admit Additional Members in accordance with Section 12.3 hereof;
(c) dispose of all or substantially all of the Company Property;
(d) merge or consolidate the Company with and into one or more limited
liability companies or other entities;
(e) authorize the dissolution of the Company in accordance with Section
13.4 through Section 13.4 hereof;
(f) sell, lease or contract to sell (including the method of sale or
form of lease) or otherwise dispose of all of any Project, or selling, leasing
or contracting to sell or lease any Project or part thereof for a sales price
other than that specified in any price schedule;
(g) approval of any schedule specifying the sales price of any Project
or part thereof;
(h) alter or amending the distribution provisions provided for in this
Agreement, or approving any distributions to any Member that are not otherwise
provided for in this Agreement;
(i) approval of the terms of the Development Loan, the Mezzanine Loan,
or other credit accommodation to the Company;
(j) apply for a gaming license or other regulatory approvals necessary
or convenient for the development and operation of a gaming Project;
(k) cause or permit the Project to be subjected to any mortgage, deed of
trust or other security interest and refinancing any such indebtedness other
than in connection with the Development Loan;
19
(l) borrow on an unsecured basis;
(m) enter into agreements with Affiliates;
(n) address material tax matters;
(o) acquire additional Property or make capital expenditures, either of
which exceeds $5 Million;
(p) raise additional equity capital in addition to or in lieu of the
Development Loan; and
(q) require additional capital contributions of the Members or approve
the voluntary contribution of additional capital by any Member.
Notwithstanding anything contained in this Agreement to the contrary
(but subject to Section 3.10 hereof), the following actions require the approval
of a Super Majority of the Board, with the advice of the General
Manager/Operator; provided, however, in the event of a deadlock vote of the
Board of Managers for such issues, the deciding vote on such issues shall be
decided by the owners of the Class B Common Units until the Repayment Event:
(r) develop and approve the annual capital and operating budget(s) for
the Company; and for the development of and/or operation of any Project;
(s) approve plans for the development of and operation of any Project,
including without limitation any decisions regarding impacting the development
and the day-to-day operations of the Company's proposed gaming/hotel Project;
and
(t) employ, compensate from Company funds, and terminate, if necessary
in the discretion of Board of Managers the (i) the Project Manager to oversee
the construction and development of the Project; (ii) and other senior managers
of the Company, including without limitation, the Executive Chef, the Food and
Beverage Manager, the Hotel Manager, the Casino Manager, the Credit Manager, the
Chief Financial Operator, the Chief Engineer, and the Spa Manager; provided,
however, whether or not any portion of the Preference Amount remains unpaid, any
termination of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as the President and Chief Operating Officer of
the Company shall require the approval of a Super Majority of the Board.
Section 3.5. Duty of Care; Liability for Certain Acts. The Manager shall
perform his, her or its duties as Manager in good faith, in a manner he, she or
it reasonably believes to be in the best interests of the Company, and with such
care as an ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs his, her or its duties as Manager shall
not have any liability by reason of being or having been a Manager of the
Company. The Manager does not, in any way, guarantee the return of the Members'
Capital Contributions or a profit for the Members from the operations of the
Company. The Manager shall not be liable to the Company or to any Member for any
loss or damage sustained by the Company or any Member, unless the loss or damage
shall have been the result of fraud, deceit, gross negligence, willful
misconduct or a wrongful taking by the Manager. The members of the Board of
Managers shall perform his, her or its duties as a member of the Board of
20
Managers in good faith, in a manner he, she or it reasonably believes to be in
the best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. A member of the
Board of Managers who so performs his, her or its duties as a member of the
Board of Managers shall not have any liability by reason of being or having been
a member of the Board of Managers of the Company. No member of the Board of
Managers, in any way, guarantees the return of the Members' Capital
Contributions or a profit for the Members from the operations of the Company. No
member of the Board of Managers shall be liable to the Company or to any Member
for any loss or damage sustained by the Company or any Member, unless the loss
or damage shall have been the result of fraud, deceit, gross negligence, willful
misconduct or a wrongful taking by such member of the Board of Managers.
Section 3.6. Resignation and Removal of Manager and Board of Managers. The
Manager may resign at any time upon written Notice to all of the Members. Unless
specified otherwise in the Notice, such resignation shall take effect upon
receipt of such Notice by all of the Members. The acceptance of a resignation
shall not be necessary to make it effective. The Manager may be removed at any
time, either with or without cause, by the vote of at least the Super Majority
of the Board. Any member of the Board of Managers designated or appointed by the
owners of the Class A Common Units may only be removed at any time, either with
or without cause, by the owners of the Class A Common Units ("Class A Common
Designee"), and any member of the Board of Managers designated or appointed by
the owners of the Class B Common Units may only be removed at any time, either
with or without cause, by the owners of the Class B Common Units ("Class B
Common Designee").
Section 3.7. Vacancies. If the Manager resigns, is removed, or otherwise
ceases to be the Manager, the Super Majority of the Board shall designate a
replacement Manager and shall promptly give Notice to the other Members of such
replacement, which Notice shall include the name and address of the replacement
Manager. Any vacancy to the Board of Managers as a result of the removal of the
Class A Common Designee shall be filled by a new member appointed and designated
by the owners of the Class A Common Units, and any vacancy to the Board of
Managers as a result of the removal of the Class B Common Designee shall be
filled by a new member appointed and designated by the owners of the Class B
Common Units.
Section 3.8. Compensation of General Manager/Operator. The Company shall
not pay any management fee, consulting fee, or similar fee to the Manager. The
Company shall pay to the General Manager/Operator compensation in an aggregate
amount per calendar year as determined by a Super Majority of the Board. The
Company may decide at any time to pay the Manager a management fee upon the
approval of the Super Majority of the Board. The General Manager/Operator
compensation may be adjusted from time to time to amounts agreed upon by the
vote of the Super Majority of the Board.
Section 3.9. Transactions with the Company; Compensation. The Manager or
any Person affiliated or associated with the Manager may act as surety,
guarantor, endorser, or provider of collateral for, and transact any kind of
business with, the Company on such terms as the Manager or Person may deem
appropriate, provided that such transactions must be carried out on terms that
are fair to the Company and in accordance with the terms of this Agreement.
Nothing in this Agreement shall be construed to preclude the Manager, or an
21
individual designated by the Manager to carry out the Manager's authority under
this Agreement, from serving the Company in any other capacity as an officer,
employee, agent, contractor, or otherwise and, providing such compensation is
authorized hereunder, receiving compensation and expense reimbursement therefor.
Section 3.10. Certain Required Approvals. Notwithstanding anything
contained in this Agreement to the contrary (including, without limitation, in
Section 3.3 and Section 3.4 hereof), the prior written approval and consent of
the owners of the Class B Common Units shall be required and obtained to
authorize the taking or happening of any of the "Major Decisions" identified on
Schedule 1 attached hereto and made part hereof.
Section 3.11. Actions by Class B Common Units. Notwithstanding anything
contained in this Agreement to the contrary, the owners of the Class B Common
Units are permitted to take the following actions without the consent, vote or
approval of either the owners of the Class A Common Units or the members of the
Board of Managers designated by the owners of the Class A Common Units:
(a) admit Additional Members in accordance with Section 12.3 hereof
(subject to the applicable pre-emptive right referenced in subsection (c) below,
to the extent applicable); provided, further, to the extent applicable, any
dilution to any Member's Economic Interest as a direct result of adding
Additional Members shall apply to both the Class A Common Units and the Class B
Common Units on a pari passu basis;
(b) as long as a Fairness Opinion is obtained, sell, dispose, convey,
assign, lease and/or transfer all or substantially all of the Company Property
or the Project; provided, however, the owners of the Class A Common Units will
first have an option to purchase all of the equity in the Company owned by the
holders of the Class B Common Units and the Class A Preferred Units on the same
price (giving effect to any tax benefits that would be realized by the holders
of the Class B Common Units and the Class A Preferred Units in the contemplated
sale, if any) and terms offered by the Prospective Purchaser in a written offer
(the "Purchase Notice"), which option must be irrevocably exercised in writing
within ten (10) business days of the receipt by the holders of the Class A
Common Units of the Purchase Notice together with the payment of the ▇▇▇▇▇▇▇
Money; provided, further, the holders of the Class A Common Units would have
thirty (30) calendar days from the date they exercise their option to consummate
such equity purchase transaction, and if such transaction is not consummated
through or due to the fault, misconduct or negligence (in either case whether
directly or indirectly) of any or all of the owners of the Class A Common Units
or their officers, members, managers, employees, Affiliates, or agents (as
reasonably determined in good faith by the owners of the Class B Common Units),
the ▇▇▇▇▇▇▇ Money shall be forfeited in favor of the holders of the Class B
Common Units and/or the Class A Preferred Units, as applicable, and if the
transaction is consummated, the ▇▇▇▇▇▇▇ Money shall be credited to the purchase
price to be paid (all of the foregoing in this subsection (b), including,
without limitation, payment of the ▇▇▇▇▇▇▇ Money, being referred to as a "Right
Of First Refusal");
(c) raise additional equity capital for the Company (subject to any
applicable pre-emptive right of the Members provided herein, if any) through the
issuance of a new class of common membership units in the Company to any Person
that is not an Affiliate of AA Capital; provided, further, to the extent
22
applicable, any dilution to any Member's Economic Interest as a direct result of
such equity raise shall apply to both the Class A Common Units and the Class B
Common Units on a pari passu basis;
(d) any recapitalization or restructuring of the Company; provided that,
without effecting or limiting any other Section, Subsection, term or provision
of this Agreement, any such recapitalization or restructuring does not
materially adversely effect the aggregate value of the Class A Common Units (as
reasonably determined by the Class B Common Units in good faith);
(e) exercise of the drag-along rights set forth in Section 10.9; and
(f) sell, assign, convey or transfer any or all of the Class B Common
Units and/or the Class A Preferred Units to any Person (subject to any required
approval from the Mississippi Gaming Commission, if any); provided, however, the
owners of the Class A Common Units will have a Right of First Refusal to
purchase the equity being offered for sale.
ARTICLE 4
MEMBERS; MEETINGS & DUTIES
Section 4.1. Members. The names, addresses, Percentage Interests, and
respective ownership of membership units in the Company of the Members are set
forth on Exhibit A attached hereto.
Section 4.2. Meetings. Meetings of the Members of the Board of Managers
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Managers. The Board of Managers may hold
meetings, both regular and special, either within or outside the State of
Mississippi.
Section 4.3. Notice of Meetings. Except as provided in Section 4.4 and
Section 4.8 of this ARTICLE 4, written Notice of the place, day and hour of a
meeting and the purpose or purposes for which the meeting is called shall be
given not less than seven (7) nor more than thirty (30) days before the date of
the meeting by or at the direction of the Manager, Board of Managers member, or
Member, as the case may be, calling the meeting, to each Member or committee
member entitled to vote or act at such meeting.
Section 4.4. Meeting of All Members. If all of the Members or Board of
Managers members shall meet at any time and place, either within or without the
State of Delaware, and upon the written consent to the holding of a meeting at
such time and place, such meeting shall be valid without call or Notice and at
such meeting any lawful action may be taken.
Section 4.5. Record Date. For purposes of (1) determining those Members
entitled to Notice of or to vote at any meeting of Members, or any adjournment
thereof, (2) determining those Members entitled to receive payment of any
Distribution, or (3) in order to make a determination of Members for any other
purpose, the date on which Notice of the meeting is mailed or the date on which
the resolution declaring such Distribution is adopted, as the case may be, shall
be the record date for such determinations with respect to the Members. When a
23
determination of those Members entitled to vote at any meeting of the Members
has been made as provided in this Section 4.5, such determination shall apply to
any adjournment thereof.
Section 4.6. Quorum. The presence of the Members holding at least Eighty
Percent (80%) of the Percentage Interests of the Company, represented in person,
by telephone or other electronic medium or communication, or by proxy, shall
constitute a quorum at any meeting of Members. In the absence of a quorum at any
such meeting, at least a majority of the Members of the Company so represented
may adjourn the meeting from time to time for a period not to exceed thirty (30)
days without further Notice. However, if the adjournment is for more than thirty
(30) days, or if after the adjournment, a new record date is fixed for the
adjourned meeting, a Notice of the adjourned meeting shall be given to each
Member of record entitled to vote at the meeting. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally Noticed.
Section 4.7. Manner Of Acting.
(a) Any action (i) expressly required to be taken by the Members, or
(ii) required or permitted to be taken by the Members or by the Board of
Managers, may in either case be taken at a meeting thereof by: (y) in the case
of Member action, the affirmative vote of Members holding at least seventy-five
percent (75%) of the Percentage Interests of the Company; and (z) in the case of
Board of Managers action, by the Super Majority of the Board, unless the vote of
a greater or lesser percentage of the Members or Board of Managers is otherwise
required by the Act, by the Certificate, or by this Agreement (including,
without limitation, Section 4.7(b) below). Unless otherwise expressly provided
herein or required under applicable law, Members who have an interest (economic
or otherwise) in the outcome of any particular matter upon which the Members
vote may vote upon any such matter and their vote shall be counted in the
determination of whether the requisite matter was approved by the Members.
(b) Subject to Section 3.10 hereof, the vote, approval or consent of the
Super Majority of the Board shall be required to:
(i) admit any Additional Members pursuant to Section 12.3 of this
Agreement, subject to Section 3.11(c), to the extent applicable (provided,
however, as provided in Section 3.4, the vote, consent or approval of the
members of the Board of Managers designated by the owners of the Class A
Common Units is not required for this subsection (i));
(ii) appoint or remove the Manager or General Manager/Operator;
(iii) determine whether the applicable standard for indemnification
by the Company under ARTICLE 5 hereof has been met; and
(iv) amend or waive any provision of this Agreement under Section
14.3 hereof.
The vote, approval or consent required by this Section 4.7(b) may be given by
one or more written consents in accordance with Section 4.8.
24
Section 4.8. Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members or Board of Managers may be taken
without a meeting if the action is evidenced by one or more written consents
describing the action taken and signed by all of the Persons entitled under this
Agreement and/or required under the Act to vote. Such written consents shall be
delivered to the Manager of the Company for inclusion in the minutes of
proceedings of the Members or for filing with the Company records. Action taken
under this section is effective when the requisite proportion of Persons
entitled to vote have signed the consent(s), unless the consent(s) specifies a
different effective date. The record date for determining Members entitled to
take action without a meeting shall be the date the first Member signs a written
consent. If an action by Members is taken without a meeting under this Section
4.8, Notice to the Members shall be considered waived.
Section 4.9. Waiver of Notice. When any Notice is required to be given to
any Member or Board of Managers member, as applicable, a waiver thereof in
writing signed by the Person entitled to such Notice, whether before, at, or
after the time stated therein, shall be equivalent to the giving of such Notice.
Section 4.10. Telephone Meetings of the Members. Members may participate
in a meeting of the Members by means of conference telephone or similar
communications equipment by means of which all of the Members participating in
the meeting can hear each other. Participation by Members by such means shall
constitute presence in person of such Members at such meeting.
Section 4.11. Liability of Members to Third Parties. Unless otherwise
provided by the Act, and except as specifically provided in Section 5.2 hereof,
no Member (or member of the Board of Managers) shall be liable in any way under
any judgment, decree, or order of a court or any other proceeding, or in any
other manner whatsoever, for any debt, obligation, liability or other amount of
the Company, whether arising in contract, tort or otherwise, or for the acts or
omissions of any Board of Managers member, Member, Manager, agent or employee of
the Company.
Section 4.12. Liability of a Member to the Company. A Member who receives
a Distribution when the Property of the Company is not sufficient to pay all
liabilities of the Company (except liabilities to Members on account of their
Capital Contributions) is liable to the Company for a period of two (2) years
after such Distribution for the amount of the Distribution.
Section 4.13. Conflicts of Interest.
(a) Subject to Section 4.13(c), Members shall be entitled to enter into
transactions that may be considered to be competitive with, or a business
opportunity that would be beneficial to, the Company, it being expressly
understood that the Members may enter into transactions that are similar to the
transactions into which the Company may enter; provided, however, if GAR (or any
of its Affiliates) contemplates entering into any such competitive transaction
(and actually takes material actions to structure or arrange any such
transaction), then GAR shall consult with AA Capital and permit AA Capital to
participate and invest in such transaction on good faith, reasonable terms and
conditions. Notwithstanding the foregoing, a Member shall account to the Company
and hold as trustee for it any property, profit, or benefit derived by the
25
Member, without the consent of the other disinterested Members, in the conduct
and winding up of the Company's business or from a use or appropriation by the
Member of Company Property, including information developed exclusively for the
Company and opportunities expressly offered to the Company.
(b) A Member does not violate a duty or obligation to the Company merely
because the Member's conduct furthers such Member's own interest. Any Member may
lend money to and transact other business with the Company as long as all such
loans or other transactions are in accordance with the terms of this Agreement.
The rights and obligations of a Member who lends money to or transacts business
with the Company are the same as those of a person who is not a Member, subject
to the Act or other applicable law. No transaction with the Company shall be
voidable solely because a Member or an Affiliate of the Member has a direct or
indirect interest in the transaction if (i) either the transaction is fair to
the Company or (ii) the disinterested Members, in either case knowing the
material facts of the transaction and the Member's interest therein, authorize,
approve, or ratify the transaction in writing.
(c) No Member nor any of their respective Affiliates shall, except for
and on behalf of the Company, engage in any casino gaming business activities
(as an owner, operator, licensee, or stockholder) in the counties of Hancock,
Harrison, Tunica, or ▇▇▇▇▇▇, in the state of Mississippi. (The counties listed
in the foregoing sentence shall be collectively referred to as the
"Non-Competition Territory".) In accordance with Section 4.13(a), Members may
engage in any activity other than casino gaming business activities in all
locations, including the Non-Competition Territory. Subject to the proviso
contained in Section 4.13(a) hereof, no Member shall be liable or accountable to
the Company or any other Member for failure to disclose or make available to the
Company any business opportunity in casino gaming business activities which are
available in counties other than the Non-Competition Territory that such Member
becomes aware of in his capacity as a Member or otherwise. Each Member agrees
that it shall disclose to the Company and the other Members all material
transactions between the Company and the Member or an Affiliate of the Member
prior to the conduct thereof.
Section 4.14. Establishment of Class C Common Units
(a) A new class of membership units of the Company designated as the
Class C Common Units is established, which shall consist of 100 such Units. As
of November __, 2004, 66-2/3 of such Units shall be deemed to represent the
Class C holder's entitlement to two percent (2%) of the Net Cash Flow if and
when distributed pursuant to Subsections (b), (c) and (d) of Section 8.4 of this
Agreement, as more particularly provided below (the "Initial Units"). If and at
such time as the Project officially opens for business to the public, as
determined by the Board of Managers (the "Opening"), the holder of the Class C
Common Units will be deemed to own and hold the remaining 33-1/3 of such Class C
Common Units, which, together with the Initial Units, will then represent the
holder's entitlement to a total of three percent (3%) of the Net Cash Flow if
and when distributed pursuant to Subsections (b), (c) and (d) of Section 8.4 of
the Operating Agreement, as more particularly provided herein.
(b) The Class C Common Units are and shall be nonvoting and the Class C
holder shall have no rights as a Member of the Company (to vote or otherwise)
except solely as to rights (i) to distributions pursuant to Section 8.1, Section
8.2 and Subsections (b), (c) and (d) of Section 8.4 of this Agreement as
26
provided herein, and (ii) set forth in subsection (d) of this Section 4.14.
After giving effect to the applicable portion of the Class C Common Units then
outstanding, the Members' percentage interests in distributions of Net Cash Flow
pursuant to Subsections (b), (c) and (d) of Section 8.4 will be diluted on a pro
rata basis. For example, if a distribution of Net Cash Flow were to be made on
the date hereof pursuant to Section 8.4(b) (after the owners of the Class A
Preferred Units received the Class A Preferred Unit Owners' Preferred Capital
Distribution), such available amount would be distributed 73.5% to the owners of
the Class A Preferred Units, 24.5% to the owners of the Class A Common Units,
and 2.0% to the holder of 66-2/3 of the Class C Common Units.
(c) Except as required by the terms of the Loan Documents, the holder of
the Class C Common Units shall not be permitted to sell, assign, pledge or
otherwise encumber or transfer all or any portion of the Class C Common Units
without the prior written consent of the Board of Managers of the Company, which
consent will not unreasonably be withheld. Exhibit A attached to this Agreement
reflects the existence of the Class C Common Units and the holder's ownership of
the applicable amount thereof as of November __, 2004, and if and when
applicable, upon the Opening.
(d) The holder of the Class C Common Units is an intended beneficiary
of, and shall otherwise be subject to, Sections 8.1, 8.2, 10.8 and 10.9 of this
Agreement as if such holder were a Member of the Company (as appropriate to
reflect his ownership of the Class C Common Units on any applicable date of
determination). If required by applicable law, and unless the holder of the
Class C Common Units has already been found suitable by the Mississippi Gaming
Commission, such holder shall make an application for and receive a finding of
suitability from the Mississippi Gaming Commission before being entitled to any
distribution from the Company otherwise contemplated hereby.
ARTICLE 5
INDEMNIFICATION
Section 5.1. Indemnification of Members and Managers. The Company shall
indemnify and hold harmless any Member, Board of Managers member, or Manager
(and each of their respective officers, members, managers, directors, partners,
officers, employees, agents, and affiliates), who was or is a party or is
threatened to be made a party to any threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including appeals (other than an action by or in the right of the
Company), by reason of the fact that such Person is or was a Member, Board of
Managers member or Manager of the Company, or is or was serving at the request
of the Company as a member, manager, director, officer, partner, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise, against costs and expenses (including,
without limitation, reasonable attorneys' fees), 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 action or
proceeding, had no reasonable cause to believe such Person's conduct was
unlawful. The termination of any claim, action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
27
equivalent, shall not, of itself, create a presumption that the Person did not
act in good faith and in a manner which such Person 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 such
Person's conduct was unlawful.
Section 5.2. Indemnification in Actions by the Company. The Company shall
indemnify and hold harmless any Member, Board of Managers member, or Manager
(and each of their respective officers, members, managers, directors, partners,
officers, employees, agents, and affiliates) who was or is a party or is
threatened to be made a party to any threatened, pending or completed claim,
action or suit by the Company to procure a judgment in its favor by reason of
the fact that such Person is or was a Member, Board of Managers member or
Manager of the Company, or is or was serving at the request of the Company as a
member, manager, director, officer, partner, employee or agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise against costs and expenses (including, without limitation,
reasonable attorneys' fees) actually and reasonably incurred by such Person in
connection with the defense or settlement of such action or suit 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, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such Person
shall have been adjudged to be liable for negligence or misconduct in the
performance of such Person's duty to the Company unless and only to the extent
that the court in which such claim, action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
circumstances of the case, such Person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Section 5.3. Indemnification With Respect to Certain Claims
Notwithstanding Lack of Success on Other Claims. To the extent that a Member or
Manager of the Company (or, if applicable, their respective officers, members,
managers, directors, partners, officers, employees, agents, and affiliates), has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.1 and Section 5.2 of this ARTICLE 5, or in
defense of any claim, issue or matter therein, such Person shall be indemnified
against costs and expenses (including, without limitation, reasonable attorneys'
fees) actually and reasonably incurred by such Person in connection therewith,
notwithstanding that such Person has not been successful on any other claim,
issue or matter in any such action, suit or proceeding.
Section 5.4. Determination of Meeting Applicable Standard. Any
indemnification under Section 5.1 and Section 5.2 of this ARTICLE 5 (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Member or Manager
is proper in the circumstances because such Person has met the applicable
standards of conduct set forth in Section 5.1 and Section 5.2 of this ARTICLE 5.
Such determination shall be made by a vote of the Super Majority of the Board.
Section 5.5. Payment of Expenses in Advance of Disposition of Action.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
claim, action, suit or proceeding may be paid by the Company in advance of the
final disposition of such claim, action, suit or proceeding as authorized in the
manner provided in Section 5.4 of this ARTICLE 5, upon receipt of an undertaking
by or on behalf of the Member, Board of Managers member or Manager, with
sufficiency surety, to repay such amount if and to the extent that it shall be
28
ultimately determined that such Person is not entitled to be indemnified by the
Company as authorized in this ARTICLE 5.
Section 5.6. Non-Exclusivity of Article. The indemnification authorized in
and provided by this ARTICLE 5 shall not be deemed exclusive of and shall be in
addition to any other right to which those indemnified may be entitled under any
statute, rule of law, provision of the Certificate, this Agreement, other
agreement, vote or action of Members, the Board of Managers or of the Manager,
or otherwise, both as to actions in such Person's official capacity and as to
actions in another capacity while holding such office, and shall continue as to
a Person who has ceased to be a Member or Manager and shall inure to the benefit
of the heirs, executors and administrators of such a Person.
Section 5.7. Insurance. The Company will purchase and maintain insurance
on behalf of any Person who is or was a Member, Member of the Board of Managers,
Manager, employee or agent of the Company, or is or was serving at the request
of the Company as a member, manager, director, officer, partner, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
Person incurred by such Person in any such capacity arising out of such Person's
status as such, whether or not the Company is required or permitted to indemnify
such Person against such liability under the provisions of this ARTICLE 5 or any
statute.
ARTICLE 6
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 6.1. Capital Contributions. The Initial Capital Contribution,
Economic Interest, Percentage Interest and equity ownership of each Member is
set forth on the attached Exhibit A and incorporated by reference herein. The
Members hereby agree and acknowledge that any amounts set forth on Exhibit A as
the value of the real and/or personal property contributed (subject to the
rights of the owners of the Class B Common Units and the Class A Preferred Units
to receive the payments provided in Section 8.4) by any Member reflects the
value of such property as agreed to by the Members.
Section 6.2. Preemptive Rights. If the owners of the Class B Common Units
(subject to Section 3.10 hereof): (y) determines that additional capital is
required by the Company to facilitate the business needs of the Company,
including, without limitation, to meet the Company's operating expenses, to fund
the expansion of the Company's Project or other business and to purchase any
Property reasonably necessary for the operation of the Company, and (z)
authorizes the issuance and sale of any securities or any securities containing
options or rights to acquire any securities of the Company (including, without
limitation, convertible debt), the Company shall first offer to sell to each
Member a portion of such securities on a basis pro rata to their Percentage
Interests (i.e., for such Member to make an additional capital contribution for
the amount of the securities to be issued ("Additional Capital Contribution")).
Each such Member shall be entitled to purchase such securities at the same price
and on the same terms and conditions as such securities are to be offered. If
any Member elects not to exercise or exercises only a portion of its rights
granted under this Section, each other Member shall be entitled to purchase the
securities offered to (but not purchased by) such Member. All of such securities
29
shall be offered to the Members until all securities proposed to be issued by
the Company are sold to all Members desiring to purchase such securities or no
Member desires to purchase more securities. Each Member must elect to exercise
its purchase/Additional Capital Contribution rights hereunder within sixty (60)
days after receipt of written notice from the Company describing in reasonable
detail the securities being offered, the purpose for which the additional
securities are being offered, the purchase price thereof, the payment terms, and
such Member's percentage allotment. Upon the expiration of such sixty (60) day
period, the Company shall be free to sell such securities which the Members have
not purchased or elected to purchase during the six (6) month period following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such Members (provided that the non-Member
purchaser of any such securities must comply with all of the other terms,
provisions and conditions contained in this Agreement applicable to an
assignee/transferee). Any securities offered or sold by the Company after such
six (6) month period must be reoffered to the Members pursuant to the terms of
this Section. The provisions of this Section shall not apply to the issuance of
options for employees or consultants of the Company that are approved by the
Super Majority of the Board (which options the parties hereto acknowledge and
agree shall be granted through a new class of nonvoting membership units in the
Company; provided, to the extent applicable, any dilution to any Member's
economic interest as a direct result of such options shall apply to both the
Class A Common Units and the Class B Common Units on a pari passu basis). The
rights under this Section shall terminate upon the first to occur of a Sale
Event or the closing of an IPO. Exhibit A hereto shall, simultaneously with the
payment of the purchase price, be revised to reflect the changes in Percentage
Interests of the Members (i.e., increase in the Percentage Interests of the
Members making the Additional Contribution and the decrease in the Percentage
Interest of the Member not making the Additional Capital Contribution), and
distributions pursuant to Section 8.1 and Section 8.4 hereof shall be adjusted
accordingly.
Section 6.3. No Rights To Return Of Capital Contributions Or To Withdraw.
No Unitholder shall have the right to demand the return of, or otherwise
withdraw or be repaid, the Initial (in the case of Members) or any Additional
Capital Contribution made by such Unitholder, and no Unitholder shall have the
right to receive a distribution of any specific Property of the Company, except
as specifically provided in this Agreement (including Section 8.4). Except as
specifically provided herein to the contrary (including, without limitation,
Section 3.10, Section 7.1, Section 7.2 and Section 8.4 hereof), no Unitholder
shall have priority over any other Unitholder, either as to the return of
capital or as to income, losses or Distributions. No interest shall be paid on
Initial (in the case of Members) or Additional Capital Contributions or on
balances in a Unitholder's Capital Account, other than as contemplated by the
Preference Amount to be paid to the owners of the Class A Preferred Units as set
forth in this Agreement.
Section 6.4. Capital Accounts. The Company shall establish and maintain
Capital Accounts for each Unitholder. Each Unitholder's Capital Account shall be
increased by (i) the amount of any money actually contributed by the Unitholder,
or contributed by another Unitholder on its behalf under Section 6.2, to the
capital of the Company, (ii) the fair market value of any Property contributed,
as determined by the Company and the contributing Unitholder at arm's length at
the time of contribution (net of any liabilities assumed by the Company or
subject to which the Company takes such Property within the meaning of Section
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752 of the Code), and (iii) the Unitholder's share of Profits and of any
separately allocated items of income or gain except adjustments required under
Section 704(c) of the Code (including any gain and income from unrealized income
with respect to accounts receivable allocated to the Unitholder to reflect the
difference between the book value and tax basis of assets contributed by the
Unitholder). Each Unitholder's Capital Account shall be decreased by (x) the
amount of any money actually distributed to the Unitholder by the Company, (y)
the fair market value of any Property distributed to the Unitholder by the
Company (net of liabilities of the Company assumed by the Unitholder or subject
to which the Unitholder takes such Property within the meaning of Section 752 of
the Code), and (z) the Unitholder's share of Losses and of any separately
allocated items of deduction or loss except adjustments required under Section
704(c) of the Code (including any loss and deduction allocated to reflect the
difference between the book value and tax basis of assets contributed by the
Unitholder).
Section 6.5. Sale or Exchange of Interest. In the event of a sale or
exchange of some or all of a Unitholder's Economic Interest in the Company, the
Capital Account of the transferring Unitholder shall become the Capital Account
of the Assignee acquiring such Economic Interest, to the extent it relates to
the portion of the Economic Interest transferred.
Section 6.6. Compliance with Section 704(b) of the Code. The provisions of
this ARTICLE 6 as they relate to the maintenance of Capital Amounts are
intended, and shall be construed, and, if necessary, modified to cause the
allocations of profits, losses, income, gain and credit pursuant to ARTICLE 7 of
this Agreement to have substantial economic effect under the Regulations
promulgated under Section 704(b) of the Code, in light of the Distributions made
pursuant to ARTICLE 8 and ARTICLE 13 and the Capital Contributions made pursuant
to this ARTICLE 6. Notwithstanding anything herein to the contrary, this
Agreement shall not be construed as creating a deficit restoration obligation or
otherwise personally obligate any Unitholder to make a Capital Contribution in
excess of the Initial Capital Contribution (in the case of Members) or any
Additional Capital Contributions made by that Unitholder; no Unitholder shall be
required to restore any deficit in such Unitholder's Capital Account.
ARTICLE 7
ALLOCATIONS
Section 7.1. Book Allocations.
(a) Except as explicitly provided elsewhere herein, the items of income,
gain, loss or deduction of the Company comprising Profits or Losses for a Fiscal
Year shall be allocated among the Members in a manner such that the Capital
Account of each Member, immediately after making such allocation, is, as nearly
as possible, equal (proportionately) to (i) the distributions that would be made
to such Member pursuant to Section 8.4 hereof if the Company were dissolved, its
affairs wound up and its assets sold for cash equal to their Gross Asset Values,
all Company liabilities were satisfied (limited in the case of each Company
Nonrecourse Liability to the Gross Asset Value of the assets securing such
liability) and the net assets of the Company were distributed in accordance with
Section 8.4 to the Members immediately after making such allocations, minus (ii)
such Member's share of Company Minimum Gain and Member Minimum Gain, computed
immediately prior to the hypothetical sale of the assets.
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(b) Losses allocated pursuant to Section 7.1(a) hereof shall not exceed
the maximum amount of Losses that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 7.1(a)
hereof, the limitation set forth in this Section 7.1(b) shall be applied on a
Member by Member basis so as to allocate the maximum permissible Losses to each
Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in
excess of the limitations set forth in this Section 7.1(b) shall be allocated to
the Members who would not have an Adjusted Capital Account Deficit, pro rata, in
proportion to the Capital Account balances adjusted as provided in clauses (i)
and (ii) of the definition of Adjusted Capital Account Deficit until no Member
would be entitled to any further allocation, and thereafter to all Members, pro
rata, in proportion to their Percentage Interests.
Section 7.2. [Intentionally Deleted].
Section 7.3. Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain for a Taxable Year, each Member must be allocated items
of income and gain for that Taxable Year equal to that Member's share of the net
decrease in Company Minimum Gain. A Member's share of the net decrease in
Company Minimum Gain is the amount of the total net decrease multiplied by the
Member's percentage share of the Company Minimum Gain at the end of the
immediately preceding Taxable Year. A Member's share of any decrease in Company
Minimum Gain resulting from a revaluation of Company Property equals the
increase in the Member's Capital Account attributable to the revaluation to the
extent the reduction in Company Minimum Gain is caused by the revaluation. A
Member is not subject to this Company Minimum Gain chargeback requirement to the
extent the Member's share of the net decrease in Company Minimum Gain is caused
by a guarantee, refinancing, or other change in the debt instrument causing it
to become partially or wholly a recourse liability or a Member Nonrecourse
Liability, and the Member bears the economic risk of loss (within the meaning of
Section 1.752-2 of the Regulations) for the newly guaranteed, refinanced, or
otherwise changed liability.
Section 7.4. Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Taxable Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability with
respect to which such Member Nonrecourse Deductions are attributable in
accordance with Section 1.704-2(b)(4) of the Regulations.
Section 7.5. Member Minimum Gain Chargeback. If during a Taxable Year
there is a net decrease in Member Minimum Gain, any Member with a share of that
Member Minimum Gain (as determined under Section 1.704-2(i)(5) of the
Regulations) as of the beginning of that Taxable Year must be allocated items of
income and gain for that Taxable Year (and, if necessary, for succeeding Taxable
Years) equal to that Member's share of the net decrease in the Member Minimum
Gain. A Member's share of the net decrease in Member Minimum Gain is determined
in a manner consistent with the provisions of Section 1.704-2(g)(2) of the
Regulations. A Member is not subject to this Member Minimum Gain chargeback,
however, to the extent the net decrease in Member Minimum Gain arises because
the liability ceases to be Member Nonrecourse Liability due to a conversion,
refinancing, or other change in the debt instrument that causes it to become
partially or wholly a Company Nonrecourse Liability. The amount that would
32
otherwise be subject to the Member Minimum Gain chargeback is added to the
Member's share of Company Minimum Gain. In addition, rules consistent with those
applicable to Company Minimum Gain and Company Minimum Gain chargeback shall be
applied to determine the shares of Member Minimum Gain and Member Minimum Gain
chargeback to the extent provided under the Regulations issued pursuant to
Section 704(b) of the Code.
Section 7.6. Qualified Income Offset. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will be
allocated items of income and gain (consisting of a pro rata portion of each
item of income and gain of the Company for the Taxable Year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as possible.
Section 7.7. Tax Allocations. Each item of income, gain, loss, deduction
or credit for federal income tax purposes that corresponds to an item of income,
gain, loss or expense that is either taken into account in computing Profits or
Losses or is specially allocated pursuant to Section 7.3 through Section 7.6 (a
"Book Item") shall be allocated among the Members in the same proportion as the
corresponding Book Item; provided, however, that in the case of any Company
asset the Gross Asset Value of which differs from its adjusted tax basis for
federal income tax purposes, income, gain, loss and deduction with respect to
such asset shall be allocated solely for federal income tax purposes in
accordance with the principles of Sections 704(b) and (c) of the Code (using any
permissible method determined by the Board of Managers) so as to take account of
the difference between the Gross Asset Value and the adjusted tax basis of such
asset.
Any elections or other decisions relating to such allocations shall be
made by the Board of Managers in any manner that commercially reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 7.7 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Person's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
ARTICLE 8
DISTRIBUTIONS
Section 8.1. Regular Distributions of Net Cash Flow. Except as set forth
in Section 8.4 and subject to Section 10.8(g), and Section 10.9(c) hereof, Net
Cash Flow, if any, shall be distributed to and among the Members no later than
the 120th day following the end of each Fiscal Year in accordance with their
Percentage Interests, taking into account any Tax Distributions made during such
Fiscal Year in accordance with Section 8.2 below. Notwithstanding any other
provision of this Section 8.1, and subject to Section 8.4 below, no
Distributions shall be made to any Member if, and to the extent that, such
Distribution would cause such Member to have an Adjusted Capital Account Deficit
as of the end of the Fiscal Year with respect to which such Distribution is
made. The payment of the Management Fees set forth in Section 3.6(b) of the
Second Amended and Restated Limited Liability Company Operating Agreement of
GAR, LLC will be considered an operating expense of the Company.
33
Section 8.2. Tax Distributions. No later than the 15th day, or, if such
day is not a business day, the next succeeding business day, after the end of
each fiscal quarter of the Company, the Manager shall cause distributions of Net
Cash Flow to be made to the Members in an amount equal to Forty Percent (40%) of
the estimated Adjusted Allocated Taxable Income (as defined below) of all
Members for the immediately preceding quarter or in such amount as otherwise
permitted or restricted pursuant to the indenture entered into in connection
with the Development Loan, for so long as such indenture is in effect ("Tax
Distributions"). The "Adjusted Allocated Taxable Income" of a Member shall be
the estimated taxable income of the Company, if any, which is allocated to such
Member for the quarterly period. Any Tax Distributions shall be made in
proportion to the Adjusted Allocated Taxable Income of each Member. For this
purpose, any income, gain, loss, depreciation and other deduction which is
recognized and allocated to a Member pursuant to Section 704 (c) of the Code
shall be excluded and tax distributions shall not be made with respect to such
amount(s). Any distribution made by March 15 of any year will be deemed to
constitute a tax or other distribution allocable to the prior year unless the
Manager specifically provides to the contrary. Amounts which may be withheld by
the Company pursuant to Federal, state or local tax laws and remitted to such
taxing authorities with respect to any payment, Distribution or Allocation to a
Member shall be treated as distributed to the Member. All Tax Distributions
shall be treated as advances on, and shall be taken into account in determining,
distributions pursuant to Section 8.3 and Section 8.4 hereof.
Section 8.3. Limitations on Distributions. No Distribution shall be made
unless, after the Distribution is made, the Property of the Company is in excess
of all liabilities of the Company, except liabilities to Members on account of
their Capital Accounts.
Section 8.4. Extraordinary Distribution Preferences in Connection with
Organization and Capitalization of the Company. Notwithstanding anything to the
contrary in this ARTICLE 8 or elsewhere in this Agreement (but subject to
Section 10.8(g) and Section 10.9(c) hereof), the Company shall initially
distribute Net Cash Flow of the Company, if any, according to the following
schedule:
(a) Beginning with the initial regular distribution made pursuant to
Section 8.1 and continuing until such time as the owners of the Class A
Preferred Units shall have received Distributions equal to the Initial 12%
Interest Rate Amount plus the Subsequent 17% Interest Rate Amount on the entire
Initial Transfer Amount per annum, the owners of the Class A Preferred Units
shall be entitled to and shall receive one hundred percent (100%) of the Net
Cash Flow of the Company so distributed ("Class A Preferred Unit Owners'
Preferred Interest Distribution");
(b) Beginning with the next regular distribution following the
satisfaction of the Class A Preferred Unit Owners' Preferred Interest
Distribution set forth in Section 8.4(a), and continuing until such time as the
owners of the Class A Preferred Units shall have received Distributions equal to
the entire Initial Transfer Amount (the "Class A Preferred Unit Owners'
Preferred Capital Distribution"), the owners of the Class A Preferred Units
shall be entitled to and shall receive seventy five percent (75%) of the Net
Cash Flow of the Company so distributed, and the owners of the Class A Common
Units shall receive twenty five percent (25%) of the Net Cash Flow of the
Company so distributed;
34
(c) Beginning with the next regular distribution following the
satisfaction of the Class A Preferred Unit Owners' Preferred Capital
Distribution as provided for in Section 8.4(b) and continuing until such time as
the owners of the Class A Common Units shall have received Distributions equal
to the Capital Contribution to the Company of the owners of the Class A Common
Units, if any, as set forth on Exhibit A hereto ("Class A Common Unit Owners'
Distribution"), the owners of the Class A Common Units shall be entitled to and
shall receive fifty-five percent (55%) of the Net Cash Flow of the Company so
distributed, and the owners of the Class B Common Units or the Class A Preferred
Units, as applicable, shall be entitled to forty-five percent (45%) of the Net
Cash Flow so distributed, taking into account any Tax Distributions made during
the Fiscal Year pursuant to Section 8.2.
(d) Beginning with the next regular distribution following the
satisfaction of the Class A Common Unit Owners' Distribution, the provisions of
Section 8.1 governing the regular distributions of the Company shall resume
based upon the owners of the Class B Common Units or the Class A Preferred
Units, as applicable, receiving forty-five percent (45%) of the Net Cash Flow of
the Company so distributed, and the owners of the Class A Common Units receiving
fifty-five percent (55%) of the Net Cash Flow of the Company so distributed.
If the Percentage Interests of the Members change during any
applicable Fiscal Year, or any additional Members are admitted during any
applicable Fiscal Year, distributions pursuant to Section 8.4 shall be adjusted
accordingly by the Board of Managers.
ARTICLE 9
FISCAL MATTERS
Section 9.1. Fiscal Year. The fiscal year (and taxable year) of the
Company shall end on December 31 of each year.
Section 9.2. Books and Records. Full and accurate books and records of the
Company (including without limitation all information and records required by
the Act) shall be maintained at the Company's Principal Place of Business or at
such other place or places within the State of Mississippi as determined by the
Manager. Such books and records shall show all receipts and expenditures, assets
and liabilities, Profits and Losses, and all other records necessary for
recording the Company's business and affairs, as required by the Act. All
Members shall have access to the books and records of the Company for any lawful
purpose, during regular business hours, at the Company's Principal Place of
Business, upon provision of notice in writing by any Member to the Company at
least five (5) business days before the date on which any Member desires to
inspect said books and records.
Section 9.3. Reports to Members. Each of the following reports shall be
prepared at the Company's expense, and shall be delivered to each Member.
(a) Tax Information. To the maximum extent reasonably possible, within
ninety (90) days after the end of each Fiscal Year, information for the
preparation of income tax returns. The Company will provide K-1's to all Members
as soon as practicable after the close of each calendar year, but in any event
no later than April 1.
35
(b) Annual Reports. Within ninety (90) days after the end of each Fiscal
Year, an annual report of the activities of the Company, including a balance
sheet as of the end of such year, an income statement and a statement of Cash
Flow for the year, which shall be audited by an accounting firm selected in
accordance with Section 9.5 hereof, unless waived in writing by the owners of
the Class B Common Units.
(c) Monthly Reports. Monthly financial reports shall be prepared no
later than the end of the month immediately following the month for which the
reports are being prepared. The monthly financial reports shall contain, among
other things, a balance sheet, statements of income and Cash Flow, including
management discussion and analysis.
Section 9.4. Tax Matters Partner. The Members hereby agree to permit the
Board of Managers to designate the "tax matters partner" (as that term is
defined in Code Section 6231(a)(7)) of the Company (the "TMP"). The TMP shall be
responsible for all administrative and judicial proceedings for the assessment
and collection of tax deficiencies or the refund of tax overpayments arising out
of a Member's or Assignee's distributive share of items of income, deduction,
credit and/or of any other company (partnership) item (as that term is defined
in the Code or in Regulations) allocated to the Members/Assignees affecting any
Member's/Assignee's tax liability. The TMP shall promptly give Notice to all
Members/Assignees of any administrative or judicial proceeding pending before
the Internal Revenue Service involving any Company item and the progress of any
such proceeding. Such Notice shall be in compliance with applicable Regulations.
The TMP shall have all the powers and authority provided to a tax matters
partner in Code Section 6221- 6233, including the specific power to extend the
statute of limitations with respect to any matter which is attributable to any
Company item or affecting any item pending before the Internal Revenue Service
and to select the forum to litigate any tax issue or liability arising from
Company items. The TMP may resign such position by giving thirty (30) days'
written notice to the Board of Managers, whereupon the Board of Managers shall
designate a new TMP. The TMP shall be entitled to reimbursement for any and all
reasonable expenses incurred with respect to any administrative and/or judicial
proceedings affecting the Company. The TMP, shall, with the prior approval of
the Board of Managers, have the authority to make any available tax election the
Company is entitled to make pursuant to applicable provisions of the Code,
including, without limitation, the elections under Code Sections 108, 168, 709,
754, and 1017.
Section 9.5. Auditors. The auditors of the Company shall be a firm of
independent certified public accountants selected by the Manager and approved by
the Board of Managers. The books of the Company shall be subject to audit on an
annual (or other more regular basis) unless the Manager, with the approval of
Board of Managers, determines that an audit of the Company is not necessary,
appropriate or advisable. Audits shall be conducted at the expense of the
Company and a copy of each auditor's report promptly shall be sent to each
Member by the Manager.
Section 9.6. Section 754 Election. The Manager shall cause the Company to
make an election pursuant to Section 754 of the Code effective in the taxable
year of Company in which the Acquisition (as such term is defined by the Second
Amended and Restated Limited Liability Company Operating Agreement of GAR, LLC)
occurred.
36
Section 9.7. Standardized Reporting Requirements. Notwithstanding anything
to the contrary herein, the Company shall comply with the list of standardized
reporting requirements set forth on Exhibit C hereto, as amended or supplemented
from time to time upon manager's prior written notice to the Company.
ARTICLE 10
DISPOSITION OF MEMBERSHIP AND ECONOMIC INTERESTS
Section 10.1. Limitations with Respect to Assignees. An Assignee of a
Percentage Interest under this ARTICLE 10 shall have only those rights of an
Assignee as described more fully in Section 11.1 hereof and shall have no right
to become a Member of the Company or to participate in the management of the
business and affairs of the Company unless such Assignee is admitted as a
Substitute Member in accordance with Section 12.2 hereof. All restrictions,
including the restrictions contained in this ARTICLE 10, shall also apply to any
Assignees of Percentage Interests.
Section 10.2. Transfer Upon Consent, Etc. Subject to Section 3.11, no
Member or Assignee may Dispose of all or a portion of such Member's or
Assignee's Percentage Interest, unless:
(a) prior to the Disposition, the Company receives, unless waived by the
Manager in writing, an opinion of counsel satisfactory to the Manager that such
Disposition is the subject of an effective registration under, or exempt from
the registration requirements of, the applicable state and federal securities
laws;
(b) prior to the Disposition, the Company receives from the transferee
the information and agreements that the Manager may reasonably require,
including, but not limited to, any taxpayer identification number and any
agreement that may be required by the Taxing Jurisdiction;
(c) contemporaneously with the Disposition, the transferee shall execute
this Agreement and any other instruments as the Manager may deem necessary or
desirable, in form and substance satisfactory to the Manager, and the transferee
shall pay all reasonable expenses, including reasonable attorneys' fees,
incurred by the Company in connection with such Disposition;
(d) prior to the Disposition, the Company, the disposing Member and the
Assignee obtain the written final, non-appealable approval of the transfer from
the Mississippi Gaming Commission if required, including without limitation, the
licensing of all Persons required to be licensed by the Mississippi Gaming
Commission as a result of the Disposition or transfer. The transferee shall
agree to submit to investigations and licensing reviews by the Mississippi
Gaming Commission as required. All costs and expenses associated with obtaining
such approval, including without limitation background investigation fees,
licensing fees and attorneys fees, shall be borne by the disposing Member and/or
by the Assignee; and
(e) the transferring or disposing Member or Assignee shall either:
37
(i) first obtain the written consent to such Disposition by vote of
the Super Majority of the Board and the owners of the Class B Common Units
prior to the Repayment Event; or
(ii) comply with the provisions of Section 10.3 below.
A transfer in compliance with this Section 10.2 may trigger Tag-Along Rights as
described in Section 10.8 below.
Section 10.3. Right of First Refusal; Permitted Sales. Subject to Section
3.11, in the event a Member shall have received and wishes to sell, transfer or
assign pursuant to a bona fide offer all or any portion of such Member's
Percentage Interest, but has not received the prior written consent referred to
in Section 10.2 above, such Member or Assignee may sell the same only after
offering it to the Company and the other Members or Assignees in the following
manner:
(a) The Member or Assignee desiring to sell all or part of such
Percentage Interest shall serve Notice upon the Manager and the other Members or
Assignees, stating that the transferring Member or Assignee has received a bona
fide offer for the sale of such Member's or Assignee's Percentage Interest and
setting forth the following information:
(i) the portion of the transferring Member's or Assignee's
Percentage Interest proposed to be sold,
(ii) the name and address and business or occupation of the Person
offering to purchase such Percentage Interest (or portion thereof), and
(iii) the sales price and all material terms and conditions of such
sale.
Such Notice shall also contain an offer by the transferring Member or Assignee
to sell such Percentage Interest (or portion thereof) to the Company and to the
other Members at the price and under the terms offered by such bona fide
offeror.
(b) For a period of fifteen (15) days after the receipt of such Notice
(the "Company Option Period"), the Company, upon the approval of the Super
Majority of the Board and subject to the receipt of any consents required to be
obtained pursuant to the Loan Documents, shall have the option to purchase all
or any portion of the Percentage Interest so offered. If the Company fails to
exercise all of said option, the other Members, or any one or more of them, on a
basis pro rata to their respective Percentage Interests in the Company or on
such other basis as such other Members shall mutually agree amongst themselves,
shall have the option to purchase for a period of thirty (30) days after the
termination of the Company Option Period, the balance (after taking into account
any Percentage Interests elected to be purchased by the Company) of such
Percentage Interest offered for sale.
(c) In the event the Company and/or the other Members, or any one or
more of such other Members, shall exercise their option to purchase all of the
transferring Member's Percentage Interest in the Company under this Section
10.3, the Company and/or the other Members exercising such option to purchase,
as the case may be, shall designate the time, date and place of closing;
38
provided, however, that the date of closing shall be within sixty (60) days of
the date that the Company and/or the other Members, as the case may be, provide
Notice to the transferring Member or Assignee of their election to purchase such
transferring Member's or Assignee's Percentage Interest.
(d) In the event that neither the Company nor the other Members, as the
case may be, shall exercise their option to purchase, as provided herein, the
transferring Member or Assignee shall be free to assign such Member's or
Assignee's Percentage Interest (or portion thereof) to the Person named in the
aforesaid Notice at the price and upon the terms and conditions set forth in
such Notice, subject to the limitations contained in ARTICLE 12; provided,
however, that such Disposition shall be made within sixty (60) days following
the termination of the last option of the Members to purchase such Percentage
Interest (or portion thereof), subject to the limitations contained in ARTICLE
12; provided further, that the transferee and the transferring Member comply
with the requirements of Section 10.2(a), Section 10.2(b), Section 10.2(c) and
Section 10.2(d) and, if applicable, comply with the requirements related to
Tag-Along Rights set forth in Section 10.8. If such Disposition is not
consummated within said sixty (60) day period, the provisions of this Section
10.3 shall again be applicable to the Member's or Assignee's Percentage Interest
with respect to which the Member or Assignee had received a bona fide offer.
Section 10.4. Transfer Upon Dissociation of a Member.
(a) Except for Percentage Interests transferred as permitted by Section
10.2 or Section 10.3, in the event that a Member Dissociates as a Member of the
Company as described in ARTICLE 13 hereof, then the Company, upon approval of
the Manager and the Super Majority of the Board, shall have the option (but no
obligation) to purchase (exercisable within sixty (60) days after the Manager's
notice of such event of Dissociation), and subject to the receipt of any
consents required to be obtained pursuant to the Loan Documents, and the
Dissociated Member shall be obligated to sell to the Company, all of such
Dissociated Member's Percentage Interest in the Company; provided, however, that
the Company shall be entitled to assign its option hereunder pro rata among the
Members in accordance with their respective Percentage Interests. The purchase
price to be paid by the Company for such Percentage Interest shall be determined
and paid in accordance with the provisions of Section 10.5 below.
Section 10.5. Purchase Price.
(a) The purchase price of the Percentage Interest (or portion thereof)
to be purchased from a Member (the "Transferring Person") pursuant to Section
10.4 shall be the fair market value thereof.
(b) The fair market value of such Percentage Interest (or portion
thereof) shall be the value as agreed upon by the Transferring Person and the
Company (with the prior approval of the Super Majority of the Board) or, if
applicable, one or more of the other Members (such purchaser or purchasers shall
be referred to herein as the "Purchasing Person") within the first fifteen (15)
days following the exercise of an option to purchase; provided, however, the
agreed value shall not take into account any minority discount or lack of
marketability discount in determining such fair market value. If the Purchasing
Person and the Transferring Person are unable to agree upon such fair market
39
value within such fifteen (15) day period, the fair market value of the
Percentage Interest (or portion thereof) shall be determined in accordance with
the following procedures:
(i) The Purchasing Person and the Transferring Person shall select
and agree upon an independent and reputable appraiser experienced in the
relevant subject matter ("Appraiser") to determine fair market value of
the Percentage Interest (or portion thereof) within thirty (30) days after
the occurrence of an event giving rise to the offer of sale. Such
Appraiser shall use its best efforts to render the appraisal to the
Purchasing Person and the Transferring Person on or before thirty (30)
days after its selection and such appraiser shall be final and binding
upon the parties; provided, however, for any and all appraisals by an
Appraiser, the Appraiser shall not take into account any minority discount
or lack of marketability discount in determining such fair market value.
The Appraiser shall deliver a written appraisal explaining in reasonable
detail the method and basis for its conclusion to each Member.
(ii) In the event the Purchasing Person and the Transferring Person
cannot agree upon an Appraiser, then the Purchasing Person and the
Transferring Person shall each select an Appraiser. If the highest
appraisal does not exceed the lowest appraisal by more than thirty percent
of the lowest appraisal, then the average of such appraisals shall be the
fair market value of the Percentage Interest and such average shall be
final and binding upon the parties.
(iii) In the event that the highest appraisal exceeds the lowest
appraisal by more than thirty percent of the lowest appraisal, then the
two Appraisers shall select a third Appraiser. The appraised value
determined by such third Appraiser shall be the fair market value of the
Percentage Interest and such third appraisal shall be final and binding
upon the parties.
(iv) The cost of the Appraiser appointed by the Purchasing Person
shall be borne by the Purchasing Person, the cost of the Appraiser
appointed by the Transferring Person shall be borne by the transferring
Person and the cost of the third Appraiser shall be borne one-half by the
Purchasing Person and one-half by the Transferring Person.
(c) The aggregate purchase price due under this Section 10.5 shall be
paid in the following manner:
(i) There shall first be credited against such purchase price the
amount of any indebtedness due and payable to the Company by such Member.
In the event that the purchaser is a Member of the Company, such
indebtedness shall be repaid out of the purchase price directly by the
other Members (to the extent that the indebtedness does not exceed the
purchase price) and deducted from the amount otherwise payable to the
transferring Member.
(ii) There shall next be credited the amount of any expenses or
damages incurred by the Company as a result of the Dissociation of the
Member.
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(iii) The balance of the purchase price shall be payable at closing
which shall occur within thirty (30) days following the latter of the
final determination of the purchase price or the exercise of the Company's
option to purchase; provided, however, if the Company shall not have
sufficient funds legally available to pay such remaining amount, either
the Company must assign its option rights to purchase identified in
Section 10.4(a) hereof pro rata to all Members, or duly execute and
deliver a promissory note to the Dissociated Member evidencing the
Company's obligation to pay the purchase price in semi-annual installments
over three years with interest accruing at the prime rate announced from
time to time by the lender providing the Development Loan.
Section 10.6. Certain Specifically Permitted Transfers. Notwithstanding
anything to the contrary contained in this Agreement, each Member shall be
entitled to sell, give or otherwise Transfer all or any portion of his, her or
its Percentage Interests to (i) such Member's Affiliates, if such Member is an
Organization, or (ii) such Member's spouse, lineal descendants, the spouses of
such Member's lineal descendants, and a trust for the benefit of any of the
foregoing, if such Member is an individual, and, upon effectiveness of such
transfer, such transferee shall succeed to all of the rights and obligations
(including voting and other governance rights) of the transferring Member with
regard to the transferred Percentage Interest and shall be admitted as a
Substitute Member of the Company with regard to the transferred Percentage
Interest, without any further action on the part of the Members, the Board of
Managers or the Company; provided, however, that such transferee shall become
parties to, and shall be subject to the terms and conditions of, this Agreement;
provided, further, that any such transfer is specifically subject to the prior
written non-appealable approval of the transfer by the Mississippi Gaming
Commission, including without limitation, all the licensing of all Persons
required to be licensed by the Gaming Commission. The Assignee shall agree to
submit to investigations and licensing reviews by the Mississippi Gaming
Commission. All costs and expenses associated with obtaining such approval,
including without limitation background investigation fee, licensing fees and
attorneys fees, shall be borne by the transferring Member and/or by the
Assignee.
Section 10.7. Restrictions on Transfers of Units of a Member. Subject to
Section 3.11:
(a) With respect to a Member which is an Organization, a direct or
indirect Transfer of any equity interest in such Member to any Person, the
dissolution of such Member or the issuance of ten percent (10%) of additional
equity interests in such Member to any Person shall require the written consent
of the Super Majority of the Board, and the approval of the Mississippi Gaming
Commission as may be required under applicable Mississippi law. For purposes of
this Section 10.7, "Stock" shall include any equity interest in a Member and
"Stockholder" shall mean any holder of such an equity interest.
(b) None of the following transfers of Stock shall be deemed a Transfer
requiring consent under this Section 10.7, unless obtaining the approval of the
Mississippi Gaming Commission is required under Mississippi law:
(i) Any transfer -- whether by acquisition, purchase, gift or
otherwise--of Stock of a Member to a Person who is an Affiliate of such
Member and who was an Affiliate of such Member upon the Effective Date.
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(ii) With respect to a Member which is owned by one or more natural
persons, the transfer of Stock in such Member to Stockholders' spouses,
lineal descendants, the spouses of such Stockholders' lineal descendants,
or a trust for the benefit of any of the foregoing.
(c) Each Member hereby acknowledges the reasonableness of the
restrictions on Transfer imposed by this Agreement in view of the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
Transfer contained herein shall be specifically enforceable. Each Member hereby
further agrees to hold the Company and each other Member (and each other
Member's successors and assigns) wholly and completely harmless from any cost,
liability, or damage (including, without limitation, liabilities for income
taxes, legal fees, expenses and other costs of enforcing this indemnity)
incurred by any of such indemnified Persons as a result of a Transfer or an
attempted Transfer by such indemnifying Member in violation of this Agreement.
Section 10.8. Tag-Along Rights. Subject to Section 3.11:
(a) If, pursuant to a bona fide offer and after fully complying with
either Section 10.2 or Section 10.3 hereof, a Member proposes to sell or
transfer any portion of its Percentage Interest in one or more contemporaneous,
related transactions which will result in the transferees holding in the
aggregate a Percentage Interest that is greater than Fifty Percent (50%) (a
"Tag-Along Sale"), then such Member (the "Selling Member") shall promptly give
written notice (the "Tag-Along Notice") to the Company and to all other Members
at least sixty (60) days prior to the closing of such sale or transfer. The
Tag-Along Notice shall describe in reasonable detail the proposed sale or
transfer including, without limitation, the Percentage Interest to be sold or
transferred, the nature of such sale or transfer, the consideration to be paid
and the material terms and conditions thereof, and the name and address of each
Prospective Purchaser or transferee. The Selling Member shall have provided
notice to the Prospective Purchaser or transferee of the Tag-Along Rights under
this Section 10.8 and shall have obtained such Prospective Purchasers' agreement
to purchase Percentage Interests in accordance with the terms hereof; the
Tag-Along Notice shall contain confirmation of such agreement to purchase in
accordance with the terms of this Section 10.8.
(b) Each of the other Members shall have the right, exercisable upon
written notice to the Selling Member within ten (10) days after receipt of the
Tag-Along Notice, to participate in such sale on the same terms and conditions
and at the same consideration specified in the Tag-Along Notice, up to such
Member's pro rata share of the total Percentage Interest proposed to be sold in
the Tag-Along Sale. To the extent that any other Members exercise rights of
participation under this Section 10.8(b) and Section 10.8(c) below, the
Percentage Interest that the Selling Member may sell in the Tag-Along Sale shall
be correspondingly reduced.
(c) Upon consummation of the Tag-Along Sale, the Selling Member shall
immediately therewith remit to any Members who participated in the Tag-Along
Sale that portion of the sale proceeds to which such Member is entitled (without
setoff, offset or reduction of any kind by the Selling Member).
42
(d) The exercise or non-exercise of the rights of Members to participate
in one or more Tag-Along Sales shall not adversely affect their rights to
participate in subsequent Tag-Along Sales.
(e) If no other Members elect to participate in the Tag-Along Sale, the
Selling Member may, not earlier than sixty (60) days and not later than ninety
(90) days following delivery of the Tag-Along Notice to the Company and the
other Members, consummate the transaction covered by the Tag-Along Notice on
terms and conditions not more favorable to the Selling Member than those
described in the Tag-Along Notice. Any proposed transfer on terms and conditions
more favorable than those described in the Tag-Along Notice, as well as any
subsequent proposed transfer of any Percentage Interests by the Selling Member,
shall again be subject to tag-along rights of the Members and shall require
compliance by the Selling Member with the procedures described in this Section
10.8.
(f) If applicable, the provisions of this Section 10.8 shall apply in
addition to, and not in lieu of, the requirement of compliance with either
Section 10.2 or Section 10.3 hereof. Transfers under Section 10.6 shall not
trigger tag-along rights under this Section 10.8.
(g) Notwithstanding anything to the contrary contained in this Agreement
(including, without limitation, this Section 10.8), upon the occurrence of any
Sale Event (including, without limitation, the sale or transfer of 50% or more
of the Membership Interests), the proceeds received by the Company or payable to
any of the Members ("Sale Proceeds") shall be first distributed to the owners of
the Class A Preferred Units until the aggregate amount received by the owners of
the Class A Preferred Units equals the Preference Amount (if such aggregate
amount has not previously been paid to the owners of the Class A Preferred
Units) and the balance, if any, of the Sale Proceeds shall be distributed among
the Members in accordance with their respective Percentage Interests.
Section 10.9. Required Participation In Certain Transactions (Drag-Along).
(a) Offer to Purchase Percentage Interests or the Company's Assets. If,
during the term of this Agreement, the Company or any Member shall receive
written evidence of a bona fide offer (whether in the form of a binding or
non-binding letter of intent, term sheet, proposal or otherwise outlining the
proposed terms of a bona fide offer) from any Person which is not a party
hereto, pursuant to which such Person offers or proposes to:
(i) purchase all or substantially all of the Company's Assets
(whether in a single transaction or in series of related transactions);
(ii) purchase all of the then outstanding membership units in the
Company; or
(iii) enter into a merger, consolidation, conversion,
recapitalization, reorganization or similar transaction with the Company;
(iv) in a transaction where each Member, or the Company in the case
of a sale of all or substantially all of the Company's Assets, would
receive proceeds consisting all of cash, cash equivalents or unrestricted
marketable securities (other than a standard 180-day lockup period) (each
such transaction shall be referred to as a "Required Participation
43
Transaction"), and the owners of the Class A Preferred Units and/or the
owners of the Class B Common Units wish to accept such offer and
consummate the transaction(s) contemplated thereby, and a Fairness Opinion
is obtained, then the provisions of this Section 10.9 shall apply.
(b) Acceptance of Offer. Subject to a Right of First Refusal by the
holders of the Class A Common Units, in the event that the owners of the Class A
Preferred Units and/or the owners of the Class B Common Units desire to accept
any such bona fide offer or proposal described in Section 10.9(a) hereof, they
shall deliver written notice of such election along with documentation (the
"Acceptance Notice") which sets forth in reasonable detail the general terms and
conditions of the bona fide offer or proposal as of the date of such notice,
including any letter of intent signed in connection therewith, to the other
Members not less than thirty (30) calendar days prior to the closing date of the
transaction contemplated by such offer or proposal, including, without
limitation, the name and address of the proposed purchaser, the proposed
purchase price, and the terms of payment and other material terms, conditions
and provisions of the proposed offer. Upon receipt of an Acceptance Notice but
subject to the option set forth in Section 10.9(c) below, each Member shall, at
such time as it is appropriate and, as applicable, (i) vote his or its
Percentage Interest and respective membership units in the Company in favor of
such sale of the Company's assets and any subsequent liquidation of the Company;
(ii) vote his or its Percentage Interest and membership units in the Company in
favor of such merger, consolidation, conversion, reorganization or similar
transaction; or (iii) sell or transfer his or its Percentage Interest and
membership units in the Company in connection with such Required Participation
Transaction. Each Member shall execute such documents and take such further
actions as may be reasonably required to consummate any of the foregoing
transactions.
(c) Sale Preference. Notwithstanding anything to the contrary contained
in this Section 10.9, upon the occurrence of a Sale Event, the Sale Proceeds
received by the Company or payable to the Members shall be first distributed to
the owners of the Class A Preferred Units until the aggregate amount received by
the owners of the Class A Preferred Units equals the Preference Amount (if such
aggregate amount has not previously been paid to the owners of the Class A
Preferred Units) and the balance, if any, of the Sale Proceeds shall be
distributed among the Members in accordance with their respective Percentage
Interests.
Section 10.10. Effects of Disposition of Economic Interest.
(a) Partial Disposition Of Economic Interest. A Member who Transfers
part, but less than all, of such Member's Economic Interest to another Person
(other than the Company or an existing Member) pursuant to the provisions of
this ARTICLE 10 shall continue to hold and exercise all rights afforded to and
shall be subject to all of the duties, undertaken by such Member under the terms
of this Agreement, other than the economic rights associated with the
Transferred Economic Interest.
(b) Complete Disposition of Economic Interest. A Member who Transfers
all of such Member's Economic Interest to other Persons pursuant to the
provisions of this ARTICLE 10 shall be subject to Dissociation from the Company
pursuant to Section 13.1(b) hereof.
44
ARTICLE 11
REGISTRATION RIGHTS
Section 11.1. Registration Rights. After an initial public offering
("IPO"), the registrable securities in the Company owned by the owners of the
Class A Preferred Units and the Class B Common Units immediately prior to the
IPO shall have customary registration rights, including two demand registrations
and unlimited piggy back rights, and the Company will pay the legal and
registration expenses, including reasonable attorneys' fees, of the owners of
the Class A Preferred Units and the Class B Common Units. The Company and the
owners of the Class A Preferred Units and the Class B Common Units (and the
owners of the Class A Common Units, if reasonably required by the owners of the
Class B Common Units and the Class A Preferred Units) shall duly execute and
deliver a Registration Rights Agreement in form and substance reasonably
satisfactory to the owners of the Class B Common Units and the Class A Preferred
Units, to further evidence such rights of such owners.
ARTICLE 12
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 12.1. Rights of Assignees. Notwithstanding anything to the
contrary contained in this Agreement, the only rights which an Assignee of a
Member pursuant to ARTICLE 10 shall have are those rights associated with the
Economic Interest received and such Assignee shall not receive any right to
participate in the management of the business and affairs of the Company or to
become a Member; provided, however, that in the event an Assignee is an existing
Member of the Company, such Assignee shall receive all rights to participate in
the management of the business and affairs of the Company incident to the
transferred Economic Interest. An Assignee is only entitled to receive the
Distributions and return of capital, and to be allocated the Profits and Losses
attributable to a transferred Economic Interest.
Section 12.2. Admission of Substitute Members. Except as otherwise
provided for in Section 10.6, an Assignee of an Economic Interest shall be
admitted as a Substitute Member and entitled to all the rights of the Member who
initially assigned the Economic Interests only with the written approval of the
non-assigning Members owning at least sixty percent (60%) of the remaining
Membership Interests. The non-assigning Members may grant or withhold the
approval of such admission in their sole and absolute discretion. If so
admitted, the Substitute Member shall have all the rights and powers and shall
be subject to all the restrictions and liabilities of the Member originally
assigning the Economic Interests. The admission of a Substitute Member, without
more, shall not release the Member originally assigning the Economic Interests
from any liability to the Company that may have existed prior to the approval.
Substitute Members shall share proportionately in all rights conferred upon the
transferor Members hereunder. Notwithstanding anything to the contrary in this
ARTICLE 12, if a transferring Member has complied with the terms of Section 10.3
in making an assignment of an Economic Interest, the Assignee of such
transferring Member's Economic Interest shall have the right to be admitted as a
Substitute Member, subject to any restrictions and liabilities of the
transferring Member.
45
Section 12.3. Admission of Additional Members. Subject to Section 3.10 and
Section 3.11 hereof, from the date of formation of the Company, any Person
acceptable to the Super Majority of the Board (subject to Section 3.11) may
become Additional Members of the Company for such consideration as the Super
Majority of the Board shall determine, provided, that such Additional Members
agree to execute and become a party to this Agreement and all of the terms and
conditions herein, including but not limited to the satisfaction of the
requirements of Section 12.4. No Additional Member shall be entitled to any
retroactive allocation of income, gain, loss, deduction or credit by the
Company. The Members may, at their option, at the time the Additional Member is
admitted, close the Company's books (as though the Company's Taxable Year had
ended) or make pro rata allocations of income, gain, loss, deduction or credit
to the Additional Member for that portion of the Company's Taxable Year in which
the Member was admitted in accordance with the provisions of Section 706(d) of
the Code and the Regulations promulgated thereunder. Upon admission of an
Additional Member, this Agreement shall be amended in order to reflect such
additional Member's Membership Interest and Percentage Interest in the Company.
Section 12.4. Gaming Commission Suitability. Notwithstanding anything
contained herein to the contrary, solely to the extent required by applicable
law then in effect, no Person shall be admitted as a Member of the Company
unless and until such Person makes an application for and receives a finding of
suitability from the Mississippi Gaming Commission, if required.
ARTICLE 13
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 13.1. Dissociation. A Person shall cease to be a Member upon the
happening of any of the following events of Dissociation:
(a) the withdrawal of a Member with the consent of a Super Majority of
the Board;
(b) in the case of a Member who assigns all of such Member's Economic
Interest pursuant to the terms of this Agreement;
(c) upon receipt of Notice by the Manager with respect to a Member who:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation:
(iv) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Member in
any proceeding in the nature of the proceedings listed in Section
13.1(c)(iii); or
46
(v) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the Member of all or any substantial
part of the Member's properties:
(d) in the case of a Member who is a natural person, the death of the
Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage the Member's person or property;
(e) in the case of a Member who is a trustee or is acting as a Member by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee);
(f) in the case of a Member that is a separate Organization other than a
corporation, the dissolution and commencement or winding up of the separate
Organization;
(g) in the case of a Member that is a corporation, the filing of
articles of dissolution (or its equivalent) for the corporation or the
revocation of its charter and the lapse of ninety (90) days after Notice to the
corporation of such revocation without a reinstatement of its charter;
(h) the failure or refusal of a Member to make and file an application
for a gaming license or finding of suitability, if required in the good faith
and reasonable discretion of the Manager, within a reasonable time not to exceed
sixty (60) days following the Manager's written request to file such
application; or
(i) the failure or inability of a Member to obtain a gaming license or
finding of suitability, if either is required, within the longer period of
either: (w) twelve (12) months following the filing of such Member's application
for a gaming license with the Mississippi Gaming Commission (after the
expiration of all appeal periods), unless such time is extended by the
affirmative vote of the Super Majority of the Board in the manner prescribed in
Section 4.7(b); or (x) the furthest date permitted by the applicable rules and
regulations of the Mississippi Gaming Commission (after the expiration of all
appeal periods); provided, however, that in the event a Member is found to be
unsuitable by the Mississippi Gaming Commission, then such Member's Membership
Interest shall be divested in accordance with the procedures prescribed in the
Mississippi Gaming Control Act of 1990, as amended; provided, however, if AA
Capital fails or is unable to obtain a gaming license in accordance with the
conditions of this Subsection, then, at the sole option of AA Capital, either
(y) the remaining Members shall purchase AA Capital's Membership Interest, in
immediately available funds or pursuant to a Pay-in-Kind (PIK) promissory note,
which shall be on terms and provisions reasonably acceptable to AA Capital and
GAR, and, to the extent required by applicable law, if any, the Mississippi
Gaming Commission (and which must be in compliance with the terms of the
indenture governing the Development Loan), or some combination thereof (at AA
Capital's sole and absolute option), at a price equal to the higher of (the
"Threshold Amount"): (A) the fair market value of such equity as established
under Section 10.5, or (B) the Preference Amount, plus AA Capital's reasonable
out of pocket costs and expenses (including, without limitation, reasonable
attorneys' fees), or (z) the equity owned by AA Capital in the Company shall be
converted to unsecured debt owing by the Company in an amount equal to the
Threshold Amount, to be evidenced pursuant to instruments, agreements and
documents mutually satisfactory to the Company and AA Capital, with the
repayment of such debt being subordinate to the prior repayment in full of the
47
Development Loan and the Mezzanine Loan (subject to any amounts, if any,
approved to be made by the Company to AA Capital by the trustee and/or creditors
owed the Development Loan and Mezzanine Loan).
Section 13.2. [Intentionally Deleted.]
Section 13.3. Covenant Not to Compete upon Dissociation. As further
consideration for and as an inducement to enter into this Agreement, each Member
further agrees that, upon the Dissociation of a Member pursuant to Section 13.1
hereof, the Dissociating Member and its Affiliates shall enter into a
Non-Competition Agreement, in substantially the form attached hereto as Exhibit
B, with the Company whereby the Dissociating Member and its Affiliates agree not
to engage in licensed casino gaming business activities (as an owner, operator,
consultant, manager, licensee or stockholder), in the Non-Competition Territory
for a period of one (1) year following the Dissociation.
Section 13.4. Term and Dissolution. Subject to Section 3.10 hereof, the
Company shall continue in full force and effect until the first to occur of the
following events (which, unless the Board of Managers agrees to continue the
business, shall constitute Dissolution Events):
(a) the written consent of the Super Majority of the Board in accordance
with Section 4.7(a) authorizing the dissolution of the Company;
(b) the merger of the Company, and the Company is not the surviving
limited liability company in such merger; or the consolidation of the Company
with one or more limited liability companies or other entities.
(c) the entry of a final decree of dissolution of the Company by a court
of competent jurisdiction.
Section 13.5. Distribution of Assets on Dissolution. The Company may not
be dissolved or wound up at any time while the indebtedness and liabilities
owing pursuant to the Development Loan remain outstanding and unpaid, unless the
Company has either deposited funds with the trustee under the Indenture or
posted a letter of credit with a national financial institution with assets of
in excess of $500 million (on terms acceptable to such trustee), in an amount
sufficient to satisfy and discharge such indebtedness and liabilities. Subject
to the foregoing sentence, upon the winding up of the Company, Company Property
shall be distributed in the following order:
(a) to creditors, including Members who are creditors and became
creditors without violating or breaching any of the terms and provisions of this
Agreement, to the extent permitted by law, in satisfaction of Company
Liabilities;
(b) to Members in accordance with Section 8.4. Liquidation proceeds
shall be paid within sixty (60) days of the end of the Company's Fiscal Year or,
if later, within ninety (90) days after the date of liquidation. Such
Distributions shall be in cash or property (which need not be distributed
proportionately) or partly in both, as commercially reasonably determined by the
Board of Managers.
48
Section 13.6. Winding Up and Certificate of Cancellation. The winding up
of the Company shall be completed when all debts, liabilities, and obligations
of the Company have been paid and discharged or reasonably adequate provision
therefor has been made, and all of the remaining Property of the Company has
been distributed to the Members. During the winding up period, the Company shall
cease carrying on, as distinguished from the winding up of, the Company
business. Upon the completion of winding up of the Company, a certificate of
cancellation, together with any required filing fee, shall be delivered to the
Secretary of State. The certificate of cancellation shall set forth such
information as is required by the Act.
Section 13.7. Effect of Dissolution. Upon receipt of the endorsement of
the original certificate of cancellation from the Secretary of State as
evidenced by the word "Filed" noted thereon, together with the date and hour of
the filing thereof, the Company is conclusively dissolved as of the date and
time of the filing of the certificate of cancellation with the Secretary of
State in the absence of actual fraud.
ARTICLE 14
MISCELLANEOUS PROVISIONS
Section 14.1. Entire Agreement. This Agreement constitutes the entire
agreement among the parties. No party shall be bound by any terms, conditions,
statements or representations, oral or written, not herein contained. Each party
hereby acknowledges that in executing this Agreement, such party has not been
induced, persuaded or motivated by any promise or representation made by any
other party, unless expressly set forth herein. All previous negotiations,
statements and preliminary instruments by the parties or their representatives
are merged into this Agreement.
Section 14.2. Interpretation. For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Members executing this
Agreement hereby agree to the terms and conditions contained herein, as it may
from time to time be amended according to its terms. It is the express intention
of the Members that this Agreement and the Certificate shall be the primary
source of agreement of the parties, and, except to the extent a provision of
this Agreement expressly incorporates Federal income tax rules by reference to
sections of the Code or Regulations or is expressly prohibited or ineffective
under the Act, this Agreement shall govern, even when inconsistent with, or
different than, the provisions of the Act or any other law or rule, or of any
other agreement which may be referred to herein. To the extent any provision of
this Agreement is prohibited or ineffective under the Act, this Agreement shall
be considered amended to the smallest degree possible in order to make the
agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Agreement that was
formerly invalid valid, such provision shall be considered to be valid from the
effective date of such interpretation or amendment.
Section 14.3. Amendment and Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed by the Super Majority of the Board, or, in the case of a waiver, by the
Member or Members against whom the waiver is to be effective; provided, however,
that this Agreement shall be deemed amended from time to time to reflect the
49
admission of an Additional Member or Substitute Member, the Dissociation of a
Member, and the adjustment of the Percentage Interests of the Members resulting
from any Transfer of an Economic Interest, in each case that is made in
accordance with the provisions hereof; provided, further, none of the following
Sections of this Agreement may be amended or modified without the prior written
consent of the owners of the Class B Common Units and the Class A Preferred
Units: Section 3.2, Section 3.3, Section 3.4, Section 3.6, Section 3.7, Section
3.8, Section 3.10, Section 3.11, Section 4.7, Section 4.11, Section 4.12,
Section 6.2, Section 7.1, Section 7.2, Section 8.1, Section 8.2, Section 8.3,
Section 8.4, Section 10.7, Section 10.8, Section 10.9, Section 13.1(i) and
Section 14.3 hereof (and any of the definitions applicable thereto regarding the
subject matter hereof and thereof); provided, further, the definitions of
Initial 12% Interest Rate Amount and Subsequent 17% Interest Rate Amount may not
be amended or modified without the prior written consent of the owners of the
Class A Common Units, the Class B Common Units, and the Class A Preferred Units.
Section 14.4. Governing Law. This Agreement, and the application or
interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Delaware, and specifically the Act, applied without respect
to any conflicts-of-law principles, but not including the Applicable Law
governing Casino Approvals.
Section 14.5. Dispute Resolution; Arbitration. Any dispute, controversy or
claim arising out of or in connection with, or relating to, this Agreement, or
any breach or alleged breach thereof shall, upon request of any party involved,
be submitted to, and settled by, arbitration in the city of the Principal Place
of Business pursuant to the commercial arbitration rules then in effect of the
American Arbitration Association (or at any time or at any other place or under
any other form of arbitration mutually acceptable to the parties so involved).
Any award rendered shall be final and conclusive upon the parties and a judgment
thereon may be entered in the highest court of the forum, state or federal,
having jurisdiction over the matter. The expense and costs of arbitration shall
be borne equally by the parties to the arbitration, provided that each party
shall pay for and bear the expenses of its own experts, evidence, and counsels'
fees, except that in the discretion of the arbitrator, any award may include the
costs of a party's counsel if the arbitrator expressly determines that the party
against whom such award is entered has caused the dispute, controversy or claim
to be submitted to arbitration as a dilatory tactic or otherwise not in good
faith. The parties acknowledge and agree that the transactions contemplated by
this Agreement, and any disputes, claims or controversies which may arise
hereunder or in relation to or involving this Agreement, involve interstate
commerce and the performance of the obligations of the parties hereunder involve
substantial interstate activities. The arbitration agreement contained in this
Section 14.5 shall survive termination of this Agreement.
Alternatively, if at any time after the Repayment Event a dispute
arises in connection with a vote to be taken pursuant to ARTICLE 4 of this
Agreement such that the dispute creates an actual unresolved deadlock between
the Members or the Board of Managers (after a good faith attempt by the Members
and the Board of Managers to resolve such dispute) thereby preventing Company
action on any of the material matters for which Members or the Board of Managers
are entitled to vote, then in such case: (i) the Parties agree to consult with
the General Manager in an attempt to resolve the dispute in the best interests
of the Company, provided that the General Manager shall not be entitled to vote
on any matter; and (ii) If, after consultation with the General Manager, the
parties are still unable to resolve such deadlock, then in such case, one or
50
more Members ("Offering Member") may propose to purchase all of the Membership
Interests of one or more of the opposing Members ("Receiving Member") by
delivering a written purchase offer (which clearly indicates the offering price
per each Percentage Interest in the Company, all of the material terms for such
purchase, and reasonable evidence of the Offering Member's ability to actually
consummate such transaction in accordance with the terms set forth in the
written purchase offer) to such Receiving Member(s) for its entire Membership
Interest in the Company. Upon receipt, the Receiving Member(s) shall be
obligated within thirty (30) calendar days following receipt of such offer
(unless such deadlock is amicably resolved between the Members and the Board of
Managers, as applicable, prior to the expiration of such 30-day period) to
either: (i) accept the purchase offer on the terms provided therein and proceed
to close on such sale; or (ii) decline the offer by returning such written offer
to the Offering Member(s), in which case the original Offering Member(s) shall
be obligated to sell its entire Membership Interest to such Receiving Member and
such Receiving Member shall be obligated to purchase (at the same price per each
Percentage Interest and on the same terms as that originally offered by such
Offering Member).
Section 14.6. Execution of Additional Instruments. Each Member hereby
agrees to execute such other documents and instruments necessary to comply with
any applicable laws, rules or regulations (as determined by the Super Majority
of the Board).
Section 14.7. Construction of Terms. Whenever used in this Agreement and
when required by the context, the singular number shall include the plural and
the plural the singular. Pronouns of one gender shall include all genders.
Section 14.8. Captions. The captions as to contents of particular
articles, sections or paragraphs contained in this Agreement and the table of
contents hereto are inserted for convenience and are in no way to be construed
as part of this Agreement or as a limitation on the scope of the particular
articles, sections or paragraphs to which they refer.
Section 14.9. Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any agreement or
condition of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation. Except as otherwise expressly provided in this Agreement (or with the
prior written consent of all of the Members), to the fullest extent permitted
under the Act and other applicable law, each Member irrevocably waives, for the
duration of this Agreement, any right or power any such Member may have to cause
the Company or any of its assets to be partitioned, or to compel any sale of all
or any portion of the assets of the Company pursuant to any applicable law. Each
Member has been induced to enter into this Agreement in reliance upon the mutual
waivers set forth in this Section and, without such waivers, no Member would
have entered into this Agreement.
Section 14.10. Rights and Remedies Cumulative. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.
51
Section 14.11. Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Agreement, their respective heirs, legal representatives, successors and
assigns.
Section 14.12. Costs and Expenses. Upon execution of this Agreement by AA
Capital, the Company shall pay the reasonable attorneys fees and costs of
counsel to AA Capital incurred in the negotiation, preparation, execution and
delivery of this Agreement and any other instrument, agreement or document
relating hereto.
Section 14.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. A fax signature hereto shall be as
legally binding as a signed original.
Section 14.14. Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing and in the manner specified below, and shall be addressed to the
party to be notified as follows: (i) If to the holders of the Class A Common
Units at GAR, LLC, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇ ▇.
▇▇▇▇; Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇; with a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇ ▇▇▇, Esq.; Telephone No. (228)
▇▇▇-▇▇▇▇; Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇; and (ii) If to the holders of either the
Class B Common Units or the Class A Preferred Units at AA Capital Partners,
Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇; Attention: ▇▇▇▇▇▇▇
("▇▇▇▇▇") Wall, Jr.; Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇; with a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇; Facsimile No. (312)
499-6701; or to such other address as each party designates to the other by
notice in the manner herein prescribed. Notice shall be deemed given hereunder
if (i) delivered personally or otherwise actually received, (ii) sent by
reputable overnight delivery service, (iii) mailed by first-class United States
mail, postage prepaid, registered or certified, with return receipt requested,
or (iv) sent via telecopy machine with a duplicate signed copy sent on the same
day as provided in clause (ii) above. Notice mailed as provided in clause (iii)
above shall be effective upon the expiration of three (3) days after its deposit
in the United States mail, and notice telecopied as provided in clause (iv)
above shall be effective upon delivery of such telecopy if the duplicate signed
copy is sent under clause (ii) above. Notice given in any other manner described
in this Section shall be effective upon receipt by the addressee thereof;
provided, however, that if any notice is tendered to an addressee and delivery
thereof is refused by such addressee, such notice shall be effective upon such
tender unless expressly set forth in such notice.
[Signature Pages Follow]
52
IN WITNESS WHEREOF, the parties hereto have duly executed this
Limited Liability Operating Agreement in duplicate as of the date first above
written.
MEMBER:
-------
GAR, LLC,
a Mississippi limited liability company
By Its Members:
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇, III
-----------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇, III
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
MEMBER:
-------
AA CAPITAL EQUITY FUND, L.P.
By: AA Private Equity Investors
Management, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
53
MEMBER:
-------
AA CAPITAL BILOXI CO-INVESTMENT
FUND, L.P.
By: AA Private Equity Investors
Management, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
54
The Company acknowledges and agrees to its
obligations set forth in this Agreement,
including, without limitation, its
indemnification obligations set forth in
Section 3.3 hereinabove.
Premier Entertainment Biloxi LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
The foregoing Operating Agreement is hereby
Acknowledged and Agreed by the following
nonvoting member of GAR, LLC:
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
55
EXHIBIT A
Attached to and made a part of the Limited Liability Company Operating
Agreement of
Premier Entertainment Biloxi LLC
Member Capital
Contribution and Percentage Representing % of
Member Value Interest Ownership in Units
------ ---------------- -------- ------------------
GAR, LLC 55% 100% Class A Common
AA Capital Equity 45% 100% Class A Preferred
Fund, L.P. and 100% Class B Common
AA Capital Biloxi
Co-Investment Fund,
L.P., collectively
EXHIBIT A
EXHIBIT B
Non-Competition Agreement
This Non-Competition Agreement (this "Agreement") is being executed
on the date indicated on the last page hereof by and between
________________________("Dissociating Member"), ________________________
(collectively, its "Affiliates"), and Premier Entertainment Biloxi LLC, a
Delaware limited liability company (the "Company").
I. RECITALS
A. Agreement in Connection with Dissociation. In accordance with the
provisions of the Limited Liability Company Operating Agreement of the Company
dated as of January __, 2004 (the "Operating Agreement"), the Dissociating
Member has withdrawn from the Company in strict compliance with the Operating
Agreement or has assigned all of his Economic Interest in the Company in strict
compliance with the Operating Agreement. As required by Section 12.3 of the
Operating Agreement, the Dissociating Member and its Affiliates are hereby
entering into this Agreement. Capitalized terms in this Agreement which are not
defined herein shall have the meanings ascribed to them in the Operating
Agreement.
B. Consideration. In consideration of the mutual covenants, agreements,
representations, and warranties contained in this Agreement, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto (intending to be legally bound) hereby agree as
indicated below.
II. AGREEMENT
1. Agreement. By their signatures hereto, Dissociating Member and its
Affiliates hereby covenant not to compete with the Company as provided below.
2. Covenant Not To Compete.
(a) The Company is engaged in the licensed casino gaming business.
Dissociating Member and its Affiliates hereby covenant with and for the benefit
of the Company that Dissociating Member and its Affiliates shall not, for a
period of twelve (12) consecutive calendar months following the date of
Dissociation, directly or indirectly engage in, or have any interest in, any
person, firm, corporation, partnership, limited liability company, or business
(whether as an employee, officer, director, agent, member, manager, partner,
security holder, consultant, or otherwise) that engages directly or indirectly
in the ownership, management, operation or control of a business substantially
similar to and competitive with the Company, in the counties of Hancock,
Harrison, ▇▇▇▇▇▇ or Tunica in the state of Mississippi ("Non-Competition
Territory"). Dissociating Member and its Affiliates agree that they shall not,
within the time period described above, engage in the licensed casino gaming
activities business (as an owner, licensee, operator, or stockholder) in the
Non-Competition Territory.
EXHIBIT B-1
(b) This Agreement may be enforced by the Company and its
successors or assigns by specific performance or by any other procedure
available to it or its successors or assigns. Furthermore, in the event that
Dissociating Member and/or its Affiliates breach any of the covenants contained
herein, in addition to any and all of the rights and remedies that the Company
and its successors or assigns may have against Dissociating Member and/or its
Affiliates as a result of any such breach, Dissociating Member and/or its
Affiliates shall be liable to the Company and its successors or assigns for all
court costs or reasonable attorney's fees actually incurred by the Company and
its successors or assigns in enforcing its rights hereunder.
(c) Dissociating Member and its Affiliates agree with the Company
that the non-competitive restrictions imposed upon Dissociating Member and its
Affiliates by this Agreement are reasonable both as to the time period and
geographical restrictions. Dissociating Member and its Affiliates further agree
that competition within the Non-Competition Territory is substantial and that
adherence by Dissociating Member and its Affiliates to the restrictions imposed
by this Agreement will not serve to substantially lessen competition.
3. Miscellaneous Provisions.
(a) Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to matters covered by this Agreement, and no other
agreement, statement or promise made by any party, and to any employee, officer,
or agent of any party which is not contained in this Agreement shall be binding
or valid.
(b) Headings and Subheadings. The headings and subheadings in this
Agreement are inserted for convenience of reference only and are not to be
considered in construction of the provisions hereof.
(c) Inurement. This Agreement shall inure to the benefit of and be
binding upon the heirs, beneficiaries, successors and assigns, as applicable, of
both parties.
(d) Further Acts. Each party agrees to perform any further acts
and to execute and deliver any documents which may be reasonably necessary to
carry out the provisions of this Agreement.
(e) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. A fax signature hereto shall be as legally binding as a
signed original.
(f) Governing Laws. This Agreement shall be governed by and
interpreted according to the laws of the State of Delaware without respect to
principles of conflicts of laws.
[Signature Page Follows]
EXHIBIT B-2
IN WITNESS WHEREOF, the parties hereto have executed this
Non-Competition Agreement as of this ______ day of ___________, 20__.
[DISSOCIATING MEMBER]
By:
---------------------------------------
Name:
Its:
PREMIER ENTERTAINMENT BILOXI LLC
By:
---------------------------------------
Name:
Its: Manager
EXHIBIT B-3
EXHIBIT C
---------
STANDARDIZED REPORTING REQUIREMENTS
As used in this Exhibit C, all references to "Leucadia" are to Leucadia National
Corporation, a New York corporation.
1. A standardized GAAP reporting package is required at each quarter
and year-end reporting period. Quarterly GAAP reporting packages
must be received within 15 calendar days after the end of each of
the first three quarters of the fiscal year. The year-end GAAP
reporting package must be audited and received within 24 calendar
days after the end of the fiscal year. In addition, audited
supplemental schedules must be submitted within 27 calendar days
after the end of the fiscal year. [The form of the reporting package
and supplemental schedules currently used by Leucadia are attached
as Exhibit __; however, these forms and the information requested
may be changed from time to time at the discretion of Leucadia.]
2. Within 50 calendar days after the end of each fiscal year, annual
audited consolidated financial statements of the Company prepared in
accordance with United States generally accepted accounting
principles ("GAAP") and audited in accordance with United States
generally accepted auditing standards and meeting all applicable
requirements of the SEC. The report and opinion of the Company's
auditors (who shall be selected by Leucadia) will not be subject to
any "going concern" or like qualification or exception or any
qualification or exception as to the scope of such audit. In
addition, the Company's auditors will provide an attestation report
as to the Borrower's internal controls pursuant to Section 404 of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 expressing a conclusion to which
Leucadia does not object, and a duly executed Compliance
Certificate.
3. If required by Leucadia's independent public accounting firm, the
Company will take whatever steps are necessary so that Leucadia's
independent public accounting firm may review the audit work papers
of the Company's independent public accounting firm immediately
after receipt of the audited consolidated financial statements
referred to in 2 above. If required under the rules of the SEC, the
Company will obtain from their independent public accounting firm
such firm's consent for Leucadia to file their opinion and the
financial statements with the SEC, within 80 days after the end of
Leucadia's fiscal year.
4. Within 120 calendar days after the end of each fiscal year, such
information as is necessary to complete the Leucadia's United States
federal income tax or information returns, including a copy of the
Company's United States federal, state and local income tax or
information returns.
5. Any information that may be required by Leucadia to enable it to
comply with the accounting and disclosure requirements of the
Securities and Exchange Commission (the "SEC") as in effect from
time to time, which information shall be provided to Leucadia in a
timely manner to meet SEC requirements. To the extent that the SEC
reduces the time frame within which Leucadia is required to make any
filings, each time frame set forth above shall be correspondingly
reduced.
EXHIBIT C-1
SCHEDULE 1
TO
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
The Major Decisions requiring the approval and consent of the owners of the
Class B Common Units prior to the Repayment Event are as follows:
1. Altering or changing any rights, preferences, or privileges of the
equity of the Company;
2. Increasing or decreasing the authorized number of membership units or
interests of the Company;
3. Creating any new class or series of equity for the Company;
4. Approving or disapproving any recapitalization of the Company,
including, but not limited to, increasing or decreasing the number of issued and
outstanding shares of equity of the Company;
5. Amending or waiving any provision of the Company's charter documents;
6. Approving or disapproving the hiring or termination of any member of
senior management (the "Key Managers"), including, without limitation, the hotel
manager, the casino manager, the chief financial officer, and the food and
beverage manager. (The Company shall enter into employment agreements, which
shall be in form and substance reasonably acceptable to the owners of the Class
B Common Units, with all of the Key Managers. The Key Managers must be
pre-approved by the owners of the Class B Common Units. Such employment
agreements will contain customary provisions regarding confidentiality,
noncompetition, non-disparagement, and non-solicitation.);
7. Any amendment to or modification of any of the Real Property Documents,
the ▇▇▇▇▇▇ Purchase Agreement, and/or the Hard Rock License
Agreements;
8. Granting liens in or on or otherwise encumbering Company assets or
property;
9. Making the Company liable for (as a guarantor, surety or otherwise) the
indebtedness, liabilities or obligations of any other Person;
10. Enter into any understanding or agreement (oral or written) regarding
any Sale Event or IPO of the equity of the Company, or any sale of any material
asset, or group of assets with an aggregate value of $250,000 or more;
11. Conversion of the Company to a corporation or any other type of
entity;
12. Issuance of additional membership interests in the Company;
SCHEDULE 1-1
13. Changing the manager of the Company, or increasing or decreasing the
number of managers of the Company, or increasing or decreasing the number of
members of the Board of Managers;
14. Any amendment to or modification of any of the Loan Documents, the
Contractor Agreement, or any management agreement of the Company after the date
of their respective execution, or enter into, amend, grant any waiver with
respect to, terminate or extend any other material agreement of the Company;
15. A material change in the nature or type of business or operations of
the Company, or any material deviation from the Company's business plan;
16. Any action that would result in Company incurring indebtedness other
than in the ordinary course of business and in excess of $250,000 in the
aggregate during any consecutive 12-month period (other than the Development
Loan);
17. Approving or disapproving any acquisition of another entity(ies) or
merger or consolidation of another entity(ies) with and into the Company;
18. Making any capital expenditure, or series of related capital
expenditures, in excess of $250,000 in the aggregate during any consecutive
12-month period (other than as expressly provided in the Budget);
19. Any material change in accounting methods or procedures, and any
decisions regarding applications of credits and carryovers and the treatment of
any activities or transactions by the Company for which alternative treatments
are available under generally accepted accounting principles or under state or
federal tax purposes;
20. Setting of individual salaries in excess of $100,000 and individual
bonuses in excess of $25,000, in each case, for any employees of the Company;
21. Entering into any contracts or agreements with GAR, or any affiliate
of GAR, or any amendments or modifications thereto, or exercising on behalf of
the Company any consent, approval, or option rights granted to the Company
thereunder, unless such transaction is on terms that are no less favorable to
the Company than those available from an unaffiliated third-party (provided
that, regardless of the terms thereof, GAR shall notify the Board of Managers in
advance of any event in which the Company will enter into any such arrangement
with GAR or any affiliate thereof, and shall provide the Board of Managers with
a copy of any applicable document promptly upon demand);
22. Any dissolution or liquidation of the Company;
23. Amending or modifying any term or provision in this Operating
Agreement, including, without limitation, any of the distribution or liquidation
provisions to any Member as provided herein;
24. Investing any funds of the Company in excess of $100,000 in the
aggregate at any time during any calendar year;
SCHEDULE 1-2
25. Requiring any additional capital contributions;
26. Altering, modifying or supplementing the Budget;
27. Settle any material tax audit;
28. Commence or settle any litigation, arbitration or governmental
proceeding;
29. The taking of any action or knowing omission to act, or the execution
or delivery of any instrument, document or agreement, that would reasonably be
likely to have or create a material adverse change or effect on the business
operations, financial condition, prospects, properties, or assets of the
Company; and/or
30. Hiring, retaining or firing any lawyer, law firm, accountant,
accounting firm, investment banking firm, appraiser, or any other expert or
professional to perform or render any services on behalf of the Company.
SCHEDULE 1-3